Jill Kerby

Mortgage holders must believe in miracles, not AIB

Maybe miracles do happen. 

Maybe David Hall’s Irish Mortgage Holder’s Organisation, a charity now working on a six month pilot project with AIB to try and resolve 1,000 of their most intractable mortgage arrears cases will succeed with just a handful of people and the €150,000 budget they’ve been given by the bank.

Maybe the process that the IMHO claim they have put in place over the past year in their dealings with AIB to sort out iMHO members’ arrears, will end up as the template for all the banks. 

Maybe Mr Hall has cracked this intractable nut which entails an estimated €100,000 people who have not paid their mortgages in 90 days. About four in 10 have paid nothing against their loans for two years. The amount of money in arrears or that has been restructured is staggering: the IMHO itself estimates it amounts to €46.6 billion of all outstanding mortgage loans.

Something certainly has to be done. David Hall says his ambitious arrangement with the IMHO’s once bitter adversary AIB, is not the only solution to the great debt crisis. No one, he says, is being forced to use their service and people can engage a private adviser.

That would be my first choice, if I was in debt distress. But only if I could afford such assistance.

The great appeal of the IMHO is that it has pledged to do its utmost to keep people in their homes and to try and force the banks to own up to their role as reckless lenders. Mr Hall’s passion has created a powerful lobby group with a powerful agenda and he has been very effective.

The IMHO also only charges people who can afford to pay them for their help and 45% of all cases they have been on a pro-bono basis Mr Hall told me. He is adamant that the IMHO’s role as the champion of the debtor will not change and their independence will not be compromised because its expenses (the directors will not get any remuneration) are to be funded by AIB. 

This question of a potential conflict of interest would never have arisen if mortgage debtors could have afforded to pay for their own financial advocate – an accountant or experienced insolvency practitioner - who could then support them in stressful debt restructuring negotiations with their banks.

The Central Bank should have stepped in long ago and insisted that this great imbalance of power between debtors (with no resources to get proper impartial advice) and the banks end by the banks picking up the cost of this independent, professional advice.

The Central Bank along with the politicians have made things progressively worse.

The deadlines they set to clear the great overhang of debt is unrealistic without massive debt write-down.

Even without that, it intentionally sidelined Mabs, the money, advice and budgeting service, with its 60 offices around the country, 25 years of experience in debt resolution and an existing budget of €18 million from both the formal insolvency process and from having an official role in the ‘informal’ representing of debtors who are afraid to engage with their lenders.

Instead the CB has permitted all kinds of regulated and unregulated bodies (like the IMHO) and individuals to operate as debt advisers, facilitators and negotiators.

As Mr Hall has pointed out, he wanted to be regulated, but that is only now possible with the introduction of new regulation for a new category of adviser, the debt management firm. Perversely, the existence of this new layer of regulation  may prevent many trained and regulated accountants, QFAs and PiPS (personal insolvency practitioners) from dispensing debt advice until they too qualify under this category.

Meanwhile, we have a generation of young people and families and a domestic economy paralysed by debt.

We have banks that cannot get thousands of its most indebted customers through the first phase of the mortgage resolution purpose – form filling - without resorting to the paid assistance of a well meaning consumer debt advocates.

And if all that wasn’t enough, the brand new insolvency Service of Ireland is already losing the confidence and respect of the people it was set up to help – the indebted, who cannot avail of its services because they are too poor to hire the compulsory personal insolvency practitioner.

In the absence of tens of billions of mortgage debt write-down it really is going to take a miracle to sort out this mess.

Inertia costs money. 

We write a great deal on these pages about the need to shop around to ensure that you get the best value financial services and products but not all of us follow this good advice as diligently as we should.

After putting off the review of two of three big household expenses, the cost of our electricity and gas bills, our bundled telecom package of telephone, broadband and cable TV service and home security monitor, we finally made the effort to compare different offers with the help of bonkers.ie, u-switch.ie and our own Money page features.

We’ve saved a total of €1,300 making the various switches.

The expensive motor insurance renewal quote that I just received is this week’s task.