The McNamara/Lowe case shows that the courts are imposing too lenient PIAs on lenders

[Brendan Burgess]

Warning: This is a very long thread.

I have long argued that we have the best protected borrowers in the World. And I have also argued that we should protect genuine borrowers who are in arrears. I have found some of the reports on the PIAs imposed by the court disturbing in that they seem way too generous. The cost of these is paid by the borrowers who pay their mortgage in terms of the highest mortgage rates in the eurozone.

I attach the High Court judgement in the case of the McNamaras. To make it more readable, I have edited out a lot of the technical stuff about whether Belvedere College is a separate class of creditors and so whether the PIA had the required technical support of creditors. And here is my summary

Early 2000s

• McMcNamara first encountered financial difficulties
• Remortgaged properties and sold some properties to overcome these problems

Up to 2007, Mr McNamara had been earning a high income as a music conductor
2007 Mr McNamara devoted significant time to an unsuccessful attempt to get elected to the Dail. As a result, the household income was reduced significantly.
8 April 2014 – Tanager got an order for possession of the family home – didn’t enforce it
Shortly before October 2016 – Tanager applied for renewal of the execution order
October 2016 – application for the Protective certificate for the PIA
? Tanager vetoed the proposal
? PIP applied to High Court to overturn the veto
? High Court hearing
August 2019 – High Court decision

The proposed PIA - Interlocking PIAs

Tanager - jointly	€2.267 m	secured on the family home
Consumer Auto Receivables	€58k	judgement mortgage on family home and 5 acres of land owned jointly
Revenue VAT	€9k	Mr McNamara
Revenue – Property Tax	€3k
Banca Sabadell SA	€210k	Unsecured
BoI Mortgage Bank	€534k	Joint
BoI	€548k	Joint
BoI	€5k	MrMcNamara
Belveder College	€13k	Unpaid school fees
Ptsb	€35k	Unsecured
Cabot	€48k	unsecured

Proposed to write of €1,7m to Tanager to reduce the mortgage to the agreed value of the home at €550k - €520k live and €30k warehoused
The McNamaras will make an initial payment of €100k
€420k to be paid over 19 years. – 6 years at 1% fixed, 13 years at ECB + 1%
Parcel of land to be sold for €60k. €30k to go to Consumer Auto Receivables and balance to go into the pot for the unsecured creditors
An inheritance of €182,500 to be made available. The €100k lump sum for Tanager to come from this money.

An investment lump sum of €25k to be made available
A pension policy generating €770 a year to be cashed. (I didn’t follow this bit)
The PIA to last 6 years.
€2,000 a month to be paid on mortgage
Dividend of 5% to be paid to unsecured creditors by way of 36 monthly payments of €960 [These figures don’t add up for me]
Tanager’s substantial objections
There are many technical objections about service and notice. But I want to focus on the substantial ones.
g) The proposed write-off of €1.7m is so significant that it “represents a clear unfair procedure”
The proposed arrangement is not a product offered by tanager
They have a suite of options for customers in difficulty such as voluntary sale and Mortgage to rent
They only consider write down where the property is sold
The value of the property is “fictional” [ not sure why they said this if they had an agreed value?]
It is reasonable to predict that the value of the property will rise by 2% a year for the remaining term resulting in a profit for the McNamaras.
H) The debtor is required to complete a Prescribed Financial Statement and make a statutory declaration that it is complete and accurate.
According to the PFS in October 2016 – the inheritance is worth €182k
According to an SFS sworn in Jan 2016, it was €500k
The SFS referred to a rental income from the inherited property which “seems to have vanished”
j) There is no reasonable prospect that the proposed arrangements will enable the McNamaras to resolve their indebtedness without recourse to bankruptcy
Given their repayment history, there is little prospect that they will be able to meet the €2,000 per month for 19 years and that there will be a default which will trigger a bankruptcy.
The extension of the term from 8 years to 19 years means that they will be 78 and 75 when the mortgage is paid off.
k) There is a greater sum due to the McNamaras from the inheritance than is proposed under the arrangements - given the variety of inconsistencies disclosed, it is incumbent on the Debtor to disclose the Will and Inland Revenue Affidavit in respect of the estate;.
o) The return under a bankruptcy arrangement would be higher
Payment history
(p) The final ground relied upon by Tanager is that, in the two-year period
prior to the issue of the Protective Certificate, payments to Tanager were
at a level which was significantly below the repayment obligations of
Mr. McNamara and Ms. McNamara. Tanager also relied in this context
on the discrepancies between the SFS on the one hand and the PFS on
the other. For these reasons, Tanager argued that the conduct of Mr.
McNamara and Ms. McNamara during the two-year period in question weighed against the grant ofrelief under s . 11 SA (9) . In this context, s . 11 SA (10) (a) requires the court on any application under s. 11 SA (9) to have regard to the conduct, within a two-year period prior to the issue of the protective certificate, of both the debtor in seeking to pay the debts
concerned and the creditor in seeking to recover the debts due.

