Raging Bull
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I was in Trim today...the system is stupid practically everything was adjourned as first time being heard. How stupid is that? ? Its doing nobody any favours
Key Post "Why borrowers should not fear repossession courts"
- Thread starter Brendan Burgess
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epicaricacy
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epicaricacy
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I'm not so sure about your conclusion re. 'its doing nobody any favours'. How about the families that have nowhere to go being granted a stay of execution (adjournment)?
The commonly understood meaning of a strategic default is where a borrower consciously decides to stop making payments in accordance with the terms of a loan agreement, notwithstanding the fact that he is in a position to do so and is fully aware of the consequences of his default.
This most commonly arises in the context of residential mortgages where the value of the underlying property has fallen (considerably) below the amount outstanding on the mortgage and the borrower takes the view that this position is unlikely to change materially in the medium term
I wouldn't consider such a decision to be irresponsible - it seems a perfectly rationale decision to me. Some may find it dishonourable, or even immoral, but that's a different point.
Given the severity of our property bubble and subsequent crash, it would be extraordinary if there were no strategic defaulters. However, trying to quantify the percentage of defaulters that are pursuing a conscious strategy would seem to me to be futile and, ultimately, irrelevant.
The bottom line is that if a borrower is in default under the terms of a loan agreement, and cannot reach an agreement with their lender to modify the terms of the original loan, then the lender should be entitled (and encouraged) to pursue whatever remedies are available to it under the terms of the loan agreement without undue obstruction or delay.
This is the only long term way to encourage competition in the Irish lending market which, ultimately, would be in all our interests.
There is a practice direction in place that requires an adjournment on a repossession of a family home at the first hearing.
For second or subsequent hearings in Trim were adjournments given. I understand that the Registrar in Trim is much slower to adjourn and quicker to grant repossessions.
Brendan Burgess
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More evidence of Deliberate Default:
http://www.askaboutmoney.com/threads/aib-at-oireachtas-finance-committee.193466/#post-1427935
AIB has 7,000 borrowers who are paying nothing at all - not a red cent.
When the legal process starts, around 50% of them resume paying.
http://www.askaboutmoney.com/threads/aib-at-oireachtas-finance-committee.193466/#post-1427935
AIB has 7,000 borrowers who are paying nothing at all - not a red cent.
When the legal process starts, around 50% of them resume paying.
Raging Bull
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I was there as a defendent., it will take me a year to get in frontof a judge which is too long,,, I have a very good defence so the sooner im in the better,,, the delays are only enriching those in legal system
Im confident of winning but I do accept your point there are those who have no chance but there is usually a stay to organize other accomodation
Sophrosyne
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Why will it take a year? Is that usual?
Raging Bull
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Ive had 5 month adjournment with registrar (summer recess)then hope to get on courts list is another 5 months if lucky at that stage its 14 months assuming no more adjournment..,, this is supposed to be the express system!!!
I really don't understand how David Hall and others can maintain the argument that there are no borrowers strategically defaulting on their mortgages. It would be truly extraordinary if there were no strategic defaulters given the attitude towards repossessions at the political, administrative and judicial level.
On his previous appearance before the Finance Committee, David Duffy made the following comments (emphasis added):
"Under the mortgage arrears resolution process, MARP, programme, everyone is required to submit a standard financial statement which goes through all of the income and expenditures of a person when he or she submits it. Within the past year, 25% of those indicate that the customer is able to afford their mortgage. Therefore, one in four of the customers who have provided a statement back to us shows that from their net disposable income - here I want to be clear that we define net disposable income as the income after reasonable living standards, which in our case are defined as 20% above the ISI guidelines, that is, one takes the reasonable living standards that have been published, adds 20% and then judges affordability - they were still able to afford their mortgage. I can go into that in more detail. That is a case where it seems to us, where one has the reasonable living standards nationally defined plus 20% and one is not making one's mortgage payment, that is a decision one has consciously made.
One in four of our buy to lets have paid zero in six months. If one looks at that population who have paid zero, they have net disposable income calculations but it is based on an income that was allocated in rent through that property. Therefore, an individual borrowed from us for an investment property or a buy to let, and he or she has a tenant who is paying rent, and for the vast majority that is the case, and in those circumstances, the landlord is making zero payments and diverting the rent. For us, that is a conscious decision not to pay or prioritise one's mortgage payment.
The last item to mention is that in excess of 2,000 customers, in all of the discussions we have had with them, have evidenced deposits which are significantly in excess of their arrears. We look at it and say that where a person has cash on deposit - non-current accounts in the financial system - and it is in excess of the arrears, we view that as a conscious decision not to pay or prioritise one's mortgage payment. I hope we will have more discussion on that.
What we are really saying is we are not trying to interpret. We are not speculating or extrapolating. We are saying clearly that if the customer tells us, based on the reasonable living standards plus 20%, that he or she can still pay and afford his or her mortgage, we believe that if the customer has not, he or she has made a conscious decision not to. If one has diverted rental income against the borrowings for that property and one is paying zero, that is a conscious decision, and if one has cash deposits in excess of one's arrears, one has also made a conscious decision. We are not trying to be clever. We are not trying to incite any discussion. We are trying to be clear that there are a significant number of people in these arrears situations who may have chosen. There may be human dimensions to that psychology; we are not arguing that. As we look at the portfolio, they have made a decision not to prioritise their mortgage payment. As such, we view that as a decision made consciously and, therefore, a strategic default."
