Single mother risks losing her apartment

REYKJAVIK Four years after the financial crisis struck Iceland people are still struggling, despite efforts from the government and reports of economic recovery. Lísa Björk Ingólfsdóttir is one out of over a hundred Icelanders who currently risk loosing their homes.

By Axel Kronholm

Lísa Björk Ingólfsdóttir. Photo: Axel Kronholm

When I first arrive at Borgarholtsbraut I think I must have gotten the address wrong. Lísa Björk Ingólfsdóttir’s name is nowhere to be found on any of the doors to the two apartments in the big white house, a few miles outside of central Reykjavik.

After looking around for a while, I realize there is another apartment in the basement of the house. She greets me in the backyard and invites me in.

The floors and the electricity in the four-room apartment are old – she got a good deal when she bought the place in 2004.

”It’s no luxury villa I’m living in” she says.

Nevertheless, it’s her home, as well as the home of her daughters, aged 5 and 15. She is divorced, and her son is 18 and living on his own.

”I’ve painted it up myself and was supposed to do the rest of the renovating later, but the crisis came first”, she says.

Lisa Björk Ingólfsdóttir has a Masters degree in corporate finance and was working as an accountant when the financial crisis hit Iceland. Since she was one of the more recently employed, she was also one of the first who had to go when her employer started cutting back in the beginning of 2009.

”I was not one of those who borrowed everything to buy my home. 40 percent of the money was my own, and the rest loans.” she stresses.

But the effects of the crisis were not confined to the reckless spenders. Even the ones who kept their jobs have had to put up with rising food and gas prices as well as higher taxes.

Everyone who had taken a loan got deeper in debt when the inflation skyrocketed. Lisa Björk Ingólfsdóttir’s mortgage inflated from 13 million Icelandic krónas to 22 million. To handle the situation, she decided to seek help from the debtors ombudsman, put in place by the government in 2010.

Thousands seeking debt relief

The purpose of the ombudsman is to facilitate debt mitigation between people in debt and their banks. The ombudsman tries to get the bank to agree to a deal, where the debtor can have his or her debts frozen for a period of six to twelve months and instead pay at least 60 percent of the would-be market rent on the property they own.

This is meant to give the persons in debt a temporary break from their creditors, and a final chance to improve their situation and to start paying off their debts. The ombudsman also suggests ways for the people to economize and raise money to pay the bank, such as selling one’s car.

Although, of the 200 people currently undergoing debt mitigation, about 120 of them, including Lisa Björk Ingólfsdóttir, are either unemployed, retired or on benefits and have small prospects of improving their financial situation in the immediate future.

Svanborg Sigmarsdóttir is a spokesperson at the ombudsman office and explains that ”about a third of them [the persons seeking debt relief] are single women, another third single men and one third couples. It’s common for the single women to also be single parents.”

Over 3000 people have been accepted for debt mitigation up until now. If the creditors do not believe someone will be able to make the payments brokered in the deal, they can ask for forclosure. That is the decision they have made in Lisa Björk Ingólfsdóttir’s case.

”They basically said you don’t have anything to pay off your loans with so you will have to sell your apartment. I said that’s not going to work. The lenders want their money. I do understand that but I don’t have them. Not right now. I’m still seeking a job and I have to take care of my children, so I can’t agree to this.” she says.

Help from the media

Lisa Björk Ingólfsdóttir was determined to fight the decision. She felt the bank had been unfair in their unwillingness to compromise and thought that she at least deserved a chance. The same day she was told her house would be put in the market, she contacted the media.

RÚV central news desk. Photo: Axel Kronholm

Next day RÚV, the public service radio and television network on Iceland, aired an interview with her where they also brought up the situation for the 200 people in debt mitigation.

”Almost no one had heard of this before. When I called RÚV they said they it was totally new, even to them”, Lisa Björk Ingólfsdóttir says.

The news report sparked some debate on the issue, and even prompted the Minister of welfare to make a statement on the radio, saying he would look into the matter. Whether Lisa Björk Ingólfsdóttir’s own situation will improve because of her decision to go public, it is still to soon to say.

”I just felt I needed to make this known. I couldn’t remain silent.” she says.


High rents limit options

Rents have increased, which limits the options for people like Lisa Björk Ingólfsdóttir. Higher demand is one reason for the increase. Furthermore, the landlords also have debts to pay and need to raise money themselves.

Today, average rents range from 120.000 to 150.000 króna (700-900 euros) a month. After food, clothes, electricity, gas and other necessities, she has 15.000 króna (around 90 euros) of her benefits over for rent each month.

”Obviously, if I can’t pay the deal offered by the ombudsman of 60 percent of market rent, I won’t be able to pay a 100 percent once I lose my house.” she says.

I ask Svanborg Sigmarsdóttir what happens to the ones who lose their homes.

”It’s difficult to say. I know there are some who have moved into their parent’s houses or live in a garage.” she says.

No luck on job market

Lisa Björk Ingólfsdóttir’s plan was to find a new job while in debt mitigation, but her efforts have been futile.

”The job market is not improving in any way, mainly because of higher taxes and because it’s more expensive to hire an employee today. The crisis is far from over. Companies are still going bankrupt.” she says.

Unemployment statistics show that in February 2012, a total of 12,600 people were out of a job. That puts the unemployment rate at 7,3 percent – the highest point in eight months.

That is a rate some southern European countries would be happy to have, but one needs to compare this to the pre-crisis situation on Iceland, where unemployment averaged just over 2 percent (2.3 average in 2007).

