Is it time for a mature conversation on long term arrears and who should pay for it?

[gnf_ireland]

Taken from Richie's attendance at the Oireachtas Committee notes from Brendan

>>Burke
>>Slide 38 - borrowers 1358 over 2 years in arrears. The majority will require social housing. Could you not do a write-down?

>>Boucher /McLoughlin
>>It's 1.8% of our mortgages compared to 5.5% for the industry
>>726 are paying nothing at all
>>267 are paying less than 50%
>>Their average contractual mortgage payment is €926 vs €1,060 for rent
>>If they get social housing, they have to pay something. They are paying us nothing.

Is it time for a mature discussion on long term arrears? There are 1358 customers with BoI alone who are in arrears for over 2 years. 726 (over 50%) are paying nothing at all to the bank currently, and a further 20% paying less than 50% their monthly commitment.

For BoI it is 1.8% as opposed to industry of 5.5% - so the numbers are probably larger elsewhere !

Why should the banks write off large elements of their mortgage? What is in it for the bank? Unless they are in complete negative equity or in bankruptcy proceedings, I don't see why the bank would do this? Surely we all accept that 2 years paying nothing is unreasonable?

The 27% who are paying >50% may have a sustainable mortgage assuming a number of factors, and maybe the bank should try negotiate a bit easier on those to come up with more reasonable solutions. But maybe if there was a way to address the 70% easier, the bank would be more favourable to this bunch (here is me hoping)

But the other 73% - surely its time to accept that the banks should no longer be covering these losses and if the government wants to come up with some social housing strategy in partnership with the bank then the government must be willing to pay for it.


At the moment, the non-tracker mortgage holders are paying for these mortgages. Maybe its time that came to an end?

 

[Codogly]

My view here is that any arrangement that has the taxpayer funding these mortgages would have to be accompanied with the transfer of ownership of these properties to the state (taxpayer).

 

[gnf_ireland]

My view here is that any arrangement that has the taxpayer funding these mortgages would have to be accompanied with the transfer of ownership of these properties to the state (taxpayer).

Completely agree. But this is why a mature conversation is needed on it.

The alternative is there is some sort of split arrangement done, and there is a charge put on the property by the state. The person has the right to live there for life, but any transfer or sale of the property must include settlement the associated charge.

So for example, if the state agree to pay for a writedown of say 40% of the mortgage, resulting in a more sustainable mortgage for the householder, two charges are placed on the property - one for the bank for the value of the outstanding mortgage and the other for the state for 45%. On any transfer/sale of the property, 45% of the proceeds of the sale must go to the state.

 

[dub_nerd]

I think a mature discussion would have to start with a recognition of who would benefit from any particular arrangement and why they are entitled to it. For instance, the OP refers to the proposal for write downs as a social housing strategy. Is somebody who is paying zero toward their mortgage entitled to be socially housed ahead of everyone else on the social housing list just because they happen to be effectively squatting at the moment? Is the bank entitled to full repayment of the mortgage at the taxpayer's expense when they have already been recapitalised for this exact eventuality?

One alternative is that the house gets repossessed, the shortfall is written down to zero, and the government buys it at current market value to give to the next applicant on the housing list. The bank gets closure on the mortgage (but takes a hit), the current mortgage payer gets debt forgiveness (but loses the property), the taxpayer doesn't pay anything over the odds, and there is no net change to the housing list (one added, one removed). This arrangement has the benefit that it's exactly what the rules provide for today.

 

[Delboy]

The problem here is that the Politicians are all over this and are holding up the process to buy votes and for virtue signalling purposes.

I also see problems with long term arrangements where the State takes the house in say 30 years time. The equivalent of Joe Duffy in 2046 will be getting calls from irate widows, grown children saying the Banks are trying to kick them out of the home that they have spent their lives in!

 

[gnf_ireland]

One alternative is that the house gets repossessed, the shortfall is written down to zero, and the government buys it at current market value to give to the next applicant on the housing list.

The problem with this proposal is no politician will actively put their name behind a scheme that sees people lose their house - no matter how sensible.

The big 'political' problem with repossessions of a family home is that it effectively makes a family homeless. That is a hard sell no matter how sensible ! All of these people are likely to need social housing, which is why I mentioned this as the basis for the conversation

I agree, I don't believe someone who has not paid their mortgage for 2 years should jump the queue, but politically it would be very difficult otherwise.

 

[gnf_ireland]

Personally, I believe there are two groups here
1. those who have reasonable chance of a performing mortgage with a small bit of help [e.g. sell part of the house to the government]
2. those who will never have a reasonable chance of a performing mortgage

The latter need to be repossessed and a reasonable social housing strategy put in place to cover it

The former needs to agree to some sort of joint purchase/charge on the property that is realised on sale/transfer of the house. But the mortgage has to be reasonable and affordable etc

There needs to be a realistic scenario where people are not punished for life for one decision based on bad timing. We have had a decade of this so far - its time to move on from it and give people in general a second chance (assuming they are reasonably trying). Not paying in two years is not trying in my view

 

[dub_nerd]

I can understand why politicians don't want to grasp this nettle. But the result of political and judicial inaction is to put out a message that you can renege on your mortgage without consequence. In fairness, it sounds like the courts will eventually come down hard on people who pay nothing at all, but only after years of rent-free living.

It would be nice to be able to save people from mere unlucky timing in buying at the height of the boom. But how do you distinguish the current unfortunates from others who have either already lost their houses and will justifiably want recompense, or those who took top-up loans for lifestyle funding?

The more you think about it, the harder it is to come up with an equable solution that is different from what we've already got. (But maybe I'm just lacking in imagination).

 

[Sarenco]

From today's IT:-

"There is one glaring disconnect in the debate – one that makes both the bankers and the politicians uncomfortable. One of the reasons why mortgage interest rates are high here is that it is such a long, costly and complicated process for banks to repossess properties from a borrower who is not paying. It is one of the reasons why the Irish market is different from many other markets – and why average rates for new borrowers here are still over 3 per cent, while they are below 2 per cent elsewhere in Europe, on average.

Yet this is tricky territory for the politicians, who want to have it both ways – calling for people to be left in their homes, while simultaneously calling for lower mortgage rates. It would be an issue worth exploring at an Oireachtas committee, to see where there ways to expedite the process to the benefit of both the borrower and the lender."