While the U.S. government grapples with the question of mortgage debt forgiveness, the Ecuadorian government is moving to resolve the issue.
The Associated Press reports that Ecuador's legislature, in a 68-21 vote, has passed legislation requiring banks to forgive any outstanding mortgage debt by first-time home buyers with properties worth up to $146,000 if they default and forfeit a home.
Ecuador's Association of Private Banks did not publicly comment on the legislature's actions, although its director, Cesar Robalino, has previously stated that such a law would make it more difficult for borrowers to obtain a mortgage. However, Pablo Davalos, an economist at Catholic University, told the Associated Press that the legislation would benefit borrowers.
‘This law is positive for the consumer and negative for the banker, who now has to increase his reserves, and that means less liquidity and less profit for the bankers,’ Davalos said
Ecuadorian President Rafael Correa has spoken positively about the legislation prior to the assembly's the vote, but he has not stated if he would sign the legislation into law.
The United Nations' Economic Commission for Latin America and the Caribbean estimates that 63% of Ecuadorian families own their own home in a national market where mortgage interest rates range between 8.5% and 10.25%.