Instead of imposing harsh austerity measures on the public, Iceland’s left-wing government decided to raise taxes and let the banks take a considerable share of the burden.

This approach has been applauded by ideological sympathizers all over Europe. However, there is much more to be done. Hundreds of people are still seeking help from the debtors ombudsman because they are not able to pay their debts.

While the absence of harsh austerity has been a relief, the government’s alternative is not without cost. Increased taxes on for instance gasoline squeezes the marigins even further for families like Lisa Björk Ingólfsdóttir’s.

Cutting back on food

Lisa Björk Ingólfsdóttir offers me a cup of coffee and I ask her in what ways she’s tried to economize and raise at least some money to pay her debts. Food and clothes is the first thing she mentions.

”I need electricity, and to look for jobs I need a phone and a computer. Buying cheaper food and cutting back on clothes are the only things I’ve been able to do”, she says.

One of the ombudsman’s suggestions to Lisa Björk Ingólfsdóttir was that she should sell her car. It is hard for anyone who has not experienced Reykjavik’s public transport system to grasp the severity of such a suggestion.

Since most people drive, public transport is both underfunded and underdeveloped. Lisa Björk Ingólfsdóttir believes it would be impossible for her to hold down a job if she had to rely on public transport to drop off and pick up her youngest daughter from kindergarten.

Besides, her car is old and would not bring in much money anyway.

”I inherited it from my father who passed away two years ago, so it also has a lot of sentimental value for me”, she says.

Hesistant post-crisis solidarity

Her friends have been very helpful and offered their moral support. Others are less sympathetic. The effects of the crisis are unevenly distributed in the Icelandic society and a lot of families haven’t been affected at all. Or if they have, it has been in the sense of going on holiday to Spain only once, instead of twice, a year.

At a dinner party I attended earlier in the week, the guests were even making fun of the crisis. Before biting into the roasted leg of lamb, they were talking about the spa treatment they had been to earlier that day.

”Oh, we are such victims, aren’t we?” they said and laughed.

Lisa Björk Ingólfsdóttir believes there is an unwillingness among the ones who have made it through the crisis unscaved to admit that there are still big problems.

”But that’s the way it is. I’m not asking for sympathy either. Most of my anger is directed towards the government. They promised real solutions when they were voted in in 2009.” she says.

Government action is indeed what Lisa Björk Ingólfsdóttir is hoping for. She thinks they need to do something to prevent her, and the other persons and families for whom the debt mitigation have failed, from ending up on the street.

The welfare minister, Guðbjartur Hannesson, has met with the debtors ombudsman to discuss the situation, but after that the government has been silent on the issue.

Recovery on the macro level

Reports about recovery has become a dominating theme in international news regarding Iceland. This narrative feels outlandish to Lisa Björk Ingólfsdóttir. She regularly helps out at Fjölskylduhjálp Íslands – a help center in Reykjavik – where the need is getting bigger every week.

Outside Fjölskylduhjálp Íslands. Photo: Axel Kronholm

When I visit the help center, a few hundred people are crowding at the door for the weekly hand-out. Everyone is assigned a number and called in a few at a time, where they get a few litres of milk, some bread and some fish.

Ásgerður Jóna Flosadóttir is in charge and tells me they expect around a thousand people to show up throughout the day. However, half of them will go home empty handed – there just are not enough supplies.

Hjörtur Howser, one of the volunteers, laughs out loud when I bring up the subject of economic recovery.

”If there is any recovery, it’s only in Excel-documents in computers. Here on the ground we can only see how the situation is getting worse.” he says.

Lisa Björk Ingólfsdóttir is just as baffled when she reads optimistic news about the progress in Iceland. ”We certainly don’t feel that. I don’t know how they create those numbers.” she says.

The weekly hand-out includes three litres of milk. Photo: Axel Kronholm

No back-up plan for Lisa

The lights are out in Lisa Björk Ingólfsdóttir’s living room. It is noon, but the windows do not let in much light. The only place in the apartment lit up is the hallway mirror where she keeps pictures of her children.

I ask her what her backup plan is and where she will go if she loses her house. Her first response is a simple shrug.

”I honestly have no idea where I will go. I don’t really have any family or friends that can take us all in.” she says.

Lisa Björk Ingólfsdóttir’s older daughter will start high school next atumn. ”This whole experience has been really tough on her. Her life has changed dramatically. Since we always have to save money she can’t have the same kind of clothes or do the same things as the other girls.” she explains.

On top of that, there is the uncertainty of not knowing where they will live in a few months time. The youngest daughter is five years old, and still unaware of the situation.

”I just don’t know how I would explain it to her.” Lisa Björk Ingólfsdóttir says.

A glimpse of hope

Three weeks later, when I talk to Lisa Björk Ingólfsdóttir over the telephone, she has some positive news. The ombudsman has been able to, as she puts it, move some numbers around, and has come up with a deal they think the bank might accept.

”It’s something, at least. I only hope the bank will go for the deal. That way, I’ll get them of my back for another year.” she says.

The deal would give Lisa Björk Ingólfsdóttir a break from the bank for another year if she is able to pay the bank 60 percent of the market rent on her apartment. This might be her last chance, and she says she is determined to meet her part of the deal as long as the bank agrees to it.

She is convinced that the media attention she created has helped in getting a deal together.

”This shows that it is worth fighting” she says.

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