Legal Effects of COVID19 payment breaks on mortgages

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The pandemic brought on by COVID19 has led to a shutdown of Ireland’s economy. This rapid deacceleration to all aspects of Irish life due to the COVID19 lockdown has had immense effects on many parts of Ireland’s economy, from economic to social activity. This mass disruption to all walks of life in Ireland has largely decreased employment numbers across the nation, which also led to a significant drop in income levels for the newly unemployed. This unfortunate set of circumstances has the dire potential to create financial issues for individuals, households and businesses with prior financial obligations. Mortgages for homes and businesses are likely potential sources of financial issues in the current pandemic.

The Irish government instituted a variety of emergency schemes to lessen the income and employment loss to much of the Irish populace. The Irish government tried to decrease the income shock to the newly unemployed as well as support the retention of employees by implementing COVID19 unemployment payments in addition to the temporary wage subsidy scheme. These schemes were put into place as a response to the rising unemployment and income lost by Ireland’s denizens as a result of the pandemic. By implementing these schemes, the question has shifted from if the Irish government will implement these schemes to how long these schemes will and who is eligible for them. Answering these questions is crucial to mortgage borrowers whose financial security may now rely on these schemes for the duration of the pandemic.

Financial service providers are also trying to help Irish denizens during the pandemic. These actions are taken separately from the Irish government’s implementation of emergency plans to help the Irish populace. In response to the mounting financial pressure unexpectedly forced upon the general public, financial service providers are offering reduced payments for borrowers as well as payment breaks for borrowers who are currently dealing with financial hardship as a result of the pandemic. This collective action from many financial service providers was not a result of legislative action on behalf of the Irish government; it was a voluntary industry initiative put forth by the Banking and Payments Federation Ireland.

The decision by financial service providers to provide payment breaks or reduced payments was born out of necessity. It is a lot easier for financial service providers to negate the risk of a potential default on a loan instead of having to deal with clients defaulting on their loans, which hurts all parties involved.

The COVID-19 payment breaks do not reduce the financial obligations that borrowers are expected to pay out to financial service providers in accordance with the contracts that both parties signed. This relief plan acts as a temporary change in the payment schedule and is not meant to be a permanent reduction in the amount agreed to be paid as a part of the loan agreement. This is shown in the fact that while borrowers may apply for payment breaks, they are required to discharge costs that may arise from the deferral of payment.

This article was written by Ian, an intern at Irish Mortgage Brokers and from the USA.