A (retired) banker's view of why some people can't pay their mortgages

I

IsleOfMan

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As a retired banker who first cut his cloth in 1970 I have seen it all. Tricksters with false P60's and Certificates of Income. Making up stories about all the overtime that they could work. Renting out the Boxroom. Not telling us about the Credit Union Loan that they were getting. So happy to take the most expensive House Insurance and Mortgage Protection Policy from us. Anything to get the loan in fact.

Those of us with the experience saw through all of this. Unfortunately a new breed of banker was created in order to cut costs by senior management, who in turn had no banking experience themselves. We the Organ Grinders were relegated to 2nd place.

The new breed couldn't see through the spoof. Loans were given to everyone. Lots of people took advantage of this.

They didn't pay their mortgage but had two new cars in the driveway. Lots of holidays. Plenty of take out meals. Cigarettes.

The new breed of banker couldn't cope but they were all in it together so nobody took the blame. Ran to the hills.
 
IsleOfMan said:
The new breed couldn't see through the spoof.
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Or they could see through it quite well but did not wish to as every loan issued contributed to their bonus. Any resulting defaults down the line were not their problem.

Lending in the early 2000s was still superior to the non lending of the 1970s.

The practices of the 2000s gave us the bust. And hundreds of thousands of new houses. The restrictive lending of the 1970s drove immigration.
 
IsleofMan: You never mentioned the bonuses you and the new breed of banker were earning from all those 'tricksters'.
It takes 2 to tango
 
All very true but lets take a look at AIB for example. It wasn't the 'new breed' of bankers that caused the ICI collapse in the 1980's and left the taxpayers holding the bill. It wasn't the new breed that led to overcharging of FX customers for years with the knowledge of the Central Bank. It wasn't the new breed of bankers that helped with Tax Evasion through the DIRT enquiry and a dodgy offshore company in the British Virgin Islands for the benefit of AIB executives.

I know none of the above has anything to do with mortgage lending but it all comes down to culture. Irish banking was rotten to the core. Excess mortgage lending was the next in a long line of incompetent actions by overpaid banking executives and regulators in this country. It has nothing to do with the mortgage underwriters. Even in your day, you didn't set the underwriting standards or get to decide how much lending was to be done (maybe you were that high up). I am willing to bet that if you had witnessed the exact same economic and credit conditions earlier in your career, you would have been forced to do exactly the same as these 'new breed' of bankers were.

The blame does not sit with people who did the application processing or the applicants themselves. The blame belongs with the people who were being paid very large amounts of money to protect their financial institutions and the financial system. They all failed miserably.
 
The false P60 practice was actively encouraged in the Celtic tiger , 3 different brokers in our case enquired if we could manipulate our P60s as we worked with family businesses..
In my greenness I thought it was an acceptable practice.
The more broker got for us the more they made, they had absolutely nothing to lose.. they made it appear that they doing us a favour .
Visiting banks in the past year with a view to switching the contrast is stark.. every cent analysed.. no such practice circa 2006
 
mccoypat94 said:
The false P60 practice was actively encouraged in the Celtic tiger , 3 different brokers in our case enquired if we could manipulate our P60s as we worked with family businesses..
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A friend of mine whose salary I guessed was about €30k borrowed €150k. I was really shocked at the time. She showed me her p60 which showed that she was on €60k which surprised me. But her employer ran a separate dud payroll system to provide employees with overstated P60s. BoI refused her as the net amount lodged did not match her P60. But the broker got her a mortgage with IIB Home Loans/KBC as they were the only lender who did not ask for bank statements at the time.

So they were all in it together. The borrower for lying about her income. The employer for giving her a false P60. The broker for identifying the only lender who would give her 5 times her salary and of course, KBC, for allowing themselves to be defrauded.

Brendan
 
IsleOfMan said:
As a retired banker who first cut his cloth in 1970 I have seen it all. Tricksters with false P60's and Certificates of Income. Making up stories about all the overtime that they could work. Renting out the Boxroom. Not telling us about the Credit Union Loan that they were getting. So happy to take the most expensive House Insurance and Mortgage Protection Policy from us. Anything to get the loan in fact.

Those of us with the experience saw through all of this. Unfortunately a new breed of banker was created in order to cut costs by senior management, who in turn had no banking experience themselves. We the Organ Grinders were relegated to 2nd place.