 

[Brendan Burgess]

The Judge's comments

The Judge’s comments
On the sustainability of the mortgage. The retirement age has move upwards in recent years – there is no retiremenbt age for musical directors or barristers. Ricardo Multi who is 78 is slated to conduct the Vienna Philharmonic Orchestra in a number of concerts shortly. Burt Bacharach performed here last year at the age of 03 - Barristers regularly work beyond retirement agen. So this should be no problem for the McNamaras.
69. Insofar as past performance is concerned, it is true that in the years
immediately preceding the issue of the protective certificates, the payment history of
Mr. McNamara and Ms. McNamara was poor. While payments were made by Mr.
McNamara and Ms. McNamara, these payments fell below what was payable under
the terms of the mortgage. However, it is clear from the evidence before the court
that significant payments have been made on a monthly basis since July 2017. Mr.
McNamara in para. 36 of his affidavit sworn in February 2019 has made the
uncontroverted averment that he has been making payments in the sum of €2,000 per
month to Tanager on foot of the mortgage . In the course of the hearing, the court was
provided with a statement of the payments made on a monthly basis since July 2017
in respect of each of the three accounts (namely the 05,06 and 09 accounts). This statement shows that in July 2017 a total of€1,000 was paid. In August 2017 a
payment of €1,500 was paid. Thereafter, in each of the months between September
2017 up to and including December 2018 (both dates inclusive) the total sum of
€2,000 was paid per month by Mr. and Ms. McNamara with the exception of March
2018 when the payment fell short by €100. The account provides a basis to be
confident that Mr. McNamara and Ms. McNamara will be in a position to sustain
payments into the future. In circumstances where Mr. McNamara and Ms. McNamara
are currently making payments of €2,000 per month, there is no reason to suppose that
they will not be in a position to make payments of €2,023.41 during the course of the
arrangement or thereafter. In these circumstances, I believe that there is a sufficient
basis to form the view that the arrangements are sustainable and that, accordingly, the
requirements of s. 11 SA (9) (b) (i) have been satisfied.

72. Insofar as the payment record is concerned, it is undoubtedly the case that Mr.
McNamara and Ms. McNamara did not meet their obligations to Tanager in full
during the two-year period prior to the issue of the protective certificate. That is a
factor to which regard must accordingly be had. However, this is not a case where
Mr. McNamara and Ms. McNamara showed contempt for their liabilities to Tanager.
It is clear from the statements of account that, for much of the period in question,
payments were made to Tanager albeit at a level which was significantly below the
contractual obligations of Mr. McNamara and Ms. McNamara respectively.
74. I am satisfied that a sufficient explanation has been provided on behalf of Mr.
McNamara and Ms. McNamara in relation to their failure to meet their contractual
obligations in respect of the repayment of their debts. For completeness, I should add
that, even if the explanation had not been satisfactory, this is not a case where I
believe it would be appropriate on this ground to reject the proposed arrangement. In
this context, I am influenced by the fact that, notwithstanding their previous
repayment history, real efforts have been made since August 2017 to make substantial
monthly payments to Tanager. As noted above, Mr. McNamara has stated on
affidavit that €2,000 per month is currently being paid to Tanager. Thi

