Fall in mortgage arrears cases ‘painfully slow’

By Eamon Quinn

The reduction in mortgage arrears is “painfully slow” and any solution based on the main banks selling on their distressed home loan books to vulture funds without writing down debt to distressed borrowers will make matters worse, the policy head of the Free Legal Advice Centres (Flac) has warned.

Paul Joyce was commenting on the latest Central Bank figures which showed a small fall of 1,217 to almost 72,490 in the number of borrowers facing some sort of arrears in paying their mortgages at the end of September from the previous quarter. The figures mean that one-in-10 of all the residential mortgages in the Republic are behind in repaying their home loans, almost 10 years since the onset of the financial crash. The Central Bank said the reduction marked the 17th consecutive quarterly drop. Irish banks, along with those in Italy, are under particular focus by the ECB to clean up their loan books of distressed property loans.

But Mr Joyce said that a fall of 7,000 in accounts in arrears from last year “is painfully slow”, and that the numbers of arrears for over 90 days at 6.9% of all mortgage accounts also gave an artificially positive picture. “And given the ECB context, it doesn’t take into account the huge number of restructuring,” Mr Joyce said, adding the high level of household indebtedness will weigh on the economy when the ECB eventually starts to hike interest rates in the coming years.

“We want the lenders to write down debt. Writing down the current mortgage to current market value should be explored in every case. Instead, we get a long, drawn-out process and you wonder whether it is doing the banks any good. There is fear that the main banks will sell their more troubled mortgage accounts [to vulture funds]” said Mr Joyce, adding this amounted to “shuffling bits of paper” with no benefit to borrowers. The number of restructured accounts at the end of September stood at 119,070, down by 977 accounts in the quarter, according to the Central Bank figures. Such restructured home loans include borrowers agreeing with their lenders to pay only the interest on the mortgage and not paying down the capital; making reduced payments; and agreeing temporary and permanent moratoriums; or striking agreement over split mortgages. The number of restructured accounts in arrears for over 720 days — borrowers who have had some sort of adjustment in the repayment agreement — fell by 545 to 31,624 in the quarter.

The figures also show that despite an improvement of about 500 accounts in the quarter meeting the terms of their restructured mortgage payments, that 12.7% of all restructured accounts were failing. Restructured mortgages are supposed to be permanent and sustainable and the high failure rates have long worried debt and mortgage experts. “Some 15,651 [accounts] were not meeting the terms of their arrangements at the end of quarter two and that was down to 15,121 at the end of the third quarter,” Mr Joyce said.

He said there was some “small evidence” of unregulated loan lenders being more willing to bring legal proceedings. “What annoys me is that the figures do not tell us who is doing what. The Central Bank figures are all anonymised. There is no breakdown by name or by domestic lender. Everybody is anonymised and protected,” he said, against the interests of borrowers.

KEYWORDS: business, finance


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