Free Houses for Everyone in Long-Term Mortgage Arrears?

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A tsunami of house repossessions, or not, depends on lenders’ plans for the 24,000 households who are in long-term mortgage arrears. When those in arrears can’t pay, or don’t engage, most assume lenders take things to the next step and seek to repossess the home. It seems, however, from recent Central Bank Data that lenders are merely sitting on those in arrears.

Are they are doing this for the good of society? Hardly.

Lenders I feel have been honest with the Central Bank, informing them that they believe 2/3rds of the 24,000 households will lose ownership of their home. That is 16,000 households, approx. 48,000 people. The unspoken crisis ahead includes those on split mortgages, who will not be able to pay the parked debt, and those whose interest-only period ends.

Unless lenders allow everyone to have their house for free, this will not end well.

The banks and vulture funds went even further in their communication with the Central Bank. They explained exactly how families would lose their home predicting that one sixth would surrender their property and 50% would lose it by court ordered repossession.

We have for a decade heard, from those who support banks and vultures, that there have been few repressions. Nearly 10,000 families have lost their home. 3,500 by court ordered repossession and the balance by voluntary surrender. This to the ill-informed is ‘voluntary’, but does not reflect the fact that it follows relentless pursuing by a bank or vulture fund.

The recent report on long-term mortgage arrears released by the Central Bank, shows clearly the very low number of repossession proceedings taken by the banks. Commentators have for 10 years inferred that the low number was proportionate to the total number in long-term arrears based on this data.

It is time for radical, but achievable, solutions to deal with this extended crisis. Playing strategic financial or political games to prevent the inevitable is cruel on the thousands who have been drowning slowly for a decade now. The impact this has on them and their ability to support their families, communities and the economy is significant.

There is a way to resolve the legacy issue of mortgage arrears however and to future proof against any additional impact for those in difficulty post COVID-19.

A cooperative approach is needed where debtors are protected and their housing needs sorted. Working with banks, lenders and yes indeed vulture funds, to address the truth and the massive scale of people who will lose their homes.

I have recently worked with Mars Capital to create consumer-based solutions which keep borrowers in their homes. These are radical, but are solutions that have been developed with dual experience of a service/loan owner and an advocate. They include:

‘Debt for Equity’, an option where the bank swaps part of your debt for an equity stake in your home, which can be realised after your death.

A ramped-up ‘Mortgage to Rent’, which extends the scheme to include properties in positive equity, and increase the maximum number of bedrooms allowed per home.

‘Super Split’ mortgages with inbuilt write off up front. Split the mortgage into loan A and B. Pay loan A ( an affordable level ) and as it’s paid down an equivalent amount is written off the parked amount.

Proactive ‘Personal Insolvency’ arrangements where the ethical owner proposes a full debt restructure.

These solutions have been priced and structured. They can help a significant amount of the 16,000 households in danger to stay in their home with a suitable solution at little cost to the State.

We have a homeless and housing crisis with 9,000 people sheltering in emergency accommodation. The fact is a further 48,000 are in unsustainable accommodation, houses they cannot afford, being haunted by debt. Facing the challenges of indebtedness and the uncertainty of future housing, the mental health effects and costs are enormous.

Indeed the Ministers for Housing and Finance should be sending Christmas hampers to each bank and vulture fund thanking them for housing so many who are in trouble.

Chart 1: PDH mortgage accounts in arrears, as held by banks and non-banks

Table 1: Payments made by PDH mortgage accounts in arrears between June and December 2019


Chart 2: PDH Borrower engagement by arrears cohort
It’s important to remember banks and vultures don’t have a great record of categorizing customers. Just because a bank or vulture says someone is not co-operating does not make it so. For example, where a bank offers to sell a customer’s home; if the customer says ‘no’, this classes the customer as uncooperative. Forgive me banker for not wanting to make myself and my family homeless, call me uncooperative !!!

Chart 3: Legal status of PDH mortgage accounts in arrears

The chart below details the legal status of all the accounts in arrears. important to note these include all accounts, so you need to divide by 1.2. A proper analysis of this data is urgently needed by the Central Bank as the number of repossession orders granted vs the number sought is very high, this is not what we have been told. 2/3rds of cases in mortgage arrears have not had a letter of demand. This data does not show historical cases.

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