eturn to solvency. Obviously, that is not always a governing criterion. Thus, for
example, if debtors show a contempt for their creditors, that is a factor that would
weigh heavily with the court in any consideration of an application under s. 11 SA. In
this case, however, I can see no basis to suggest that Mr. McNamara and Ms.
McNamara have shown contempt for their creditors. At worst, they have delayed in
facing up to the consequences of their insolvency. However, in these proceedings,
they have now faced up to the consequences of their insolvency and have acted
appropriately. Accordingly, I have come to the conclusion that the past payment performance of Mr. McNamara and Ms. McNamara should not operate to prevent an
order being made under s. l 15A (9).
The Bankruptcy comparison
The PIP argued that the creditors including Tanager would be better off under a PIA than bankruptcy.
They said that the value of the property would be reduced by 15% in a forced sale. Tanager said that this was excessive but produced no evidence to support this. The ISI says it’s 10%.
They allowed nothing for the time value of money.
Tanager said that a discount rate of 5% should be used.
83. With regard to the Society of Actuaries 5% discount rate, the practitioner, in
para. 59 of his replying affidavit, says that this suggestion on the part of Tanager is
incorrect for many reasons. In the first place, the underlying cost of funds to Tanager
is a relevant consideration and this has not been provided or disclosed by Tanager.
Furthermore, the practitioner suggests that there is no scope for a discount for the time
value of money in circumstances where the arrangement envisages that, in the future,
Mr. McNamara and Ms. McNamara will be paying and maintaining a mortgage
payment based on a variable rate equating to the ECB rate plus 1 %. He also makes
the point that a personal insolvency arrangement is a debt resolution mechanism
whereas net present value calculators are used in circumstances where there is a need
to value a future investment.
The interest rate on the mortgage
b) Insofar as the interest rate is concerned, it clear from Appendix 2 to the
proposed arrangements in both cases, that, for the duration of the
arrangements, the fixed monthly payments of €2,023 .41 are as much as
can be afforded by Mr. McNamara and Ms. McNamara during that
period. There is therefore no scope to provide for a higher rate of
interest during the currency of the proposed arrangements than the
proposed 1 % rate. Insofar as the period after the arrangements is
concerned, one might get the impression from reading Appendix 7 to the
arrangement in both cases that the practitioner intends that the interest
rate would remain at 1 % even after the arrangements come to an end.
However, in respect of the 09 account, the rate equates to the ECB rate
plus 1.25%. Nonetheless, it seems to me that this slight divergence in
rate as between the rate provided for in the proposed arrangements and
the rate applicable to the 09 account is not sufficient to demonstrate that
Tanager will, as a consequence, suffer an unfair prejudice. This is
particularly so in light of the fact that, as explained in sub. para. (c)
below, Tanager has provided no sufficient evidence of the cost of funds
to it. For the avoidance of any doubt as to the rate of interest to be
applied after the expiry of the arrangements, in the event that the court
ultimately makes an order under s l l 5A (9) confirming the coming into
effect of the arrangements, the order will expressly record that the rate of
interest, post arrangement, will equate to the ECB rate plus 1 %.
(c) In my view, it is very significant that Ms. O'Brien has provided no
evidence dealing with the cost of funds to Tanager. In support of her
contention that a rate of 1 % is insufficient, Ms. O'Brien says nothing
about the cost of funds to Tanager. Instead, her evidence highlights that
Tanager does not offer fixed rate loans but that "other unrelated
And the judge quoted a precedent set in another PIA case
"57 . ... I am not satisfied that the objecting creditor has shown me
sufficient evidence that the proposed fixing of interest would, over
the balance of the extended term of 2 7 years, be unfairly prejudicial
to it merely on account of the interest rate, and the evidence
adduced on the part of the objecting creditor ... is predicated on a
treatment of the objecting creditor as a lending bank, and not as an
investment fund. I have insufficient evidence on which I could
conclude that the proposal to fix the interest rates for the proposed
extended term is unfairly prejudicial to the objecting creditor having
regard to its status. "

