Karl Deeter "Some borrowers are going into arrears on purpose"

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livEwirE

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This kind of thing REALLY infuriates me, it's shocking to think what some people will stoop to :mad:

Karl Deeter: Up To 25% Of Those In Mortgage Arrears Are Lying

http://www.broadsheet.ie/2012/04/02/karl-deeter-up-to-25-in-mortgage-arrears-are-lying/

Responding to today’s story about Permanent TSB’s http://www.independent.ie/business/irish/permanent-tsb-sets-aside-14bn-in-bad-loan-provisions-3068090.html (bad loan provision,)Karl Deeter, of [broken link removed] appeared on Newstalk at lunchtime with Jonathan Healy.

Jonathan Healy: “You mentioned Permanent TSB there. They made a loss of, was it €424 million that was announced today? But more significantly, in those figures, 12% of their mortgage book is more than 90 days in arrears. How much of a problem is that going to be for PTSB? Because with the way the market is at the moment and the way people’s pockets are at the moment, that’s not going to be going in the opposite direction any time soon?”

Karl Deeter: No, it won’t. And as a matter of fact, a lot of the banks have said that, lately they’re seeing an advancement in the level of arrears and it’s being caused by people thinking that they might get some kind of debt deal that is being caused by changes that the Financial Regulator made and how often you can contact people. And I’ll be honest, those figures are going to come out.

Healy: “Is this the moral hazard? Is this the moral hazard everyone was being warned about earlier on? That people are now sitting back thinking that they’re going to get a better deal? Because I don’t think that that’s what’s happening out there, Karl?”

Deeter: “No the banks aren’t doing deals. But people think that they might get one. And I’ll be honest with you Jonathan, those figures are going to come out soon because banks haven’t been measuring them but they’re starting to be asked for them. When people see the amount of mortgages that are in arrears that don’t need to be, I think it’ll be a couple of days’ headlines in that alone.”

Healy: “Are you honestly telling me that there are people out there who are chancing their arm at the moment, who can actually afford to pay their mortgage who are telling their bank, ‘I can’t'?”

Deeter: “Oh yeah. Yeah. That’s…”

Healy: “How many?”

Deeter: “The lowest estimate that we’ve heard from collection teams, and I’ll tell you why we started to look into this originally is because I have people coming to me for mortgage consultation who I’d say to them ‘I don’t..’, ‘I can’t seem to see what your problem is?’. And they say ‘well, you know I don’t want to have to give up X’. And what they’re doing is, effectively, strategically making the decision that they wanted to bet on their own case rather than for the banks. And typically you see landlords saying ‘look, if you had a business that was turning over €6,000 but costing you €10,000. What would you do? You’d shut it down.’ And it is certainly happening on the investment side, in a powerful sense. The lowest estimate we’ve heard is around 12% of the arrears.”

Healy: “The investment side is…”

Deeter: “No I’m talking about in general, when you generalise it…”

Healy: “12%?

Deeter: “Yeah. The lowest that we’ve heard. The highest that we’ve heard is that some collectors reckon that as many as 1 in 4 are..eh..don’t need to be in arrears.”

Healy: “OK. And basing that on relative good information and just putting it out there to make the situation for the banks look better?”

Deeter: “I’ll be honest, that is more than likely to appear in one of the papers tomorrow, I probably shouldn’t have covered it with you. But the thing is, it is based on conversations had with executives in banks, and I mean at board level. It has to do with going through conversations with collection teams in different companies. And it…no-one will go on the record with it. But what I am finding out, certainly, off the record, that those are the estimates. It’s a shocking number and I think that it’s a total finger in the eye to the people who are in genuine trouble, who aren’t in this situation by choice. And certainly with people who are strategically defaulting I think the banks should move in on them instantly. And instead focus any kind of resources or any kind of forbearance on people who have lost jobs and people who aren’t doing it because they want to.”
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Listen[broken link removed]
 
Karl Deeter is believing the executives at banks and those involved in the collection teams that people are just not paying in the hope of getting a deal?

To quote Mandy Rice-Davies (someone I would hold in higher esteem and regard than bank executives) "Well, they would say that wouldnt they!"
 