The new breed couldn't see through the spoof. Loans were given to everyone. Lots of people took advantage of this.

They didn't pay their mortgage but had two new cars in the driveway. Lots of holidays. Plenty of take out meals. Cigarettes.

The new breed of banker couldn't cope but they were all in it together so nobody took the blame. Ran to the hills.
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It was a deliberate policy of the banks to give out money. The banks were more at fault as they decided to adopt the American originated model of giving people so much credit that they would change the mentality of people to expect to have debt all over the place, to consolidate, to spend their entire lives paying off interest.

During the boom I went to see a banker to borrow for a property. He was beyond eager to give me money. Was willing to give me 100% even though I only wanted 90%. I was shocked at how easy it was to borrow compared to before. They would basically accept any figures. Anything to get the loan out. Including offering me a loan instead of a mortgage as it was easier to get 'Dublin' to pass it. That's what I was told. I didn't care as I'd done my figures. I assumed the man was working on some kind of commission, or target, he was all fired up. He was some boyo. It was Ulster bank. I now have that loan at a lower rate than many mortgages. It has to be reviewed every year and when I fixed it about two years ago it was more complicated a procedure than when I borrowed. Including having separate phone calls to my husband and me to 'fix' the rate. I was amazed at the change in mentality, the carefulness of procedure, the seriousness of the new bankers.
 
Guys, it might be worth going back to the Mortgages Forum around 2005 and 2006. You will see plenty of examples of borrowers complaining about not being able to get a mortgage. I remember in particular one borrower at the time claiming discrimination as he had been refused a 100% mortgage.

I also remember being on Matt Cooper with the MD of permanent tsb and I was arguing against 100% mortgages. My objections were dismissed. From memory, it subsequently transpired that his predecessor had gone to the Financial Regulator arguing that they should not allow 100% mortgages. And if they did not ban them, then ptsb would be forced to compete by offering them. The FR said that they would not interfere with the market and so ptsb offered them.

Brendan
 
Brendan Burgess said:
A friend of mine whose salary I guessed was about €30k borrowed €150k. I was really shocked at the time. She showed me her p60 which showed that she was on €60k which surprised me. But her employer ran a separate dud payroll system to provide employees with overstated P60s. BoI refused her as the net amount lodged did not match her P60. But the broker got her a mortgage with IIB Home Loans/KBC as they were the only lender who did not ask for bank statements at the time.

So they were all in it together. The borrower for lying about her income. The employer for giving her a false P60. The broker for identifying the only lender who would give her 5 times her salary and of course, KBC, for allowing themselves to be defrauded.

Brendan
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Ordinary people are going to overborrow if they have money thrown at them. They should be protected from themselves by the banks, the regulators, the Central bank and Government.

This is what I've seen:

False P60's
False accountants declarations of income
No cross checking of income coming into accounts
Pretend figures of rent counting as income
Ignoring Credit Union loans
Completely fictitious income
People being constantly overdrawn
People having their overdrawn limits increased
People having multiple credit cards with different banks
People having their credit card limits increased on a phone call
People being sent cheques of 10K by credit card companies to spend
Borrowing money for somebody else

The latest wheeze is pay day loans.

It is not normal to have an overdraft all the time, to never pay back your credit cards in full (the law here doesn't allow that), to have so many credit cards, to use credit cards to pay loans, to have so many loans that your entire income goes on interest.

No loan should be allowed unless it is cross checked what you can afford based on all your borrowings and income. This should apply to everything, car loans etc. And you shouldn't be able to buy a car you can't afford just because you want it (another thing we were limited on when we borrowed for our first car here, with income etc required before we'd get the loan).

The regulators and the CB should change back from bad American practise and stamp out things like pay day loans.
 
IsleOfMan said:
As a retired banker who first cut his cloth in 1970 I have seen it all.
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What about the cosy monopoly the big two had going with each other? I won't go inside the door of either after what I saw with my parents having an account in each of those banks.

And the banks were just as corrupt back then and it was who paid out for AIB. Have you forgotton that. And the banks letting of Charlie Haughey FF and Garrett Fitzgerald FG. Have you forgotton those 'arrangements'.
 
Brendan Burgess said:
Guys, it might be worth going back to the Mortgages Forum around 2005 and 2006. You will see plenty of examples of borrowers complaining about not being able to get a mortgage. I remember in particular one borrower at the time claiming discrimination as he had been refused a 100% mortgage.