The future value of the home
alue of the family home. The suggestion put forward by Ms. O'Brien
in her affidavit that the value of the family home is likely to appreciate in the future is not based on any empirical evidence or any valuation
evidence from a valuer. It is simply conjecture on Ms. O'Brien's part.
Secondly, Ms. O'Brien, in making this case, fails to take account of the
very real consideration that the household income is limited . On the
figure set out in Appendix 2, there is no scope to provide for additional
payments to reflect the possibility that house prices might rise in the
(e) For these reasons, I am of the view that the complaints made by Ms.
O'Brien (as summarised above) do not withstand scrutiny. I also bear in
mind in this context that Tanager will recover more under the proposed
arrangement than it will in a bankruptcy.

 

[Brendan Burgess]

The judge's comments on the inconsistencies between the SFS and PFS

The inconsistencies between the SFS and PFS
90. With regard to the Tanager's objections based on the discrepancies between
the SFS and the PFS, there are, undoubtedly, inconsistencies between both
documents. In particular, in the SFS, it is stated that the value of Mr . McNamara's
half share in his parents' house is of the order of€500,000 and that Mr. McNamara is
in receipt of monthly rent from that property of the order of €800 per month. In
contrast, the PFS says nothing about any rental income. Furthermore, the PFS
suggests that the value of the inheritance is significantly less than €500,000. The
value given for the inheritance in the PFS is €182,500. This is also the figure which is
subsequently utilised in the proposed arrangements. Given that the SFS was
completed in January 2016 and the PFS was completed in October 2016, it is difficult
to understand why there should be such an obvious discrepancy between both
documents. This is highlighted by Ms. O ' Brien in para. 26 of her affidavit and
reiterated by her in para . 34 of her affidavit. In my view, Ms. O'Brien was entirely justified in raising the issue.
91. Furthermore, in the course of the hearing, counsel for Tanager contended that
there is no reference in the SFS to the Revenue debt or to the judgment mortgages.
Counsel submitted that the SFS was a "grossly misleading" document. He also
contended that it "beggars belief" that the value of the inheritance would drop, in
such a short space of time, from €500 , 000 to €182,500. While the latter point is
certainly made in Ms. O'Brien's affidavit, I cannot see anything in her affidavit which
makes a complaint in relation to the SFS in respect of the revenue debt or the
judgment mortgages.

92. In fairness to Mr. McNamara and Ms. McNamara, I believe that I should
confine myself to the issues raised by Ms. O'Brien in her affidavit insofar as the
discrepancies between the SFS and the PFS are concerned. As noted previously, Mr.
McNamara swore an affidavit in response to Ms. O'Brien's affidavit. Thereafter,
Tanager did not choose to reply to Mr. McNamara notwithstanding the opportunity
given to Tanager to do so.

