This article is from earlier this year but very much worth a re-post:
DUBLIN—In Mairead Harold’s Irish childhood, there were no rugged mountains, stone-built cottages or seaside cliffs.
Harold grew up poor in Dublin’s derelict Finglas neighbourhood, where rows of gritty semi-detached houses and parks have long been regarded as a haven for drug dealers and their clients.
A 1987 marriage to Stan Harold hardly improved her fortunes. Within weeks of their wedding, he was laid off and she had to use a modest family inheritance to pay down most of the $24,000 mortgage on their new three-bedroom home.
It wasn’t long before Stan left.
Almost 20 years later, he came back, announcing in 2005 that he wanted roughly $130,000 to surrender his claim to the house. Mairead Harold couldn’t raise the cash on her own. She earned $13 an hour working for a bookmaker, her unemployed adult son lived with her and her heroin-addicted daughter was constantly asking for money.
During her second meeting with a loan officer at Allied Irish Bank — after explaining she needed cash for her husband and to pay off some legal fees and $8,000 worth of debt — Harold’s loan application for $162,500 was approved and she walked out with a cheque. At most, she said she spent 10 minutes with bank officials.
“I didn’t need a loan, I needed a divorce lawyer,” Harold recalled on a recent afternoon, her eyes welling with tears as she smoked a cigarette.
Now Harold is battling the bank. At 46, she is struggling to find even part-time work and can’t afford the monthly mortgage payments of about $1,300 on a home she estimates is worth $79,000. The bank wants to evict Harold, her son and the 4-year-old daughter she had with a recent boyfriend.
Harold’s story shows how easy it was to get credit during Ireland’s roaring heyday of the last decade, when its hard-charging economy won the island nation the nickname the Celtic Tiger.
The roots of Ireland’s rags-to-riches-and-back-again story began more than 20 years ago.
During the early 1990s, with a young, English-speaking, low-cost workforce, low interest rates and government grants, Ireland’s export-oriented economy blossomed, growing by an average 6.5 per cent from 1990 to 2007.
By 2000, unemployment had plunged to 3.8 per cent, the lowest in Europe, from 16 per cent in the mid-1990s. Irish expats and new immigrants alike flocked to the country. In 2005, 100,000 immigrants arrived in Ireland, more than triple the 30,000 who came annually in the mid-1990s.
The newcomers and newly employed needed places to stay and Ireland’s bullish housing market was supercharged. Bank loan officers, anxious to boost commissions, encouraged many borrowers to take out loans far larger than they needed.
“A certain newfangled confidence began to emerge,” columnist Jody Corcoran wrote in 2010 in Ireland’s Sunday Independent newspaper. “We Irish, we had it cracked. . . Everybody wanted to own their own house, but many also wanted a second property, a holiday home; or an investment or two, an apartment in Bulgaria, a villa in Croatia or a mock-Tudor pile halfway up a mountain, half an hour’s drive from Lisbon.”
Even Ireland’s government seemed to relish the “greed is good” mentality. “The boom is getting boomier,” said then-Prime Minister Bertie Ahern, who suggested doomsayers should consider suicide rather than “talking down the economy.”
But Ireland’s bull market was, indeed, too good to be true. More houses were being built than could be occupied. In County Leitrim, for instance, housing supply from 2006 to 2009 outpaced demand by 401 per cent.
In September 2008, the U.S. bank Lehman Brothers collapsed. Days later, the stocks of Irish banks went into free-fall as investors and analysts came to grips with the fact that the country of 3.8 million was vastly overextended.
Stories of reckless lending and borrowing abound.
In 2010, Dublin lawyer Vincent Martin and his colleagues were contacted by a man who was at loggerheads with the Irish Nationwide building society, a local bank. After obtaining the bank’s files on his account, the man had discovered the bank, which has since merged with Anglo Irish Bank, had created a new version of him for their credit committee.
So they could lend him more money during Ireland’s bull market, banking officials had changed the man’s occupation, inflated his roughly $39,000 annual salary to $78,000, and forged both his and his employer’s signature. Martin wouldn’t reveal the man’s name because of ongoing litigation. He also declined to say whether police were involved in the case.
To help that man, and others such as Harold, Martin and his colleagues started a legal aid group called New Beginning, which specializes in helping people who are at risk of losing their homes.
It’s a growing worry, despite government assurances that new laws are coming to help shield mortgage delinquents.
As many as 250,000 Irish homeowners are at risk of being evicted for falling behind on their mortgages, Martin said. In the last three months of 2011, banks started 12,000 new court proceedings that may lead to evictions.
While there have been few actual evictions — banks have repossessed 1,177 residential properties since July 2009 — that seems poised to change. After the Lehman Brothers collapse four years ago, when several of Ireland’s banks seemed likely to follow suit, the Irish government agreed to guarantee $572 billion worth of loans at six financial institutions. Now, the head of Ireland’s central bank says it’s time for banks to get tougher about collecting from debtors. The alternative is defaulting on its payments to the E.U. and IMF.
