Greg Connor:"more than 35% of mortgages arrears are strategic defaults"

Brendan Burgess said:
Hi gaius

Where are you getting this information from? Governor Honohan quoted it from an unpublished study. Has it been published yet?
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Same study. Reference to it here.
A Central Bank sample study showed that 32 per cent of residential mortgage holders in serious arrears were unemployed, or had a mortgage co-payer who was unemployed. Unemployment does not explain the remaining 68 per cent of arrears cases.
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Not yet published formally as far as I know.
 
Davy's has published a report on mortgage arrears which says

Yesterday, we launched our new report on Irish mortgage arrears. At 16.5% by value, Irish owner-occupier 90+day mortgage arrears have now met our expected peak. With early stage arrears still substantial, the 90+ day rate looks set to rise further. This is doubly disappointing given the 1.1% employment growth in the year to Q1 2013. It appears that mortgage payment discipline has weakened – hurt by constraints on banks in contacting delinquent borrowers and the lack of a credible threat of repossession.



However, the impact on banks’ provisioning of higher arrears cases is offset by the stability in the housing market. Also, to the extent that the higher rate of rate arrears reflects strategic non-payment, performance can be restored with a credible threat of repossession.
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maybe there is a link between a increase in standard variable rates on mortgages and an inability to service ones mortgage. I for one am finding it next to impossible to keep up the repayments on my mortgage.
 
A few more quotes from the report

These developments are especially disappointing given the stabilisation in labour market conditions. With employment rising by 1.1% in the year to Q1 2013, job cuts can no longer be blamed for the persistent and extended rise in arrears rates. Unfortunately, a confused regulatory approach, far too favourable to delinquent borrowers, has encouraged a weakening in payment discipline. Ireland now has significant numbers of solvent borrowers who can service their mortgage debt but choose not to do so.

Strategic non-payment of mortgage debt is probably more concentrated in the BTL sector, evident in banks' appointment of rent receivers to ensure rental income is not diverted. However, Central Bank Governor Patrick Honohan recently acknowledged that many delinquent owner occupiers in arrears are solvent. That is, they can pay their mortgages but have been slow to adjust their expenditure to their new circumstances, choosing instead to go into arrears on their mortgages.

Exacerbated by a confused regulatory response
The initial iterations of the Code of Conduct on Mortgage Arrears (CCMA) placed severe limitations on banks in contacting delinquent borrowers, breaking the golden rule that early engagement can avoid longer-term arrears. Furthermore, the government has only just passed legislation to address the 2011 Dunne ruling – preventing banks' from repossessing properties associated with delinquent loans. Without the credible threat of repossession and with limitations in contacting delinquent borrowers, it is not surprising that a weakening in mortgage payment discipline has emerged, especially with politicians encouraging unrealistic expectations for debt forgiveness.
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These developments are especially disappointing given the stabilisation in labour market conditions. With employment rising by 1.1% in the year to Q1 2013, job cuts can no longer be blamed for the persistent and extended rise in arrears rates.
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Maybe Austerity measures and higher variable rates on borrowers can ? Part time jobs are contributing to the marginal fall in unemployment rates.
 
There is also an element of people using savings to continue paying their mortgages after job losses. There is always going to be a lag between unemployment and arrears. Just because employment figures are stabilising doesn't mean that a rise in arrears can be automatically linked to people choosing not to pay.
 
demoivre said:
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Maybe Austerity measures and higher variable rates on borrowers can ? Part time jobs are contributing to the marginal fall in unemployment rates.
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+1. The numbers in full time employment have not increased. And most of the increase in part time employment are considered "underemployed".
 