I have no idea what the figure is, but there are certainly some people who could pay their mortgages on time who are not doing so.

I haven't heard any bankers say this, but I would know people who don't see why they should cut down on their second holiday or take their children out of private schools "just to pay the mortgage"

And I have spoken to people with investment properties who seem to think that the investment property income and expenditure is ring-fenced from their own lifestyle. If the rent does not cover the repayment, they say that is the bank's problem. They can only pay the rent and no more.
 
We must move in different circles Brendan. I cant speak for people with investment mortgages but I certainly know people who are struggling to pay mortgages.
People I know who have cut back everywhere just to ensure the mortgage is paid. While I cant say I know people who have cut back on food to pay the mortgage I certainly know plenty who have had to make savage cuts in their lifestyle spending and did so willingly.

I know none who are in arrears and still continue a lifestyle akin to Celtic Tiger years.
 
I know people paying mortgages who are finding it tough to make ends meet and pay the mortgage on time even though they are managing to do so, however I know one person in my circle of friends who could pay her mortgage but openly says that she isn't paying the full amount each month and has been doing this for some time in the hope that a deal will be made for those in arrears!
 
I am sure there are people who are acting the maggot with investment homes. A fool would argue otherwise. But has he talked to people about why they are in arrears on such properties? Did it enter his mind they are paying the mortgage on their PPR out of fear of losing it!

Mr. Karl, people who are in family homes and in arrears, none of which is really in their control, it is highly unlikely if not reckless to suggest they are deliberately staying in arrears in the hope of a 'bank deal'.

Everyone knows there will be no bank deal, the numbers are too lethal to even contemplate.

Believe me, the fear of losing my home far outweighs any distant hope of a bank deal. My arrears are present and rising.
I don't want a deal for my arrears - I want a fair interest rate. Then my arrears go away over time - real basic stuff.

I doubt the customer would come off scott free in the event of a deal of sorts on any arrears. There is always a catch. Always.

And as usual there is fudging of the numbers. Bad loan provision - Is this 'loans' that have gone bad, commercial, personal and so on, or is the fact PTSB is owed a fortune in self generated arrears from mortgage hikes and they have been tagged onto the figures for padding out the story. Suggestion for you PTSB.

Put the rates back down, factor in the reason for genuine arrears that you and your banks buddies caused then get your abacus out again.

I know people who don't eat properly or heat their home because of the fear of the 'bank'

The utter cheek of you to suggest a percentage of people are deliberately in arrears and absolutely nothing to substantiate it.

Immature speculation in a time when people are suffering on all levels of their existence because of arrears.

Yours sincerely, always suspicious.
 
As I'm being mentioned I thought I might reply.

The interest in this area came from my work as a working financial advisor, people were coming to me for consultations and I quickly established that they could pay, but they didn't agree with (insert whatever reason you want here).

Then I got information off the record from bank executives, granted, you can call 'vested interest' if you want, they had no reason to lie.

Then there are the collectors who I double checked with - many of whom are friends and former brokers, they have no incentive to lie to me or to be dishonest.

Last of all were banks talking off the record.

I appreciate that the vast majority of people in financial trouble are genuine cases, I also know - without a shadow of a doubt - that there is a sizeable contingent who are intentionally managing their affairs to their own gain/the banks detriment, when they have the capacity to meet those repayments. Just because it's an uncomfortable topic doesn't mean it isn't true, and frankly I find it a real slap in the face to the genuine cases, the debate should perhaps focus on allowing banks to move quick on these cases while advanced forbearance is reserved for deserving cases.

btw: Thanks D for pointing out the thread.
 
I'm sorry MortgageGuy,
I find it impossible to believe anything out of the mouth of a banker or anyone linked to them. They have always been out for themselves and that hasn't changed even in light of the meltdown they played a large part in. They have contantly changed the goal posts.
But as I asked my bank manager, at what point does the bank stop being nice to you over arrears?
They are under vast pressure thanks to their stupidity and they are sure to move on investment portfolios first. I say first cautiously in the hope they will always have a level of forbearance to PPR's, but how long will that last?

I totally agree with any measure of severity a bank may enact on a customer who is deliberately 'defaulting' for any amount.

