Wednesday 8 July 2015

Banks told: get on top of family arrears crisis

Published 06/08/2014 | 02:30

Banks have been told to do more to help stricken mortgage holders
Banks have been told to do more to help stricken mortgage holders

Banks have been told to step up their efforts to sort out the mortgage arrears crisis.

A new report released by the Central Bank shows that lenders are now more inclined to offer repayment solutions to families struggling to meet their mortgage costs.

But just over half of those who are three months or more in arrears kept to the revised payment deal offered by their bank, the report says.

And one in 10 troubled mortgage holders made no repayments after their mortgage was restructured, the economic research, entitled 'Mortgage Repayments After Permanent Modification', found.

People are becoming more inclined to keep to the restructure deal, but banks need to do more, the report says.

"Given that 55pc of the stock of permanently modified defaulted loans made a full repayment in December 2013, more needed to be done before the arrears issue is resolved," the economic paper states.

The report found that 11pc of those who had been offered a permanent restructuring of their mortgage by their bank have failed to make any payments.

Chief executive of the Irish Brokers Association Ciaran Phelan suggested that some of these may be strategic defaulters, people who deliberately don't pay.

"From this report it would appear that the level of strategic defaulting among homeowners is far lower than the 20pc forecasted by some the banks," he said.

"Only 11pc of those that have gone through the permanently modified process are not making any repayments, so this would seem to be a more realistic measure of non-cooperation among homeowners following negotiations with their bank."

However, others suggested that those who were making no payments after getting their mortgage repayments altered may have lost their jobs again, or be overwhelmed by other debts.

The Central Bank report, by economist Anne McGuinness, says that banks are now offering deals on mortgages to around six out of 10 of those who are three months or more in arrears.

Payment

These deals are typically extending the term of the mortgage, adding the arrears to the overall amount owed, or splitting the mortgage to reduce the monthly payments by putting some of the money owed to one side to be dealt with later.

However, around 28,500 mortgage accounts that are in arrears have not been restructured. This means one in four of those in mortgage trouble have yet to be offered a permanent solution by the bank.

The economic paper says the reasons for this are because the family cannot afford the lower payments, are in dispute with their bank, or are failing to co-operate with their lender.

Irish Independent

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