I think it is an interesting concept but I don’t think any of the banks here sell on individual non-performing home loans to debt collectors – do they? And things aren’t so bad here that you would be talking about cents in the euro (maybe for personal loans but not home loans and I’m not sure there’s much public appetite to help out personal loans) – maybe 40/50 cents in the euro? – the bank could probably do as well by repossessing and selling.
I also don’t know why it has to be a full charitable donation to the borrower. I can understand the need for a middleman to fund/facilitate the transaction but I think there are rarely cases where borrowers (certainly here anyway) are saying that they cannot afford ANY of their repayments – so if they can buy 100K of debt for 5K, why don’t they ask the borrower to repay the 5K so the whole thing is self-financing other than admin costs and float to keep them going.
There is of course already a (very unpopular) example of this sort of thing here already: the builder in Cork who went bankrupt, the bank sold his house (for maybe 40 cents on the euro? I can’t remember exactly) and it was his son-in-law who bought it at the lower price. So as a family, they effectively cleared the debt for 40/50 cents on the euro and still have the house.
With the way the home loan market here is structured, any charitable equivalent of the US concept would probably be better off buying up repossessed houses and gifting them back to the evictees – same concept (and cost) but not requiring bank co-operation with the charity.
I would be interested to know how the tax authorities would treat the ‘gift’. I know in the US if your mortgage provider writes off your debt, it is not considered a gift for tax purposes – but it is specifically a gift from your mortgage provider so a ‘gift’ from any other source might have to be taxed.
[Pepper bought GE’s entire mortgage book at about 40 cents in the euro to allow for sub-prime lending/non-perfomance within the book, they don’t buy (afaik) individual mortgages]