Households in big trouble as they fail to pay mortgage debt
Repossessions set to soar as bondholders turn the screw
Published 03/02/2011 | 05:00
A WAVE of repossessions has been predicted this year as more households fall behind on their mortgage repayments.
The Irish Brokers Association (IBA) said bondholders and others who have lent money to bailed-out banks were putting lenders under pressure to deal with defaulting mortgages.
Some 13,000 people have not paid their mortgages for a year.
And another 15,000 mortgage holders have made no payments for six months.
Anyone who has not paid their mortgage for a year or more is no longer protected by the Central Bank code of conduct on mortgage arrears.
This leaves them highly vulnerable to having their lender take legal action to repossess their home. But banks have so far been reluctant to take this drastic action.
Lenders had initiated 3,054 court cases to repossess homes in the three months up to last September, the latest Central Bank figures show.
Banks held 522 properties as a results of repossessions and voluntary surrenders, the figures show.
But IBA chief executive Ciaran Phelan said banks and building societies were coming under pressure to enforce mortgage contracts that were in default.
All lenders have packaged up residential mortgages and sold them on to investors. These investors in these securitised mortgages expect a level of cash to be generated from mortgage repayments each month.
"If mortgage holders are in default then the bondholders usually expect the bank to take the next steps as per the mortgage agreement and take steps in relation to the security," Mr Phelan. He accused the Government of doing little more than tinkering around the edges of the problem.
"Unless the Government tackles the issue, Ireland is likely to see an eventual avalanche of 15,000 to 20,000 repossession cases coming through the legal system over the next 12 months or so," he added.
The industry body said that the 13,000 mortgage holders had defaulted as they were already past the 12-month protection period. This means they are subject to the will of the banks.
"An additional 15,000 homeowners are over six months in arrears last September and it would unfortunately seem that probably at least half of these will still be unable to meet their mortgage repayments in March of this year, bringing the total to over 20,000," Mr Phelan said.
He added that there was a risk that banks and building societies could be seen as a soft touch if they failed to act against those who had defaulted on their mortgages.
Continued prevarication and the reluctance of banks to write down mortgages where no repayments were being made risked making the situation worse, the IBA said.
A spokesman for the Irish Banking Federation denied that banks were about to engage in large-scale repossessions.
Legal actions in the courts for repossession remained low as banks sought to work with those in arrears in a bid to keep people in their homes, he said.
"There is no doubt that lenders are coming under pressure but strenuous efforts are being made to accommodate people, including those who have been in arrears for lengthy periods," the banking body said.