Article by David Hall in Sunday Business Post, 9th November 2014
Last week we announced 1330 long term sustainable deals done with AIB Group in the past 11 months, which includes EBS and Haven mortgages on behalf of distressed mortgage holders. This was following an initiative with AIB where we provided an independent, impartial and free service to residential mortgage holders who were in arrears on their mortgages. We had the same project with KBC Bank and will shortly release very good figures on deals done.
Many have asked how do you do a deal with a bank. This is a difficult question to answer as many professionals and mortgage holders dealing directly with their banks will confirm.
The best place to start is at the end. If you can’t get a deal from you bank you must consider an insolvency arrangement or bankruptcy. The starting point is would you bankrupt yourself if you can’t agree something with the bank. It’s not advisable to do as some of us did with the school yard bully and threaten him or her unless you’re willing to carry it through. Look at the full implications of bankruptcy and also what would be involved if you were part of a personal insolvency arrangement. A consultation with a reputable PIP (preferably one who has exposure to large volumes of transactions) or indeed recent press reporting’s from some banks will give you an idea as to particular banks appetite for doing personal insolvency arrangements which allow you stay in your home and secure a debt write down or appropriate restructure. Remember that in such arrangements you will be held to the reasonable living expenses as specified on the Insolvency service web site (www.isi.gov.ie or also check against http://www.misc.ie).
Many of us have strong views about banks behaviour and attempt to solve the mortgage crisis. The following is not to be read as being accepting of their behaviour or handing of customers. Dealing with banks is a lottery. It depends which bank you are with to what solutions they provide.
The code of conduct in mortgage arrears is essentially a useless administrative system which pretends to protect customers who are arears. Indeed many debtors obsess about it and distract themselves from the main issue of affordability. There is no real brain surgery in how a bank assesses your financial situation to establish the starting point. One common mistake is not detailing your full expenditure. A bank will not necessarily allow you keep the level you list and will use the RLE’s to bring you back if you exceed same but will allow you live on a low expenditure amount if you declare.
Banks differ on what expenditure they allow families and individuals and this is benchmarked from the insolvency service reasonable living expenses (RLE’s). In informal arrangements, some banks try to apply the Insolvency Service level and others add a % on top ranging from 5-20%. Next challenge is knowing what solutions your bank provides and as they don’t advertise you will need to seek third party help to establish same. A bank assesses your situation and then applies the least costly product for them. The challenge is some banks have terrible terms with their products.
A significant area of frustration is the delay in a bank getting back to you, having you submitted all the information they have requested. This is not because they are necessarily targeting you but that they are not the most efficient in the world. All communication with a bank should be in writing and all calls should be recorded, either by you or on their system which can be accessed if necessary.
It’s useful when preparing to deal with your bank to make a data protection request of the bank. This costs €6.35 and requires the bank to send you all information, including internal communication relating to you. Many people dealing with their bank are frustrated in trying to deal with their bank. This can have a significant effect on one mental health and affect their family and work life. No bank is worth this and in such circumstances a third party who has experience in achieving deals with banks might be worth engaging.
One of the greatest miss conceptions by those wanting to and actively involved in dealing with their bank to try and resolve their mortgage problem is that in attending a meeting in their bank or at a branch that the persons they are meeting are decision makers. This in general is not the case. While well-meaning the staffs are there to advise you and gather information from you, your file is sent elsewhere for consideration.
Banks offer a variety of solutions to assist when you are in difficulty with Mortgage arrears, some are good yet some are not so good. The Government despite all its rhetoric don’t require banks to have minimum level compulsory solutions for those in mortgage arrears. When this mortgage crisis began the government then and now has continued to prefer banks over those in mortgage difficulty. There is an urgent need for the establishment of a national service that will provide the essential trusted third party intermediary service that is urgently required. Such a service was recommended by the Finance Committee along the lines of our Project with AIB and KBC Bank. This could be done using the existing respected MABS infrastructure.
Many banks have to learn a lesson. They must accept where someone has an unsustainable mortgage and will lose their home that any residual debt after its sold must be dealt with at the time of negotiation. We cannot advise anyone to surrender their home unless they have an affordable deal in relation to the negative equity debt.
I would strongly encourage all those people who feel trapped, alone and unable to deal with their financial situation to seek help. Take that first step and contact a third party. Its ok for people not to be confident enough or to be scared to deal with you bank. Many share your feeling. But don’t give the bank any more power than it has. Don’t make yours and your family’s situation worse.
There are solutions, informal solutions and formal arrangements through the insolvency service. While the insolvency service has been slow to ramp up, it has made some welcome changes and is doing so now. Let’s tackle debt together.
