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Money Times - March 6, 2018

Posted by Jill Kerby on March 06 2018 @ 09:00

THE MORTGAGE ARREARS CRISIS ISN’T OVER…BUT THE CHAOS IS COMING TO AN END

 

A decade ago I attended a conference about personal insolvency hosted by the management and accountancy consultants Grant Thornton, who also happened to be one of the biggest personal insolvency practitioners on these islands.

The conference pre-dated the new insolvency and bankruptcy laws that were being planned by the government but it was clear that the main causes of the surge in personal insolvency and bankruptcy cases was the collapse of property prices and a surge in unemployment. The best solution then came from a Norwegian speaker, recalling their own property crash in the early 1990s: deal with the arrears quickly, he said. (They set new mortgage values for such cases at 100% plus 10% of the new market value. Insolvency regulations allowed people with overwhelming debts a quick, fresh start.)

Fast forward to 2018 and the disastrous Celtic Tiger property bubble that took a decade to inflate (from 1997) is still floundering pathetically, in full view, a decade later. 

Instead of coming up with a humane, realistic solution for distressed home owners in tandem with the bank rescue (controversial as it was), mortgage arrears were allowed to build up, empty or abandoned homes were left idle (and still are) and a proper,comprehensive strategy to deal both with strategic mortgage defaulters and those who were always going to struggle with their excessive debt, was never undertaken. 

Instead, too many ‘solutions’ were adopted in a piecemeal fashion: to this day the terrible post-Tiger debt creature keeps getting little pumps of oxygen demanded by politicians, housing and homeless charities, the media. Judges side with homeowners who show any initiative to try repay their property debt.

Last week’s stay of execution on the sale and disposal of another 20,000 of the so-called ‘non-performing’ mortgage loans owned by PTSB and Ulster Bank is the latest iteration of this decade-long debacle.

Will the vulture funds that want to buy the billions of euro worth of cut-rate mortgages have to become regulated bodies like the middle-men credit service agents they employ? At time of writing the Finance Minister has asked the Central Bank to ‘review’ the current mortgage arrears regulations to see if this is entirely necessary, as the opposition parties and debt charities insist.

What does appear to be happening is that anyone shown to have declined to engage with Ulster Bank or PTSB and have paid nothing against their mortgages (in some cases for up to seven years) may find they have run out of road,  With no deal on the record, and no appearances before a judge to plead their case for more time, such people will finally hand back the keys.

According to the banks, some of the owners have simply been unreachable, having moved out, emigrated or simply disappeared. Others, who are still living in the property will, if they qualify, have to seek to be re-housed by their local authority.

But other homeowners, who have forbearance arrangements in place – like reduced payments or interest only loans or even split mortgages – are also included with the defaulters because technically, their loans are also ‘non-performing’ compared to their original loan agreement.

The risk, say those opposing the sale of these loans to the unregulated vulture investors, is that replacement forbearance deals (if the one made with PTSB or Ulster Bank runs out, say after a 5 year term) may not be forthcoming and the newowner may set new repayment terms that can’t be met.

Forcing these vultures to come under the regulation of the CB, warn the banks, may scare them off or produce a worse sale price which may weaken the banks’ balance sheet.

Either way, this is one of those ‘rock and an even harder place’ for customers with so called, non-performing loans they are now diligently paying. Unless they have a cast iron contract that states that their forbearance measure is permanent and can never be altered, they may have to live with a certain amount of uncertainty, regulation or no regulation, and regardless of who owns their loan.

For those PTSB and Ulster Bank customers who haven’t engaged with the lender, and who simply don’t have the money to make any reasonable payment, they need to contact the Insolvency Service of Ireland. (www.isi.ie). There is no cost now for their services or for engaging a Personal Insolvency Practitioner (PIP).

Mortgage holders with any bank or lender (even a vulture investor) who finds themselves unable to pay their mortgage and/or other debts, should contact their nearest MABS office which runs Abhaile, the highly successful mortgage arrears service which provides a range of free support services and has kept many people and families in their homes.

The mortgage crisis isn’t over, far from it. But the chaotic phase appears to be.  And for that, I suppose we should be grateful.

The TAB Guide to Money Pensions & Tax 2017 is available in good bookshops. See www.tab.ie for ebook edition.

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