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

[The_Banker]

I don't understand how someone who won't pay but could pay can get away with it--surely if a bank is going to 'let someone off' with part of their debt they will check into their assets and income and that of their partner if married?
I too know someone who has been underpaying for quite a while in the hopes of debt relief although they could pay in full.

Would a married couple be responsible for each others debts?

 

[Bronte]

No married couples are not responsible for each others debts unless they've signed up for them. But if one is trying to sort out a financial meltdown it might be better that all assets and income were included. Depends completely on the situation.

 

[Time]

I know a judge that would disagree there.

 

[Delboy]

Greg Connor was on the Pat Kenny show, 1st thing this morning. Went through his case for their being strategic defaults accounting for around 35% of the current total in arrears. Made his points in a rational manner I thought.
The other participant in the discussion was David Hall....when Pat asked him for his thoughts on what Greg said, he went off on the usual tangent, answering a totally different question to suit his 'forgive everyone in arrears' agenda. He did at 1 stage say 'what would anyone stand to gain from attempting to strategically default' !!!!!!!!!!

The mind boggles

 

[gaius]

No married couples are not responsible for each others debts unless they've signed up for them. But if one is trying to sort out a financial meltdown it might be better that all assets and income were included. Depends completely on the situation.

You also need to take into account that the banks seem content to be bailed out by the taxpayer so they'll have no problem doing a half-assed job as consequences for them will be limited.

 

[Delboy]

Gregory Connor is standing over his figures on high levels of Strategic arrears currently happening

http://www.irishtimes.com/business/...-the-mortgage-arrears-crisis-crisis-1.1334707
"Despite the paucity of data, the issue must be faced. Is it credible that this explosive growth is entirely due to distressed arrears?
The classic source of distressed arrears is loss of employment. 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.
Another source of distressed arrears is unsustainable increases in mortgage payments relative to after-tax income. There has been a general decline in after-tax incomes, but also big declines in required mortgage payments due to falls in interest rates.
Consider a 30-year mortgage with a principal balance of €250,000, paying 1.2 percentage points over the ECB rate (a typical tracker mortgage). In 2006 when the ECB rate was 3 per cent, such a mortgage had a required monthly payment of €1,223; with the decline in the ECB rate (now 0.75 ), the monthly payment has fallen to €918. Banks are offering temporary interest-only periods to many customers. If this mortgage is switched to interest-only, it requires a payment of €405 per month, a fraction of the true capital cost (and much lower than the cost of renting). For standard variable rate mortgages, monthly payments have fallen only slightly, but interest-only restructurings have been on offer."

 

[Brendan Burgess]

Some very interesting figures from Ulster Bank in recent days

Ulster Bank warns of action against strategic defaulters

The bank said yesterday it had witnessed a substantial rise in the number of mortgage borrowers strategically defaulting.



It attributed the increase to a number of factors including the introduction of the mortgage code of conduct and the halting of repossessions following the discovery of a loophole by Justice Elizabeth Dunne in the 2009 Land and Conveyancing Reform Act.


Speaking during a call with investors during which the bank outlined plans to reduce its number of branches, Ulster Bank’s chief risk officer Stephen Bell said about 35 per cent of mortgage borrowers in arrears are not currently paying anything.

I am shocked by that figure. 35% of borrowers are not paying anything?

I have met two people recently who told me that they had not paid anything at all for the last 12 months, and I assumed that they were exceptions. But it's much more common than I had assumed.

I wonder if this 35% figure is typical of the other mainstream lenders?

If a family has no income, they will generally qualify for MIS after 6 months. So they should be paying this over to the mortgage lender.

So who is not paying their mortgage?

Most of these must be strategic defaulters, so Gregory Connor's estimate may be right after all.

I would have thought that the vast majority of people go to extreme lengths to pay their mortgage - maybe 95% of all borrowers.

That would classify 5% as strategic defaulters or people who are paying a lot less than they can afford.

There are 761,000 mortgage accounts.

If 5% are strategic defaulters, that would be around 38,000 accounts.

