ptsb before Oireachtas Finance Committee

http://oireachtasdebates.oireachtas.../committeetakes/FIJ2014040900003?opendocument

Ciaran Lynch : Do you offer split mortgages to those in positive equity as well as negative equity

ptsb: We have offered 4,000 to over 90 days and 3,000 to below 90 days.
positive equity/negative equity is not a factor.

We have not yet completed a Mortgage to Rent scheme, but we would like to. We have 100-150 customers where it might be suitable.

The problems are many
1) The process is fraught - too many bodies - housing association, housing bodies, local authorities,
2) income thresholds and valuations (220k max in Dublin; 180k outside Dublin) exclude many people.

The banks are working with the Housing Authority to see what we can do to resolve these issues.

We can't control this proposition which is why we are on zero on it.

CL: You have very high Assisted Voluntary Sales - 1,300
After the disposal, what are you doing with the shortfall

ptsb: 1) The shortfall is the responsibility of the borrower. If they can contribute to the shortfall , we would expect that. If they can't, we won't pursue it. We have learned a lot on our journey. We have no monopoly on good ideas.

The AVS has the least take up. We are piloting an idea now with up to 200 customers about doing a deal on the shortfall, before the Assisted Voluntary Sale.

We have not written off anything yet. We just don't pursue it.

CL: An AVS with a shortfall is not a resolution process?

Masding: We do write off the shortfall on a case by case basis.

Michael McGrath: What percentage of your customers are not engaging at all?

ptsb: 15% to 20% are not having meaningful engagements. They might be engaging but not meaningful.

McGrath: How do you define a sustainable mortgage? How do you measure it

ptsb: 1) Certainty
2) Is there a clear path to repayment of the capital before the end of term or an extended term?
3) Sometimes, that affordability is not there. And selling the property is seen by the CB as a sustainable solution.

The mechanics
1)The customer completes an SFS
2) The form is validated by a team in Dublin
3) The underwriter will make a decision and look at cash flow

McGrath : You have 10,000 closures "repossession, AVS" , so you have 3,000 in this process who are less than 90 days in arrears.

3,000 people under 90 days have had Assisted Voluntary Sale proposed to them.

ptsb: Yes. If we deem the mortgage unsustainable early on, it's in the interest of the borrower. The arrears status is a secondary consideration. The mortgage might be just unsustainable.

A lot of the people in the 3,000 have been in forbearance for years and so are not in arrears. But the mortgage is still unsustainable. There is no long term solution.

McGrath: 10,000 are about to lose their homes. That belies the government's claim that it's a "last resort".

ptsb: I would caution about saying that 10,000 will lose their home. The issue of a legal letter does not mean it will end in repossession. It often encourages them to engage.

35% of customers engage with us meaningfully (An SFS and meeting) after the legal letter. We have found solutions for 70% of those 35%

McGrath: How will you make money out of free current accounts?
Masding: Current accounts are a valuable sort of funding for us. By putting the threshold at €1,500 we have got a lot of money. We have no intention of charging fees in the future.

McGrath: The future generally - have you a viable future? Will you come through the stress tests without new capital from the taxpayer?

Ciaran O'Donnell (sharing time with Simon Harris)

A quarter of long term proposals are legal?

You are only achieving your targets through legal proceedings?

Were you given any targets by the CB for the legal proceedings?

ptsb: No

Positive Equity Paradox
People coming to us in PE are at a disadvantage.
What percentage of your mortgages are trackers? 2/3rds .
Of the 11,707 and the 5,300 , how many were in positive equity

Around 50% of accounts are in positive equity.
On buy to lets - 20%

How many split mortgages are in positive equity?

ptsb: We don't look at that.

CO'D. What do you do with someone with a cheap tracker and positive equity.

ptsb: Chances are that they will meet the affordability criteria.

CO'D: How many of your legal proceedings , AVSs etc are in positive equity.

ptsb: We are losing €75m to €100m on our tracker book on a costs of funds basis.

CO'D: If you get rid of a tracker in arrears, does it improve your balance sheet.
ptsb: We don't seek to do it. We have already provided for it, so it does not affect it at the stage of repossession. A very marginal impact.

CO'D: How many of your splits were in positive equity?
The worry I have is that the institutions are bloodhounds seeking out positive equity , especially those on cheap trackers.
What comfort can you give Mr Masding.

Mr Masding: I absolutely assure you that the arrears management process starts with mortgage affordability.
I reassure you that myself and my boards and my shareholder, do not consider equity or balance sheet.
Shane O'Sullivan: That is absolutely correct.

Pearse Doherty
(I took a phone call so missed most of what he said)

Set out a hardship case of an elderly, sick couple, told to vacate their home. How do you deal with vulnerable cases?

ptsb: We have a hardship committee that looks at these cases. That particular case has had some positive developments recently.

Doherty: Why didn't you deal with this case favorably from the start. Many people don't have access to a TD or a third party to make representations on their behalf.

