RIGA, July 9 (Xinhua) -- In the final reading on Thursday, Latvian lawmakers passed legislative amendments enabling lenders to write off the outstanding mortgage debts left from the 2008 financial crisis, local media reported.
At the beginning of this year, the Latvian central bank and Finance Latvia Association came up with the proposal to provide a legal solution that would allow writing off unrecoverable mortgage loans.
Under the new provisions, banks will be able to write off the outstanding loans granted before 2008 to individual home buyers. The new law also allows writing off guarantors' debt obligations and ceded obligations.
The written-off debts will not be liable to taxation as they will not count as income.
Some Latvian credit institutions have already been implementing various debt settlement programs to help mortgage holders to get rid of their old debts, but these solutions required concluding a bilateral agreement between the lender and the borrower. Under the new provisions, banks can write off the unrecoverable mortgage debts unilaterally.
Latvia saw a huge lending boom before the 2008 crisis, but the precipitous income drop caused by the crisis left some people struggling. These debts are essentially unrecoverable and should therefore be written off, Bank of Latvia Governor Martins Kazaks told lawmakers in April.
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 (680 million U.S. dollars). Enditem