RIGA, April 1 (Xinhua) -- The Latvian parliament's budget committee during a remote meeting on Wednesday endorsed a proposal to allow banks unilaterally write off people's mortgage debts that have been accumulated since the 2008 financial crisis, the parliamentary press service informed.
The Latvian central bank and Finance Latvia Association recently came up with the proposal to provide a legal solution that would allow writing off unrecoverable mortgage loans.
MP Martins Bondars, who chairs the budget committee, said that lawmakers now expect the authors of the proposal to draft their version of the bill, which could then be debated in parliament.
The idea is to include the provision in the personal income tax law, by setting out the basic principles for writing off mortgage debts that are considered unrecoverable. Banks will be able to unilaterally write off the mortgage loans their clients took out before the financial crisis broke out at the end of 2008, leaving many borrowers unable to pay off their debts.
Latvia saw a huge lending boom before the 2008 crisis, but the precipitous income drop caused by the crisis left many people struggling and pushed them out of the legal economy. These debts are essentially unrecoverable and should therefore be written off, Bank of Latvia Governor Martins Kazaks told lawmakers.
According to the central bank's data, there are currently around 13,000 people in Latvia who are still unable to pay off their old mortgage loans taken before the 2008 crisis, with their debts totaling an estimated 600 million euros.
Some banks in Latvia are already offering settlement programs to their indebted clients, according to Finance Latvia Association.