Fallout from debt crisis has just begun
The threat of home repossession and the process itself is very frightening and very real. There have been few repossessions - that is true. But this is all about to change.
Many borrowers are not able to pay their mortgage and now face a terrifying prospect of being challenged by lawyered-up bankers.
Do not stick your head in the sand if you are in financial trouble with your mortgage. Ignoring the issue will not make it go away.
The deck is stacked against you -but you should engage with your lender and read the Central Bank's code of conduct on mortgage arrears before you do so. The bank can deem you uncooperative if you don't follow that code when dealing with it - and it is allowed to seek to repossess your home as a result.
We have seen a dramatic increase in people contacting us where they have been served with proceedings to repossess their home.
The place to sort your mortgage arrears issues is not in court. When a lender writes to you threatening legal action, seek independent advice. Have your financial position assessed and find out if you can avail of an informal restructure of your mortgage or a formal insolvency arrangement.
In extreme circumstances, bankruptcy might be required. Each of these are solutions and will help you get back on track.
We see people every day who have done everything they can to protect their family and are trying to find a solution to protect their home. Last year we arranged 2,556 such deals.
Recently, there have been attempts to blame borrowers for the problems they are facing - and to infer that those who can't pay actually can. Also an opinion has been expressed that if you pay what you can afford, you will not have your home repossessed.
This is incorrect. Paying something may be a delaying tactic - but unless you and the bank agree a mortgage restructure and you pay the agreed amount, it will repossess your home.
The courts process takes time, so if you receive an aggressive letter threatening you and requiring you to leave your home within seven or 28 days, this means the bank are about to issue proceedings. It does not mean that you should leave your home.
Usually you are then served with a summons and once you get that, the legal process begins. The first court date is adjourned as court practice. Once you are at this legal stage, you are no longer protected by the code of conduct on mortgage arrears -so the bank can charge a penalty interest rate. Oh, and it will also be expecting you to pay their legal fees.
Here is where you are completely on your own. There is no system to help you with legal representation. However, instead of paying a solicitor, it may be a better idea to get advice from a financial advisor or a Personal Insolvency Practitioner who is equipped to actually solve the problem.
The legal system is daunting and scary but if you can agree a mortgage restructure with your bank, the legal proceedings can be struck out by the lender.
Fewer people have been engaging with banks over the past year. The simple cases have been dealt with by the banks and of those which remain unresolved, a great many borrowers simply can't pay. The fallout from the personal debt crisis is only beginning.
David Hall is CEO of the Irish Mortgage Holders Organisation
Sunday Indo Business