93. Nonetheless, given the discrepancy between the SFS and PFS insofar as the
value of the inheritance and insofar as the rental income is concerned, Mr. McNamara
is, in my view, under an obligation to explain himself. On the face of it, the
discrepancy raises an issue as to whether the full means of Mr. McNamara and Ms.
McNamara are being brought to bear for the benefit of their creditors under the
proposed arrangement. Section 1l5A (9) (b) (ii) requires that the court, on an
application of this kind, must be satisfied that there is a reasonable prospect that
confirmation of the proposed arrangements will enable the creditors of Mr.
McNamara and Ms. McNamara to recover the debts due to them to the extent that the
means of Mr. and Ms. McNamara reasonably permits. In tum, if their means have not
been brought to bear, this would raise a question as to whether Tanager (which suffers uch an extensive write-down of debt under the proposed arrangements) will suffer an
. Furthermore, it is absolutely crucial in proceedings under the 2012 - 2015 Acts
that debtors proposing to seek relief under the Acts should comprehensively and
accurately disclose all their assets and liabilities in their PFS. The proper functioning
of the system depends on full disclosure being made.
uch an extensive write-down of debt under the proposed arrangements) will suffer an
94. Furthermore, it is absolutely crucial in proceedings under the 2012 - 2015 Acts
that debtors proposing to seek relief under the Acts should comprehensively and
accurately disclose all their assets and liabilities in their PFS. The proper functioning
of the system depends on full disclosure being made. Creditors, practitioner

96. I am conscious that there may well be a very good explanation for the
difference between the SFS on the one hand and the PFS on the other (insofar as the
inherited property is concerned). While Ms. O'Brien has very properly raised an issue
in relation to the discrepancy, the fact that there is a discrepancy does not ipso.facto
mean that the PFS is inaccurate. It may well be the case that there is a good
explanation for the difference in value. In these circumstances, an issue arises as to
whether it would be appropriate to dismiss the applications given Mr. McNamara's
failure to properly address the discrepancies. In the course of the hearing, counsel for
the petitioner argued that there was no need to address the issue at all in circumstances
where, if it transpired that the value of the inheritance turns out to be greater than
€182,500, the "windfall assets" provisions of the proposed arrangements would be
triggered. In this context, clause 9 of Part IV of the proposed arrangements provide
that the McNamaras will be required to introduce an amount of not less than 75% of
the net proceeds of any inheritance received by them during the term of the proposed
arrangements. However, it seems to me to be inappropriate to leave the matter to be
dealt with in that way. As noted above, the issue of the discrepancy between the
information contained in the SFS and in the PFS was very properly raised by Ms.
O'Brien in her affidavit and, in my view, Mr. McNamara was under an obligation to
explain the difference. Furthermore, given the very significant write down of debt roposed in this case, it is difficult to see why I 00% of the inheritance should not be
deployed in part repayment of Mr . McNamara's debts.
97. In light of the failure of Mr. McNamara to explain the apparent discrepancies
highlighted by Ms. O'Brien in her affidavit, the question which now arises is whether
that failure to explain the position should lead to the dismissal of the present
applications or whether, instead , Mr. McNamara should be given a further opportunity
to fully and accurately explain the discrepancy. With some considerable misgivings, I
have come to the conclusion that I should give Mr. McNamara a further opportunity
to address the issue on affidavit. In this context, I bear in mind the consequences for
Mr. McNamara and Ms. McNamara in the event that the present applications are
refused. They will lose possession of the family home.
98. I therefore propose to adjourn the matter for a brief period to give Mr.
McNamara an opportunity to explain the position in relation to the inheritance, its
value, and the rent payable in respect of the inherited property . I will not direct proofs
for Mr McNamara and the practitioner but it would be appropriate to support
whatever is said in the affidavit by any relevant exhibits. If an adequate explanation
can be given for the differences between the SFS and the PF in relation to the
inheritance and the rent, then this should dispose of the three grounds of objection
summarised in para. 86 above. On the other hand, if the affidavit is incomplete or
unsatisfactory, further argument may be required as to whether the applications
should be refused in the circumstances.

 

[Brendan Burgess]

My views

Even if there were no issues with the payment record or the PFS, this PIA is way too generous

The mortgage will be written down to the current value of the house - €550k
They will pay a fixed rate of interest on this of 1% or €5,500 a year for 6 years
So most of the annual mortgage payments of €24,000 will be paying down this loan.
After 19 years, they will own the property outright with no mortgage.