I also remember being on Matt Cooper with the MD of permanent tsb and I was arguing against 100% mortgages. My objections were dismissed. From memory, it subsequently transpired that his predecessor had gone to the Financial Regulator arguing that they should not allow 100% mortgages. And if they did not ban them, then ptsb would be forced to compete by offering them. The FR said that they would not interfere with the market and so ptsb offered them.

Brendan
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You've reminded me now that they gave out more than 100%. I think for the stamp duty, the legal fees and furniture. It was crazy.
 
Bronte said:
And the banks letting of Charlie Haughey FF and Garrett Fitzgerald FG.
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I don't think it's fair to put Garrett in the same category. As far as I know, he borrowed money to invest in Guinness Peat Aviation. He lost that money. He was effectively insolvent. He took full responsibility and sold his family home to repay what he could.

Brendan
 
No, he did so because he was a director and thought it was a very good investment.

He made a risky investment and he paid the price. As far as I can recall, there was no element of dishonesty or abuse of power. He was retired from politics when he made the investment and got whatever writedown he got.

Brendan
 
Was it not a decision by AIB in both men's cases because of politics. Because of power. Because FG or FF were the one's who will ultimately pay off the bankers mistakes. As we've seen more than once.

In effect no matter how badly behaved the banks are, they know that ultimately the government will bail them out. Again. And Again.

So it's in a banks interest to demonstate to FG & FF that they will sort things out on a quid pro quo basis.

There is no reason for AIB not to have pursued Garrett for the remainder of the debt. That they would have done so if it were Brendan Burgess.
 
Just to state that I never opened this thread as a new thread, I was actually responding to the thread. "Would you be prepared to pay higher interest so that people who pay nothing don't get repossessed". Someone decided to open a new thread with my comment.

Based on my comments above I would say that I would not be prepared to pay higher interest as many people chanced their arm and many new breed bankers were happy to let people chance their arm. The present generation should not have to pay extra for other peoples greed.

Back in the day we were on an incremental salary. The banks decided to introduce Performance Related Pay. Many of the old style bankers kept the standards but came under increasing pressure to "perform". Monthly meetings, monthly targets, Top ten branches/bottom ten branches. Everybody could give a loan, even the newbie at the counter.

We could see the spending habits of our customers. We had their cancelled cheques, we could see their Visa card statement. Didn't matter. Up their credit so they could spend more. And customers did.
The crash came and those who partied decided not to pay. The bankers who gave them the loans ran for it. Now today's banker is trying to tidy up the mess and today's borrower are being asked to pay more.
 
IsleOfMan said:
We could see the spending habits of our customers. We had their cancelled cheques, we could see their Visa card statement. Didn't matter. Up their credit so they could spend more. And customers did.
The crash came and those who partied decided not to pay. The bankers who gave them the loans ran for it. Now today's banker is trying to tidy up the mess and today's borrower are being asked to pay more.
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Even though it's not your thread starter your viewpoint is interesting. Were there a lot of cancelled cheques? Did you guys not discuss that it was crazy to lend vast sums to people who clearly had a spending problem, a money management problem, a credit problem. And did ye not think this could not end well?

Do you not think the banks were more to blame than the borrowers. If you're going to allow twenty year olds to have credit cards and overdrafts it's only going to credit an entire generation that living on credit is the only way to go.

I had a sibling come back to Ireland during the boom and procured a house and car with no deposit in a matter of months. I have a friend whose sibling took out 'equity' three times in her home. (consolidating !)
 
Bronte said:
There is no reason for AIB not to have pursued Garrett for the remainder of the debt. That they would have done so if it were Brendan Burgess.
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Bronte

Banks cut deals all the time. They always have and they always will. They do it for the rich and they do it for the poor. They do it for retired politicians and they do it for retired postmen.

In the last ten years, over 100,000 mortgages on family homes have been rescheduled.

Where there is commercial debt and the borrower engages with the lender, deals are done which usually leave the borrower in their family home. It's the best way to maximise recovery.

Sure they could have applied to the courts to have made Garret a bankrupt. Or they could have applied for an order for possession. But they probably got more by doing a deal than by putting a 70 year old (?) man and his ill wife out on the street.

Brendan
 
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