I understand you are on the front line to gather the facts. Since we are this far into the meltdown, surely mortgage providers would have sussed out the fibber from the ill fated by now. The financial means statement is fairly indepth and the bank can and do ask for supportive proof to the customers claim - I know. So anyone walking in saying they are poor, had better have a real good story and proof.

Do you have any approximate details of the amount of people who are acting the maggot or genuinely knee deep in it.?
1 in 4 arrears customers are possible messers?
I suppose it's like welfare cheats - there will always be some stretching the system
 
I loathe what the banks done to this country and the vultures at the top of them in particular but I am well aware from personal knowledge of a small number of people who are "managing" their mortgage to give the impression to the financial institution whom they have borrowed from that they are in trouble paying their mortgage in the hope of getting a reprieve of some sort down the road. The people I know are doing this with their home mortgage. There are also other people I know who are having a very miserable life trying to make sure that they pay their mortgage. I am not involved in the financial industry but I have to agree with the general trust of the last post of MortgageGuy. My heart goes out to the people in genuine trouble.
 
Plus one Dermot..I guarantee you all that I know people who are doing exactly the same as the poster above said..
 
MortgageGuy said:
As I'm being mentioned I thought I might reply.

The interest in this area came from my work as a working financial advisor, people were coming to me for consultations and I quickly established that they could pay, but they didn't agree with (insert whatever reason you want here).

Then I got information off the record from bank executives, granted, you can call 'vested interest' if you want, they had no reason to lie.

Then there are the collectors who I double checked with - many of whom are friends and former brokers, they have no incentive to lie to me or to be dishonest.

Last of all were banks talking off the record.

I appreciate that the vast majority of people in financial trouble are genuine cases, I also know - without a shadow of a doubt - that there is a sizeable contingent who are intentionally managing their affairs to their own gain/the banks detriment, when they have the capacity to meet those repayments. Just because it's an uncomfortable topic doesn't mean it isn't true, and frankly I find it a real slap in the face to the genuine cases, the debate should perhaps focus on allowing banks to move quick on these cases while advanced forbearance is reserved for deserving cases.

btw: Thanks D for pointing out the thread.
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Can you produce facts to back up your claims other than the opinions of vested interests?
 
itsallwrong said:
I'm sorry MortgageGuy,
I find it impossible to believe anything out of the mouth of a banker or anyone linked to them. They have always been out for themselves and that hasn't changed even in light of the meltdown they played a large part in. They have constantly changed the goal posts.
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If your starting point is that due to the industry I work in I am incapable of telling the truth then there is little point in discussing this. I would also remind people that I represent clients (private people) not the bank, while we do make money from banks our ultimate customer is the borrower, not the lender.

That aside, much like any system open to abuse there are those who take advantage.

I stumbled upon this as a financial advisor first, figured that the marginal case wanted somebody in their corner, but then I heard it more often from more sources.

The defence that a person fills in a Standard Financial Statement which catches everything is idealogical, lots of people can change how their incomes look - if this wasn't the case Revenue wouldn't release stats on the black economy showing that (for instance in the professions) that there is widespread underpayment of taxes, last time around Dentists and Accountants were particularly hit hard - and rightly so.

There are a number of ways to do this, and the more you get into it the more you spot the loopholes in the system.

Naturally, we should empathise with genuine cases, but perhaps not for those where abuse of the system is taking place. It is common on investment properties - often where a bank tries to go to capital and interest rather than interest only.

If a business cost 10k per year but only earned 5k you'd close it down, that is what some people are doing, but they can't close down the debt at the same time. It's a highly uncomfortable topic, over on politics.ie it is being discussed and in the main a lot of people there are busy being insulting rather than furthering the debate.

Everybody knows this is happening, we just can't talk about it - banks don't want to in case it sparks more moral hazard when people realise it is really easy to skip a few months payments and the repercussions are minimal (other than wreaked credit).

The banks won't comment publicly, some don't keep measurements of the size of this problem, others do and won't release the figures, but if you are tenacious and talk to enough people you get a general idea of the size of the problem and it's big.
 