No one else in the whole country gets to rent a house worth €550k for €460 a month which is what is happening here.

No one else gets the option to buy a home like this for €550k with money forced out of the bank.

There was 8 years left on the mortgage and Tanager has been forced to extend it to 19 years at ECB +1%.


Their payment record has been appalling

The legislation is very clear that before overruling a Veto, the judge must pay attention to the payment record of the borrower over the two years prior to the application for the PIA.

We know that Tanager got an order for possession in 2014. They would not have got that if the payment record had not been appalling.

The McNamaras applied for a PIA in 2016.

As the judge said
"69. Insofar as past performance is concerned, it is true that in the years immediately preceding the issue of the protective certificates, the payment history of Mr. McNamara and Ms. McNamara was poor."

According to the judgement, they have been paying €2k a month since mid 2017.

We do not know whether they were simply unwilling to pay or unable to pay. In any event it doesn't matter. This record suggests that it is unlikely that they will pay the mortgage over the next 19 years.

They have been paying for other things instead of prioritising their mortgages
Their children went to a private school.

He stopped work to stand for election to the Dail although he was already in financial difficulty.

I have no problem at all with people going to private schools or standing for the Dail but I do object to getting everyone else to pay for it.

It is very unlikely that they will be able to pay this mortgage from their income
They are aged 59 and 56 now. They have not been earning much in recent years - or certainly not enough to pay €2,000 a month between them.

It is very unlikely that their careers are going to take off in their 60s and their 70s to enable them to pay the mortgage.

The inconsistencies between the SFS and PFS

From the judgement:
90. With regard to the Tanager's objections based on the discrepancies between the SFS and the PFS, there are, undoubtedly, inconsistencies between both documents. In particular, in the SFS, it is stated that the value of Mr . McNamara's half share in his parents' house is of the order of€500,000 and that Mr. McNamara is in receipt of monthly rent from that property of the order of €800 per month. In
contrast, the PFS says nothing about any rental income. Furthermore, the PFS suggests that the value of the inheritance is significantly less than €500,000. The value given for the inheritance in the PFS is €182,500. This is also the figure which is subsequently utilised in the proposed arrangements. Given that the SFS was completed in January 2016 and the PFS was completed in October 2016, it is difficult to understand why there should be such an obvious discrepancy between both documents. This is highlighted by Ms. O ' Brien in para. 26 of her affidavit and reiterated by her in para . 34 of her affidavit. In my view, Ms. O'Brien was entirely justified in raising the issue.

This is crazy. Tanager pointed out this discrepancy in their affidavit and neither the PIP nor the McNamaras even attempted to answer it. They clearly felt that this too would just be waved through by the judge.

At a court hearing for a possession order, the bank has to jump through so many hoops that it's very easy to slip up. Every last thing must be proven and evidenced. Yet in this case, the borrower can just assert what the inheritance is worth and was not required to show the Inland Revenue Affidavit or the Will.

 

[Brendan Burgess]

I am surprised at how Tanager conducted this case

I am not a lawyer, but it seems that a lot of time was wasted on legal technicalities which diluted the force of the real arguments.

Half the judgement is taken up with arguing issues such as whether Belvedere College constitutes a separate class of creditors or whether the Revenue was a secured or unsecured debt. And whether proper notice of this and that had been served.

The big arguments should have been

1) These guys have an appalling payment record
2) It is very unlikely that they will have much of an income in their 60s and 70s
3) The PFS appears to be wrong by a huge amount
4) The bank has an order for possession which is rendered meaningless by this whole process

 

[Brendan Burgess]

Is it any wonder we are charged the highest mortgage rates in the eurozone?

 

[gnf_ireland]

@Brendan Burgess
Like some of the high profile cases floating around, I do find this one incredible. I would not like to be in the situation the McNamara's find themselves in, but in reality I don't think this will be the last we hear of this.

