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Pursuing legal rights of the new debt set


Accusing Irish banks of driving debt-laden mortgage holders to suicide can be dismissed as a headline-grabbing exercise and ignored if made by the predictable coterie of left-wing critics. But it’s a different matter when the charge is levelled at banks by the master of the Irish High Court, Edmund Honohan.

He has experience of handling repossession cases and also happens to be the brother of Patrick Honohan, governor of the Irish Central Bank. Unsurprisingly, his broadside has produced cries of outrage from bankers, but Honohan says he is standing by his criticism.

In an unusually blunt statement delivered from the bench, he accused banks of pursuing to the bitter end debtors who simply could not meet their mortgage repayments and of doing so with the objective of writing off debts to achieve a tax benefit. Such meaningless accountancy exercises were causing social disquiet and driving some people to suicide.

Most of the debt cases arose due to circumstances beyond the control of borrowers, namely because the economy shut down as a result of the banking collapse.

While debtors might think they were outlaws in unchartered territory, he wanted to assure them that even members of what he called ’the new debt set’ had legal rights.

According to Honohan, the banks were cheerleaders for the Celtic Tiger when the property bubble developed and now that the bubble had burst they were reverting to type and coming to court assuming the bank always wins. That, he warned, was not how the law sees it.

He called for a fresh start to protect the homes of distressed mortgage holders, including an element of debt forgiveness.

The situation could not be allowed to continue for another 18 months, which was when the government proposed to amend the personal bankruptcy laws.

The Honohan criticism has put the mortgage crisis back at the top of the Irish political agenda

Responding to his criticism, the Irish Banking Federation accused him of being emotive and inflammatory by claiming that people were being driven to suicide over mortgage debts.

Federation chief executive Pat Farrell claimed banks had been accommodating in difficult circumstances for customers.

He cited a statutory code agreed with government that included a two-year moratorium on court action for repossessions, plus a range of other relief measures.

Honohan denied he had used emotive language. He said he had dealt with cases where borrowers had taken their own lives and had met widows of some of the victims.

His claim was supported by the Samaritans, which has reported a marked increase in the number of Irish suicides since the onset of the recession.

Ireland’s personal debt, including mortgages, is estimated at close to a staggering €160bn, which works out at an average of €100,000 for each of the country’s 1.5m households.

And the debt keeps on rising, with the 80,000 mortgages currently being restructured or in arrears facing further strain from the government’s austerity programme and the European Central Bank’s determination to push up interest rates.

The Honohan criticism has put the mortgage crisis back at the top of the Irish political agenda, with ministers now promising a series of early, unspecified measures to help those in trouble.

At the same time, they are resisting the idea of general debt forgiveness, claiming it could make matters worse if those now paying their mortgages decided not to do so because their neighbours’ arrears are being written off and that, in any event, taxpayers cannot afford such a rescue.

Meanwhile, Irish property prices, once the fastest rising in Europe, continue to plummet at a record rate. A new monthly house purchase index published by the Central Statistics Office shows prices generally have fallen by 40% from their peak of four years ago, with predictions that the fall will reach 50% by the end of the year.

In Dublin, where prices rose fastest during the boom, the decline has been equally dramatic dropping by 13% in a year and by 47% in four years.

Elsewhere in the Republic, the fall was 35% while the price of apartments generally is down by 51% on their 2007 level.

The index is limited in scope in that it covers only the price of properties for which mortgages have been issued and not cash sales. It also
gives the data in percentage rather than money terms.

While a more detailed house price register is planned, economists are predicting that it could be two years before the market stabilises, with an
overall price fall of up to 60%.

They blame high unemployment, the lack of lending and the uncertainty created by the International Monetary Fund-European Union bailout, for the continuing slump.

New house completions have also been hit – just 2,766 were built in the first three months of the year, the lowest since records began 36 years ago.

Civil disobedience in action

Dubliner Des Nix doesn’t like bankers, their bonus culture and the damage they have done to the Irish economy, leaving overburdened taxpayers to pick up the tab.

Many share his attitude, but what makes 62 year old Nix different is that he decided on a personal protest.

When he received an €80 speeding fine, he wrote to the Gardai saying he was refusing to pay as a gesture of civil disobedience.
The money, he claimed, would go to the exchequer, which is now primarily a slush fund to pay gangster banks and their bondholders, and he was not prepared to be part of that.

In court, where he faced a €1,000 fine or jail term, he remained defiant.

Fortunately, however, the prosecuting Garda officer failed to appear and the case was dismissed. But Nix wasn’t finished and applied for expenses to cover his trip to court. The application was refused.

“Don’t push it,” Judge Victor Blake told him. “You’ve done pretty well so far.”



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