Furthermore, the government has only just passed legislation to address the 2011 Dunne ruling – preventing banks' from repossessing properties associated with delinquent loans. Without the credible threat of repossession and with limitations in contacting delinquent borrowers, it is not surprising that a weakening in mortgage payment discipline has emerged, especially with politicians encouraging unrealistic expectations for debt forgiveness.
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I suspect massive negative equity coupled with the enactment of the new Insolvency/ Bankruptcy legislation has the banks worried about what they will have to deal with if they increase the rate of repossessions.
I don't think removing the limitations in contacting borrowers is going to make one bit of difference to arrears cases other than causing distress to families. The strategic defaulter will probably have the savy to deal with the additional phone calls and those who are in genuine distress can't pay anyway.
 
demoivre said:
I suspect massive negative equity coupled with the enactment of the new Insolvency/ Bankruptcy legislation has the banks worried about what they will have to deal with if they increase the rate of repossessions.
I don't think removing the limitations in contacting borrowers is going to make one bit of difference to arrears cases other than causing distress to families. The strategic defaulter will probably have the savy to deal with the additional phone calls and those who are in genuine distress can't pay anyway.
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Perhaps we're finally gone past the stage of daily phone calls and the odd later....maybe, just maybe the Banks are finally going to start getting real and start repossessing properties that are lost causes, thereby also flushing out the strategic defaulters who either start paying up again (incl arrears and interest) or surrender the asset

Charlie Weston in today's paper, based in part on the Davy report
http://www.independent.ie/business/...s-targeted-for-seizure-by-banks-29458021.html
BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.
A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.
 
Delboy said:
Charlie Weston in today's paper, based in part on the Davy report
http://www.independent.ie/business/...s-targeted-for-seizure-by-banks-29458021.html
BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.
A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.
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And the article continues :
"These are made up of residential and buy-to-let properties, according to calculations contained in a new report by [broken link removed].
An analysis estimates that what it calls non-cooperative borrowers number between 23,700 and 43,700.

FEARS
Letters threatening legal action have been sent to these borrowers."
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So are the banks threatening legal action or have they issued proceedings ? Big difference !
 
demoivre said:
So are the banks threatening legal action or have they issued proceedings ? Big difference !
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Yes, big difference but this does look like a step up in the way they've being dealing with this so far. I think we're entering the a new phase....be interesting to see how it plays out over the next few months
 
With the Dunne loophole still active, they can do little more than sabre rattle.
 
Time said:
With the Dunne loophole still active, they can do little more than sabre rattle.
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Are you sure the bill has'nt been signed off to close the loophole? Both houses of the Oireachtais passed it before the break. President then must sign off within 7 days. So I think it's now in force
 
Delboy said:
Yes, big difference but this does look like a step up in the way they've being dealing with this so far. I think we're entering the a new phase....be interesting to see how it plays out over the next few months
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Under the Mortgage Arrears Code, they must give notice of intention to take legal action to repossess.
Then, I think, they must issue a legal notice that they will issue proceedings.
Only then can they actually issue the legal papers.

Brendan
 
The new Insolvency laws and the Land and Conveyancing reform act 2013 are effective from today so nothing in the way of the banks from repossessing houses, other than the fear of the potential hammering to their balance sheets ! The quarterly arrears stats going forward will be interesting but I would wager that arrears will rise, a negligible amount of long term solutions will be reached with borrowers and repossessions will remain low. In fact I'd bet my house on it.
 
demoivre said:
The new Insolvency laws and the Land and Conveyancing reform act 2013 are effective from today so nothing in the way of the banks from repossessing houses, other than the fear of the potential hammering to their balance sheets ! The quarterly arrears stats going forward will be interesting but I would wager that arrears will rise, a negligible amount of long term solutions will be reached with borrowers and repossessions will remain low. In fact I'd bet my house on it.
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Bet all you want but the scenario you outline is what has being happening for the past 5 years. And see where we are now.
It simply cannot go on like this forever....something has to give
 
David Duffy, the Chief Executive of AIB, said on today's Morning Ireland that he estimated that the level of strategic defaulters was in excess of 20%.

In this, he included people who were paying their unsecured creditors such as the credit unions ahead of the mortgage. I have come across this a lot recently including one case, where I think that the mortgage is sustainable but the borrower has paid nothing to the lender for three months because they simply had nothing left over, while paying the Credit Union in full.

Brendan
 
People don't want to blob their own copybook locally. There is shame in defaulting on the local CU.
 
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