There are 83,000 accounts in arrears over 90 days.

That would give a 45% strategic default rate.

This seems too high. But the rate must be at least 20% and could be as high as 40%.

Brendan

 

[MortgageGuy]

The strategic defaulter doesn't exist according to many people, the figures suggest otherwise.

We'll never really know who the 'true' ones may be because some may be happy to go for insolvency, others might come to an informal arrangement, and others will self-cure once the true threat of repossession comes.

Paying literally 'nothing' for 12 months is difficult to understand, there are state supports there for this, and even €10 a month would be 'something'. There are people in terrible poverty, but that doesn't seem to account for those numbers. Even people in state housing have to pay rent, so a zero payment for a year seems odd. It could be that ulsterbank have their figures wrong or are replacing '12 months arrears' (which can build incrementally) with 'have paid nothing' and these are two very separate things, in one you don't pay a penny for a year, in the other you might make a 50% payment for 2 years and be a year behind.

 

[Brendan Burgess]

It was reported in the Irish Times as well, although they may be both using the same source. It's clearly 35% of those in arrears are paying nothing. It's not a different type of arrears.

The 35% figure is shocking. But then I was shocked that two people whom I knew were paying nothing.

I have heard it said before that when a borrower's direct debit bounces, they often stop paying completely.

 

[shtall]

On this subject here is and example I have given sfs wages slip bank statements to show where my money goes, I earn 500 per week working fulltime my car is off the road now 3 months as I cannot afford the bill of 1400 todate due and a further 1000.00 for a part needed so I get lifts as there is no direct route to my place of work some weeks I am lucky to have anything in my account after direct debits and buying food. I am divorced and he has his own rent to pay and took the car we had so he pays this and we have children to support so yes its wrong to stop paying and live a luxurious life I agree. I do not have holidays nor am I out every week and the children are taken to free places for a day out ! I now buy clothes in different cheaper shops and groceries in cheaper stores as this is what you do.
My money vanishes alright but not on me !

 

[Gerry Canning]

It was reported in the Irish Times as well, although they may be both using the same source. It's clearly 35% of those in arrears are paying nothing. It's not a different type of arrears.

The 35% figure is shocking. But then I was shocked that two people whom I knew were paying nothing.

I have heard it said before that when a borrower's direct debit bounces, they often stop paying completely.

..................................................................................
Very hard to get to grips with this 35% + !!
Can I suggest the word Strategic is the wrong word.
If it is replaced with Surviving Defaulters then 35% is ok.
Let me explain.
Most of what are called (Strategic) have no strategy , most are ostrich like ignoring the issue and hoping it will all magically blow over.
They may well have reckoned that the best they can do is to hang in and wait !!They may also reckon , what,s the point in paying one-third and still have no security. They may also have paid down other debts.In NO way am I condoning these actions.
We couldn,t have it messier.

If everyone was TOLD they must @ least pay 35% of disposable income ,would that not quickly flush out the Strategic ones? as distinct from the hopeless cases.

I really COULD NOT see 35% as truely Strategic. BUT IF IT IS, @ 35%THE PROBLEM IS NEARLY UNMANAGEABLE.

I await wisdom !!

 

[Brendan Burgess]

Hi Salmon

A good point about the word "strategic" being inappropriate for a lot of cases.

Even the word "default" might be wrong, as most of these will get back on track when the lender is allowed to take effective action.

David Hall and Ross Maguire say there are almost no strategic defaulters but then acknowledge that people pay their credit cards and credit unions ahead of their mortgage. That is tactical preference of another creditor at the expense of the mortgage lender.

There are strategic defaulters who are paying nothing and hope to get a debt write down.
There are people who have no strategy except to bury their head in the sand.
And there are people who are choosing to pay other creditors ahead of their mortgage.

The three groups could well add up to 35% and the level of arrears would be a lot less if they paid their lenders a reasonable amount.

 

[Gerry Canning]

Hi Salmon

A good point about the word "strategic" being inappropriate for a lot of cases.