If I go into a bank today, I cannot get a mortgage of 1% fixed for 6 years and ECB+1.25% beyond that. I have a proven track record of paying my mortgage on time every both and yet I am not afforded this. Why is someone who track record has been poor given this? The equality of it is just appalling !

But in reality, it is unexceptionally unlikely they will be able to continue working at a normal rate until they are 79. There is a big difference between wanting to and being able to. Its simply not a viable proposal. Taking individual cases out of world famous people doing it, probably in the 0.0001% of those in the industry is not practical. Today, the most mortgages can only be taken out until 68, 70 on exception - yet the basis of this arrangement is that they have the ability to pay their mortgage until 79.

The inheritance thing is mind boggling !

But the biggest issue for me is the fact that during a time they were clearly bankrupt and were in debt at a very serious level, they still sent their children to a private school - Belvedere College. The level of entitlement shown by this is astounding to me !!

As for how banks issued nearly 300k in unsecured loans to them is also beyond me !

 

[cremeegg]

Excellent work, a real public service Brendan.

The judge's focus on Tanager's cost of funds seems misplaced to me. The time value of money has no direct connection with any cost of funds. My personal experience with judges (painful) was that they are usually well informed, but here the judge just seems to misunderstand.

 

[Brendan Burgess]

Hi gnf

I got very annoyed on the radio about the Belvedere thing.

You are paying the highest mortgage rates in the eurozone to pay for them to send their kids to Belvedere.

As for how banks issued nearly 300k in unsecured loans to them is also beyond me !

There is very little information on how the debt evolved. But my guess is that these are the shortfall on investment property mortgages.

I also assume that the mortgage of €2.2m on a house worth €550k is because there was cross security.

Brendan

 

[gnf_ireland]

I got very annoyed on the radio about the Belvedere thing.

You are paying the highest mortgage rates in the eurozone to pay for them to send their kids to Belvedere.

I assume the children are still not going to Belvedere, and that it was a historical debt. I seriously doubt any private college would allow that level of debt to accrue over an extended period. Its more the attitude that while owing millions they still felt their children should go there, without being able to afford it.

There is very little information on how the debt evolved. But my guess is that these are the shortfall on investment property mortgages.
I also assume that the mortgage of €2.2m on a house worth €550k is because there was cross security.

Strangely, this part does not annoy me as much. With investment properties, risk is taken onboard and normally has a higher rate of interest than a PPR. The deposit amounts should also be higher, although maybe not the case back then. I have a feeling they may have been afforded excess funds due to their fame at the time. But if an investment goes bad, they have lost the property and there is a shortfall. If the person cannot afford to pay that shortfall, the only real option is to write it off. But at the end of the day, the person does not have anything from it either, and cannot gain in the future from it.
I think for BTL's, if there was a minimum deposit of 40% and a higher interest rate, if sold at a loss on the open market, the investor has lost at least 40%, the bank should also take some of the loss for their bad decision to lend the funds in the first place. It might make them think twice about excessive lending !!

The issue is the PPR - they will own the house at the end of it, having effectively paid minimal interest on the loan for years - assuming they can keep up the repayments, which I doubt they can. They will end up having to deal with that in the future, but maybe there will be equity in the house the next time so may be willing to look at other options as they will have something to lose this time. They had nothing to lose here, as they were completely bankrupt prior to the debt writedown !

 

[Brendan Burgess]

I assume the children are still not going to Belvedere,

They are now 19 and 21.

Strangely, this part does not annoy me as much.

Nothing strange about that. It doesn't annoy me either.

I have no problem with people borrowing to invest in property, although I would usually advise against it.

But I have speculated here. It's possible that they bought their house for €1.5m and have paid little or nothing on it over the years, so the mortgage might be due to the purchase of the home alone.

 

[noproblem]

So how are they paying back the judgement now or is there something we don't know?

 

[Delboy]

I'd assume the private school debts were accumulated over the last 2 years of the youngest attending there as Belvo is about 6k a year. A fairly cynical move if I am right in that assumption.

