Brendan Burgess
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Long term arrears - over 5 years are falling while there has been some increase in early arrears. I wonder why long term arrears are falling?
Why is behind the fall in long term mortgage arrears?
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RonnieShinbal88
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A Sucknami?
I wonder is it sales? The natural life cycle along with buoyant prices?
Or is it' deliberate non payers' on low trackers who saw not paying as a cheap loan?
Or Irish salary increases?
Could be cyclical or have lenders been doing something different when engaging with those in long term arrears.
Brendan Burgess
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I am trying to get my head around the significant fall in arrears over ten years.
There are 4 ways in which arrears can be reduced.
So say a borrower has a scheduled mortgage balance of €200k and €180,000 of arrears ( 10 years at €1,500 per month) or a total mortgage of €380,000
1) Borrower retains their home and just pays off their arrears.
This would be very common for early arrears where someone misses a few payments but gets back on track and overpays for a few months and clears the arrears without any rescheduling.
It would require a big capital payment if the borrower is 10 years in arrears. For example, they inherit €180,000, give it to the lender and their new balance is €200k.
2) Borrower retains their home and the lender capitalises the arrears.
So the borrower engages and the lender adds the €180k to the €200k and so the revised scheduled balance is €380k with no arrears.
That is fine as long as the borrower is paying. It would be hard to capitalise 10 years of arrears as the borrower is presumably about 15 years older.
3) Borrower retains their home and the lender writes off some of the arrears as distinct from capitalising them.
This is very rare and, as far as I know, only happens as part of a PIA.
4) Borrower disposes of their home via a planned sale or mortgage to rent or repossession.
If the borrower sells their home for enough to clear the full balance, that is good.
With a MTR, the borrower must be in negative equity, so the bank writes off the negative equity and the arrears.
Not sure how arrears are reported after reposessions, but there are so few, it's not material.
There are 4 ways in which arrears can be reduced.
So say a borrower has a scheduled mortgage balance of €200k and €180,000 of arrears ( 10 years at €1,500 per month) or a total mortgage of €380,000
1) Borrower retains their home and just pays off their arrears.
This would be very common for early arrears where someone misses a few payments but gets back on track and overpays for a few months and clears the arrears without any rescheduling.
It would require a big capital payment if the borrower is 10 years in arrears. For example, they inherit €180,000, give it to the lender and their new balance is €200k.
2) Borrower retains their home and the lender capitalises the arrears.
So the borrower engages and the lender adds the €180k to the €200k and so the revised scheduled balance is €380k with no arrears.
That is fine as long as the borrower is paying. It would be hard to capitalise 10 years of arrears as the borrower is presumably about 15 years older.
3) Borrower retains their home and the lender writes off some of the arrears as distinct from capitalising them.
This is very rare and, as far as I know, only happens as part of a PIA.
4) Borrower disposes of their home via a planned sale or mortgage to rent or repossession.
If the borrower sells their home for enough to clear the full balance, that is good.
With a MTR, the borrower must be in negative equity, so the bank writes off the negative equity and the arrears.
Not sure how arrears are reported after reposessions, but there are so few, it's not material.
Brendan Burgess
Founder
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- 52,117
I am sure that there are examples of all 4 of these, but not enough to see a fall of 1,000 over a year.
Am I leaving out some other circumstance?
Am I leaving out some other circumstance?