The European Banks are borrowing money from the ECB at 1% and lending it at higher rates, i.e 4 and 5%. The profit allows the banks to recapitalise. As soon as the banks are recapitalised and healthy you can bet your bottom dollar they will pursue non performing loans vigourously and where appropriate pragmatically.

I wonder if the Irish banks reluctance to act is financial ( under capitalised ) or political? Either way the inaction is creating a stasis in our economy. Moral hazard aside, debt forgiveness is a must to increase consumption and improve our domestic economy ( the export led recovery is not working ). If the banks cannot fund widespread debt forgiveness, then they must pursue non performing loans. Forebearance without any deleveraging is just prolonging the agony.

Whatever your opinion on default, strategic or otherwise, its the banks/ govt that are creating the stategic speculation through inaction.

Compulsive viewing, if it wasn't so serious it would be very entertaining.
 
The_Banker said:
I know none who are in arrears and still continue a lifestyle akin to Celtic Tiger years.
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Oh yes you do. We all do. Simon Kelly, business man and son of developer. Despite being bust wasn't he able to go into court and the judge allowed extraordinary family expenses, including school fees to not be included when assessing his means to repay his mult million pound debts.

But wait, he's different, he is an a different circle of friends to you so you wouldn't have met him or the rest of them. As he's different along with the boys in Nama, we can't be letting the little people have a Nama, or debt right down and then there's the moral hazzard to think about. Moral hazzard if you're a little guy of course, difference rules for different circles. Isn't Sean Quinn broke, able to go into court with less than 20K. Able to go to the Highest court in the land despite being broke. But hey he still lives in a mansion and lives a millionaires lifestyle. Sean Fitzpatrick, going bankrupt. Nope no change in lifestyle there either. etc etc etc.

So to the OP, you're shocked. How dare ordinary people do what they can to survive, how dare people priorites their home loans over their investment property. Banks have been hounding people, telling them what grocery shop they can go into (we had posters here on AAM on this) and people on here worried sick about whether to pay their utility bill or mortgage.

Are people not being smart not paying the investment and instead paying their home loan and family bills. And how are they any different to the people I've mentioned on this thread, plus all the other guys in Nama.
 
The_Banker said:
Can you produce facts to back up your claims .....?
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Is there anything wrong with Karl Deeter discussing anecdotal evidence from clients, industry insiders and observers?

Did anyone hear the interview with Noeline Blackwell from Flac on RTE 1 this am? She offered some counter points.
 
The_Banker said:
To quote Mandy Rice-Davies (someone I would hold in higher esteem and regard than bank executives) "Well, they would say that wouldnt they!"
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Let's think this thru, if the banks are saying this now, why now. What is their aim. They want to scupper or thward the new insolvency legislation. That's what they are at. I'm convinced of it.

Have the bank not already been paid for the defaulting loans?

If tracker mortgages are transferred to Anglo, will they be sold at a loss/write down. And wouldn't it be far better for banks to take hits on investment properties and put them at a level that borrowers could sustain. Instead of this absolutley idiotic interest only being rolled over, debt never reducing, and a false idea that somehow things will be solved when property rises again.

Maybe if their are strategic defaulters they are doing the right thing as the banks are not ? (I wrote this before reading Springsteen).
 
I dont think that imputing motive (claims of "vested interest" or some "bank industry conspiracy") is helpful in this discussion.

Karl Deeter in the course of an interview about massive losses at PTSB stated that he suspects that there is some "strategic default" happening. Many people have challenged the assertion and Karl Deeter has defended the assertion.

Bronte said:
Could you tell us what was said, it would help in debating the issue.
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The Irish Times also had an interview with her.
 
I'm sure that what Karl Deeter has said is correct, but I wonder if it's not counterbalanced by (as people on this thread have said) people paying their mortgage on time and in full and neglecting normal living expenses.

There was the case of the guy in Kerry last year who claimed that his children were eating cardboard cereal boxes while he was paying the mortgage in full and he hadn't even bothered contacting the banks to re-arrange his finances.

There have also been many threads on here with people looking for deals with the banks without really explaining how or why they can't meet their mortgages and I'm sure a lot of that is down to exorbitant lifestyle expenditure and hoping for deals.
 
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