Doherty: How many repossessions do you expect this year? Will it hit a thousand?

ptsb: Certainly not. It will be in the hundreds and not the thousands. Partly due to the fact that it takes 3 to 4 years to get a response.

Residual debt
Only 15% of AVSs are accepting them. Why don't you roll out your pilot across all cases?

ptsb: We will learn from it.

Senator Aideen Hayden Brilliant interaction

We are coming up with a lot of cases of joint mortgage holders splitting up and having to sell their home.

How many of your AVSs were in positive equity.

ptsb: We make all our assessments based on affordability and sustainability.

Hayden: Do you offer split mortgages to people in positive equity.

Shane O'Sullivan : Yes. [ BB: I think he is wrong here. They don't give splits to people in positive equity. Or if they do, they are wasting taxpayers' money]

Hayden: There is nothing unsustainable about offering interest only as a long-term solution to home owners.

ptsb: We see interest only as a legitimate treatment, but we are conscious how we deploy it. But we do apply it to buy to lets.

Hayden: You have much higher proportion of buy to lets in negative equity

People in positive equity are being treated differently. You are using them to fix your balance sheet.

Masding: As a professional banker, we don't look at the balance sheet when looking at arrears.

Long term interest only is sustainable for buy to lets, across the World.

O'Sullivan: Repayment of the principal at the end of the term is a key part of sustainability. We can do that with a buy to let, but not with a home loan. We would do it on an exceptional basis.

Comes back in
Hayden: You should revisit your policy. In Germany they have inter-generational mortgages.

According to MABS, 40%(?) of the SFSs have been overruled by you. Do you abide by the ISI guidelines?

ptsb: No - we have our own. We abide by them. Unless the person is in insolvency, in which case, we use the ISI guidelines.

Hayden: Can we have the guidelines?
ptsb: No. We don't provide them to third parties.

Hayden: Are your criteria more or less generous than the ISI guidelines.
ptsb: ours are more generous than the ISIs

Hayden: How many PIAs applications have you been involved in

ptsb: We were one of 4 approved. We approved two others vetoed by other lenders. We have vetoed only one.
We work with PIPs to see if the PIA or our solution is better.

Hayden: How do you determine that someone is a non-cooperating borrower. For example, when one partner is cooperating and their partner is not.

ptsb: There must be meaningful cooperation. It varies. See next post for more details.

Hayden: The appeals process - Chairman interrupts: How many appeals succeed?
ptsb: around 20%

ptsb: Rent Receiver is appointed on behalf of the borrower. win win win. Fixes the property and manages it. the lender gets the rent. the borrower works with us on keeping the property. We have 350 receivers to 350 accounts or 700 properties.

We have never appointed a fixed charge receiver. We have never done it and we don't intend to. They can sell the property without going through the repossession process. The tenant suffers.

Stephen Donnelly

Why has there been such a growth in legal proceedings?

ptsb:
We were slow out of the traps. We were trying to develop the right treatments through data analytics. WE are now dealing with the cohort who are not sustainable.

Donnelly: So you have the analytics. Who are these people?
ptsb People who won't answer the phone.
People who wont' answer the door.
People who make an appointment and don't show up
people who agree an SFS but wont' provide the information they have committed to
People who agree a repayment schedule, but then they don't adhere to it.

Donnelly: I have no problem with you taking legal action against those who won't engage. But I am very disappointed that there is no policy in place for the residual debt of engaging borrowers who agree to a voluntary sale. I am not suggesting that all debt must be written off.

Masding: I hope when we come back in 6 months, we will have a product in place for the residual balance.

Donnelly: Why do you offer only one solution?

O'Sullivan: We recommend one treatment, then we explain why the other treatments are not suitable. But we focus on the recommended solutions

Then our team follows up by phone to discuss the offer with them to see if they have any questions.

What happens on retirement?
I have publicly advocated for debt for equity. AIB is looking at converting a split mortgage to debt for equity on retirement.

Masding: We started behind everyone else. Can I assure you. AVS - we need to work on. Allow me to take away the Debt for Equity retirement concept and see if it works.

Donnelly: But not just at retirement. It can work from the outset.

Michael Creed

Agree with Stephen Donnelly, that people who don't engage should be subject to legal proceedings.
My constituents are often incapable of dealing with the process. Literacy and Numeracy issues.

Have you tried to explore any alternative route with the CB. for example, an intermediary?

ptsb: We have a hardship policy but it becomes more difficult when the borrower has unsecured loans as well.

There was a pilot with StepChange, but it has fallen away. The banks might try to do this in a collegiate fashion.

Creed: What about the mortgage protection policy? How many have up to date policies in place? What about PPI?
If someone cancels their direct debit on their mortgage protection,do you pursue that diligently?

ptsb: Some insurers notify us. Some don't. Those in arrears often don't pay their ppi.

Clarification from ptsb this morning


The bank does not charge interest on the warehoused proportion on homes.

But it does do so on buy to lets.

297 buy to let splits agreed out of a total of 4,000