Has the Central Bank changed its policy towards mortgages facing a shortfall on retirement?

ClubMan

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I thought that the CB's ongoing policy was that a mortgage on which the borrower only paid the interest was not considered sustainable/performing? Or have they changed their mind/policy on that in recent years? In general or only in specific cases?
 
Hi ClubMan

I don't know. I thought the same as you, that ptsb would have to consider it a non performing loan if it's not paid off in full by retirement.

Brendan
 
I tried to find info on how the CB categorise distressed mortgages but couldn't find anything. Anybody know if such info exists in the public domain? I'm pretty sure that in the past they considered a loan on which interest only or even interest and some capital were being repaid to be non performing and, more importantly, not sustainable.
 
I found this speech by Ed Sibley


The Deputy Governor’s comments coincided with the publication of four papers focused on distressed mortgage debt. These papers provide insights into:

  1. The economics of mortgage debt relief during a pandemic;
  2. The approach to pandemic related mortgage payment breaks in Ireland;
  3. Resolving long-term mortgage arrears; and
  4. The level of mortgage borrowers potentially facing shortfalls in repaying their mortgages.
He stressed that resolution of long-term mortgage arrears remains a key policy priority for the Central Bank, and that it is receiving significant focus.

I can't find the papers online. I have emailed the Central Bank to ask for them.

Brendan
 
Here is an account of his speech


“Greater innovation is required, anchored by consideration of resolving the underlying affordability issues; and longer-term cost of credit for the borrower – and so, not overly relying on long-term interest only arrangements,” he said.

“A combination of modifications already regularly used within the lenders’ suites (for example, arrears capitalisations combined with term extensions, interest rate reductions, or split mortgages), and debt write-down in some cases, may allow many within this group to clear their mortgages by maturity and retain homeownership,” the paper said.

Meanwhile, another Central Bank paper published on Tuesday showed that lenders estimate that borrowers behind 95,000 owner-occupier loans – or 13 per cent of the total – are not currently on track to repay all that they owe by the end of their loan term.

Almost 63,000 accounts are assessed as having a shortfall of greater than 10 per cent of the balance, it said. Almost 45 per cent of these cases fall into the long-term arrears category.
 
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Without getting all Humpty Dumpty about it, does the CB actually clearly define anywhere what they mean by "sustainable" in the context of distressed/restructured mortgages and mortgage forebearance?
 
@ClubMan

We discussed before in context of a proposed loan sale. There's an EBA document linked in the following thread:

Just remember the CBI has multiple roles, and look at the borrower as well as the lender.

I haven't had time to look at this particular case in detail.
 
Thanks. So the key term is probably "performing" rather than "sustainable"? But unfortunately what they consider "non performing" might arguably be "sustainable". E.g. lifetime interest only with the mortgage cleared on death by life assurance, other funds or sale?
 
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