Even the word "default" might be wrong, as most of these will get back on track when the lender is allowed to take effective action.

David Hall and Ross Maguire say there are almost no strategic defaulters but then acknowledge that people pay their credit cards and credit unions ahead of their mortgage. That is tactical preference of another creditor at the expense of the mortgage lender.

There are strategic defaulters who are paying nothing and hope to get a debt write down.
There are people who have no strategy except to bury their head in the sand.
And there are people who are choosing to pay other creditors ahead of their mortgage.

The three groups could well add up to 35% and the level of arrears would be a lot less if they paid their lenders a reasonable amount.

............................................................................................

The 3 groups you mention are as you hint all resolvable to a greater or lesser degree and at worst the write off will probably be sustainable.


I worry about the 4th case ie the Hopeless one.
In this case Bank loses circa 50% due to value drop.
Customer ends up on stretched social housing .
Ends up WE get caught for 100% of the cost .

I have sympathy will Hall&Maguire but they do NOT help their other good arguments by stating there are almost no strategic defaulters. That gets peoples backs up and we end up in 2 self justyfying camps .
I see this whole (Default/arrears) issue getting sucked into absolutes.

It is always easy to search for Black & White arguments .. This one is GREY !!

 

[Delboy]

Brendan

David Hall was on Drivetime yesterday eve (or it could have being Weds) and Mary Wilson mentioned your name and the 20% strategic default level.
He basically said you were talking hot air and that Ulster banks 35% figure was pure bull. He started using new terms for the people not paying....'debt prioritisers' or something like that.

As usual he got a free ride with no counter balance on the show against him

 

[Brendan Burgess]

Hi Delboy

I heard that. I thought that Mary Wilson challenged him hard enough. I think that the majority of people listening to this or watching such debates on TV are much more balanced and know that there is some serious level of strategic arrears.

The problem is that few are prepared to say this in public. Greg Connor is one. I am another. We get accused of being "spokemen for the banks" or as I was once described on radio "The repossession Czar" .

 

[mercman]

IMO, the Ulster Bank have come out now quoting figures as they left it so long to deal with their non payers. It does appear there are thousands of people who simply are unable to afford these payments.

The other side of the equation is that people are awaiting 'Debt forgiveness' to start. Personally, I do believe this will happen. The ECB are so slow in getting anything done that their in decisions have left the entire Europe in the debts of recession.

They are aware of the problem but are so slow in dealing with the issues. If anybody listened to Draghi on the radio yesterday, he more or less said that they have a massive problem. They didn't reduce interest rates yesterday but will in the future. What a joke. Problem is that the Banks keep increasing their margin so the rates and repayments barely move.

DEBT FORGIVENESS WILL HAPPEN not just in Ireland but throughout Europe. And these idiots throughout Europe better hurry up before it really is to late.

 

[Time]

So the Dunne loophole has not yet been closed?

Personally I knows a couple who have paid not a cent for the last 4 years. They are still in the house and nothing has happened. They don't believe anything will happen.

 

[Delboy]

So the Dunne loophole has not yet been closed?

Personally I knows a couple who have paid not a cent for the last 4 years. They are still in the house and nothing has happened. They don't believe anything will happen.

It passed in the Dail the other evening and goes before the Seanad next. On target to be passed by all before the summer recess.
Should be actual reporssessions by xmas but I won't hold my breath

 

[Gerry Canning]

Again how is a bank supposed to verify someones salary? They are not the revenue.

................................................................

If a customer is looking for forebearance , it is NOT up to Bank to verify salary/income it is up to the customer to supply details.
If customer does not readily supply information , the Bank would be well within their rights to go hard on the customer.

 

[gaius]

It actually could be higher than 35% because that figure only counts the ones paying zero. It doesn't count the ones paying 1-99% of mortgage repayment amounts to get the banks off their backs when they are able to pay more.

I think it's fair to assume that the vast majority of those paying zero are strategic. Even unemployed people contribute a small amount to their own rent. Nearly 70% of households in arrears still have an employed person in the household!