Brendan Burgess
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Hi Sarenco
I too am baffled.
I wonder if it's the term "strategic"? Strategic makes it sound like a carefully considered plan, to withhold payments so that the lender will be forced to do a deal.
If we used "deliberate default" it might be easier for him to grasp.
Buy to let borrowers who are keeping the rent are deliberate defaulters.
People who pay the their credit unions ahead of their mortgage are deliberate or selective defaulters.
People who pay nothing at all for two years are deliberate defaulters.
David Hall knows that there are thousands who are paying nothing. He describes them as "frightened".
My view is that if they had faced an imminent threat of repossession from the first missed payment, they would have made a better effort and would not be in the mess they are in today.
I too am baffled.
I wonder if it's the term "strategic"? Strategic makes it sound like a carefully considered plan, to withhold payments so that the lender will be forced to do a deal.
If we used "deliberate default" it might be easier for him to grasp.
Buy to let borrowers who are keeping the rent are deliberate defaulters.
People who pay the their credit unions ahead of their mortgage are deliberate or selective defaulters.
People who pay nothing at all for two years are deliberate defaulters.
David Hall knows that there are thousands who are paying nothing. He describes them as "frightened".
My view is that if they had faced an imminent threat of repossession from the first missed payment, they would have made a better effort and would not be in the mess they are in today.
Sophrosyne
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It seems a ridiculously slow and costly system.
Is an adjournment always necessary? Could the registrar, if you were agreeable, have transferred your case immediately to the Circuit Court Judge’s List?
Brendan Burgess
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Hi Sop
A very interesting question.
The borrower must have a bona fide defence. If RB had entered a defence, he should have asked to be transferred. The Registrar probably assumes that no borrower wants the case heard quickly.
Brendan
A very interesting question.
The borrower must have a bona fide defence. If RB had entered a defence, he should have asked to be transferred. The Registrar probably assumes that no borrower wants the case heard quickly.
Brendan
Hi Brendan
I take your point but I suppose a borrower could deliberately decide to default on a loan and retain whatever limited funds they have available to meet their reasonable living costs. In contrast, a strategic defaulter is in a position to meet the scheduled payments but consciously decides not to do so.
To be fair to David Hall, I think it is entirely possible that many strategic defaulters are motivated by fear (e.g. they choose to build a cash reserve to address an uncertain future rather than meeting their pre-existing contractual obligations). In the extract above, David Duffy acknowledges that "there may be human dimensions to that psychology".
In any event, I don't think it really matters whether a strategic decision to default is motivated by fear or greed. The net result is that the default rate is considerably higher then it would be if the consequences for defaulting were more immediate and we are all paying for this policy/practice by way of a higher cost of credit.
I'm pretty sure that statistic only relates to borrowers that are in arrears of over 720 days. If I'm correct in that regard, it would be reasonable to assume that considerably more than 7,000 of AIB's borrowers are making no payments whatsoever.
Sophrosyne
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Strategic default is a distraction.
The issue starts with whether lenders have acted reasonably. We have at least two posters on this site where their lenders did not.
The Government is considering proposals to allow the Circuit Court to assess lenders’ proposals regarding mortgage arrears and if considered unreasonable, impose alternative arrangements - similar to examinership where struggling businesses operate as a going concern with court approval.
I think this should have been in place from the get-go.
If the court concludes that a lender acted reasonably, orders of possession can be issued without the need for multiple adjournments.
The issue starts with whether lenders have acted reasonably. We have at least two posters on this site where their lenders did not.
The Government is considering proposals to allow the Circuit Court to assess lenders’ proposals regarding mortgage arrears and if considered unreasonable, impose alternative arrangements - similar to examinership where struggling businesses operate as a going concern with court approval.
I think this should have been in place from the get-go.
If the court concludes that a lender acted reasonably, orders of possession can be issued without the need for multiple adjournments.
Sophrosyne
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Explain
The Government's reported proposals to charge the Circuit Court with the role of arbitrating between lender and borrower are completely impractical and any practical application of this proposal would almost certainly be unconstitutional.
The Circuit Court is already completely overwhelmed - how could the judges possibly find the time to arbitrate these decisions and how are they expected to determine what is "fair" as between the parties from a commercial point of view?
The proposal is, yet another, exercise in kicking for touch (in this case until after the next general election). It has nothing to do with equity or resolving the underlying issue.
Even conceptually, it would only work if lenders' security interests are suspended until the Circuit Court issued its determination as to what it considers to be "fair" as between the parties. What if the lender disagrees with the Circuit Court's determination? Would its security interest be voided? Would that be constitutional?
At one level, I agree that trying to divide or quantify the "can't pays" from the "won't pays" is a distraction. However, the fact that it is glaringly obvious that there is a significant cohort of borrowers that are deliberately choosing to default in circumstances where they could discharge their obligations clearly indicates that the Irish "solution" to the mortgage arrears crises is far more expensive than it needs to be.
Otherwise, I really don't see why it matters whether a borrower can't, or simply won't , meet their loan obligations. In either circumstances, we should be facilitating (and indeed encouraging) our lenders to exercise their contractual remedies - in the long run that would be in all our interests.
Sophrosyne
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How so?