I've seen talk online that the €550k valuation on their house is pure fantasy stuff. Tanager alluded to this also during the court proceedings though I'm sure the option was there for them to get an independent valuation.

I sure would like to see the house myself to test that valuation! But it looks like they'll one day have a valuable asset too pass on to their sons that was obtained at a heavily discounted rate courtesy of the taxpayer.

Heads they win, tails we lose

 

[Brendan Burgess]

I've seen talk online that the €550k valuation on their house is pure fantasy stuff. Tanager alluded to this also during the court proceedings though I'm sure the option was there for them to get an independent valuation.

Tanager referred to the valuation as a fantasy valuation and I said that on Matt Cooper.

But since then I have noticed in the judgement that it was the valuation agreed by Tanager and the PIP. Had they disagreed, the ISI would appoint an independent valuer.

Someone who knows the house has tole me that it's a fair valuation.

Brendan

 

[Delboy]

Fair enough

 

[gnf_ireland]

I sure would like to see the house myself to test that valuation! But it looks like they ill one day have a valuable asset too pass on to their sons that was obtained at a heavily discounted rate courtesy of the taxpayer.

Not sure it is at the cost of the taxpayer ! The losses made were from whomever sold the debt to tanger and to be fair, it is more than likely irrecoverable anyway

The bigger issue is what happens if they default from now on - which in my opinion is likely given the age etc they need to pay the mortgage to !

A neighbour of mine ended up in trouble with a bank over property investments and ended up selling the family home they lived in for 43 years and moved into an apartment to clear the debt. His wife left that house in absolute tears, as you can imagine. The problem was he has assets, so the bank played absolute hardball with them. Here we have a couple who have a massive debt write-off and still get to stay in their house. The equality of it is very strange !

Just shows, if you go into debt, may as well go big !

 

[Bronte]

Excellent work, a real public service Brendan.

The judge's focus on Tanager's cost of funds seems misplaced to me. The time value of money has no direct connection with any cost of funds. My personal experience with judges (painful) was that they are usually well informed, but here the judge just seems to misunderstand.

I’m amazed the judge can just decide what interest rate a bank can charge. And an interest rate no client of that bank can get. That’s like telling Dunnes Stores what price they may sell a bag of potatoes for.

 

[Brendan Burgess]

I’m amazed the judge can just decide what interest rate a bank can charge. And an interest rate no client of that bank can get. That’s like telling Dunnes Stores what price they may sell a bag of potatoes for.

100% agree.

But it's worse than that. The PIP set the interest rate and the judge approved it.

Brendan

 

[noproblem]

Shocking when ordinary people who work hard and pay their bills, etc, see this happening but apparently it's open to everyone to avail of if difficulties arise or ?. Personally, it tells me something about the people involved.

 

[gnf_ireland]

Shocking when ordinary people who work hard and pay their bills, etc, see this happening but apparently it's open to everyone to avail of if difficulties arise or ?. Personally, it tells me something about the people involved.

I fully believe that there needs to be measures to draw lines on things when people are in serious financial situations. I have absolutely no issue with mechanisms for sorting out this, and we need to be able to put the past behind us and start afresh. No difference to the justice system - pay your due,and you start again.

But two things frustrate me about this case:
1. the sense of entitlement the parties had to continue to send their children to private school when they knew they could not afford it. The children are 19 & 21 according to a previous post. They applied for a PIP in 2016, and were unable to meet commitments in the 2 years prior (financial difficulties started in the early 2000's). Why on earth would someone who was bankrupt justify sending their kids to private school
2. The revised mortgage arrangement is unsustainable and is not something that I can walk off the street and get today. The rate is amazing and the age the mortgage is required until is madness. It is not a solution in my view, but exceptionally favourable terms based on their prior fame. This will be back in the courts within a decade again ! I am all for solutions, but this is not a solution - it is a short term fix