For years, Ireland has clung to the ideal of the family home as sacrosanct. It has remained one of the few developed countries that for decades never levied property taxes, so evictions could stoke the kind of unrest that Greece has experienced.
“The Irish are mad about property ownership,” says Matthew Kerby, an expert on Irish politics at Memorial University in St. John’s, Newfoundland. “The idea of repossessions isn’t popular for good reason. The last people to do them on a widespread level here were the English, and you’d typically see them kicking a family of 12 out of their home and burning their barn.”
Foreclosure dominates radio talk-shows and television, sparked, some say, by the case of one family that surfaced after the Irish Times newspaper published a letter last August from a desperate father in Kerry, in the southwest.
“I have found myself and my loved ones having to cope with a new torment — hunger,” wrote M.P. MacDomhnaill, signing his letter with his initials. “Today I have had nothing to give my children, only bread and cereal. The wolf that I have been keeping from the door has finally moved in.”
MacDomhnaill, who lost his job as a civil servant last June, told the newspaper in an interview that his family had a running joke about what has more calories, cornflakes or the box they come in. His 7-year-old daughter had actually started eating parts of the box.
MacDomhnaill said he bought a home in 2003 for $170,000 and still owed $105,000 . While he received about $1,350 a month in social assistance, he said he continued to make his monthly payments of $1,020 because he worried about being evicted, leaving his family with $330 for food and other expenses.
His story created an outcry, with many suggesting that MacDomhnaill and others stop paying their mortgages. Banks are starting to establish legal cases for eviction against thousands who have done that, lawyers said.
The legal battles play out in a Dublin courtroom where each Monday, a judge deliberates over dozens of new and continuing civil cases related to mortgage defaults. The Irish Times has started assigning reporters to the hearings and recently covered one case where a bank sought a repossession order against a man who had recently suffered a stroke, and another against a single mother of five children who owes about $43,000.
During one recent hearing, Mairead Harold sat in the back row of the crowded courtroom, her hands folded in her lap, waiting for her case to be called.
“I’ve struggled all my life,” she said. “This is just a terrible thing. Someone will come along and pay the bank 60,000 (euros) and I’ll be out on the street with my kids.”
Nearby, 38-year-old John Larkin rubbed his balding head.
The father of five is locked in a fight with a bank that is trying to foreclose on two pubs he owns in his hometown of Donegal. In 2006, Larkin borrowed $2 million to buy and upgrade the pubs, but business has since soured.
“My wife asks me if will we lose everything and I don’t know what to say to her,” Larkin said.
Larkin recently ran into the bank officer who helped him secure his loan. The two recalled negotiations for Larkin’s loan: the banker, who has since been laid off, had tried to coax him to accept a loan worth $1.3 million more than Larkin needed.
“He was standing to make 17,000 (euros) in commission, but that’s how it was,” Larkin said. “Money was there for the taking. You almost can’t believe it now.”
From his office in the corner of an automotive park, Dublin county sheriff John Fitzpatrick, 68, has an intimate view of Ireland’s pain. For the past 32 years, it has been Fitzpatrick’s job to enforce foreclosures and debt collections, and he has never been busier.
Last year, his office handled 4,920 court orders for foreclosures and debt collections, nearly five times as many as the 1,035 in 2006.
“I don’t like it but what can you do?” Fitzpatrick said.
One case involved a man who threatened to commit suicide as sheriff deputies were repossessing his home. Fitzpatrick phoned the bank.
“They told me to forget it, to just walk away, and I think they left him alone,” he said. In another case, he was given a court order to evict a woman who was battling terminal cancer.
“I called the bank and just told them we weren’t doing it,” he said. “I think it just fizzled out.”
Ireland is debating legislation to allow those facing eviction to forfeit ownership, but to continue living in the home as a renter. That discussion is taking place even as the government introduces Ireland’s first-ever property tax, a $130 household charge that is being levied on the country’s 1.6 million households.
On March 31, 5,000 protesters marched through central Dublin to denounce the new charge and at least 1 million households refused to pay the tax before a March 31 deadline.
Meantime, mortgage delinquency is getting worse, said Martin, the Dublin lawyer. A recent Ireland central bank report shows 70,911 mortgages are in arrears of more than 90 days. That’s up from 62,970, or 8.1 per cent, in September.
“No one wants to run away from these debts, they’re just looking for a bit of breathing space,” Martin said. “It’s an amazing thing to see. These big banks are bailed out with taxpayer money and the next thing you know, they’re using that money to hire lawyers to try to evict people.”
Martin said his group now offers free legal advice to clients such as Harold, who also face an uncertain future because of Ireland’s unforgiving bankruptcy law.
Declaring bankruptcy makes it nearly impossible to own a home or borrow money for up to 12 years. A bankruptcy can also restrict the ability to travel internationally.
“In the U.S., filing for bankruptcy almost seems like a badge of honour, like at least you’ve tried,” Martin said. “Not here. You file for bankruptcy, and they might as well put you in the graveyard.”