Distress signals: turmoil behind closed doors
Mortgage arrears and high levels of personal debt pockmark the national recovery. John Meagher on the hard-up homeowners who are driven to breaking point
William Prior has heard more tales of despair than he cares to think about. There have been suicides, attempted suicides, parents living in fear about where their children will sleep a few weeks from now and people so wound up by stress that they have effectively withdrawn from society.
There is a common bond: mortgage distress. They are part of a cohort of tens of thousands of people who struggle to repay home loans and the Laois farmer and auctioneer turned social campaigner has seen it all.
"There's unbelievable hardship out there," he says. "I know of a couple who have water, tea and bread for six days a week and a proper meal on the seventh, and that's because they're stretched to breaking point."
Others struggle to cope in the face of being inundated with letters of demand and phone calls from agents working on behalf of banks. "People that get into serious arrears can feel they're isolated and vulnerable. But they're not alone - far from it."
Prior established the Phoenix Project in 2010, a charity that aims to provide assistance to people in mortgage distress and, thus far, it says more than 18,000 people from all parts of the country have been helped.
"It's completely free of charge," he says. "People don't pay a cent. We rely entirely on donations to fund our service." The charity, based in Portlaoise, provides stress management counselling and advice on how to deal with banks. It has negotiated agreements with lenders on behalf of clients and estimates that it costs on average €157 to keep people in their homes. Thus far, it claims none of its clients have had their homes repossessed.
Those who campaign to stop evictions talk of heartbreaking situations where frightened children and their parents are removed from their homes late at night. One such repossession was described in the Dáil last summer as akin to Mugabe's Zimbabwe. South Kildare TD Seán Ó Fearghaíl told the chamber there were security guards wearing balaclavas present, unmuzzled Alsatian dogs and members of the gardaí standing by.
Such disturbing scenes evoke late 19th century Ireland when the proliferation of evictions led to the formation of the Land League. But there are far more repossessions that happen without fanfare. In the first six months of last year alone, some 900 repossession orders were issued by the circuit courts. The rate of evictions is steadily increasing. For many, giving up their home is something that's done when there are no cameras, and no campaigners about.
Despite Fine Gael's pre-election talk of "let's keep the recovery going", a significant swathe of the population risk losing their homes. The Phoenix Project believes "nearly 50,000 family homes face the threat of repossession over the coming years" while David Hall of the Irish Mortgage Holders Organisation says 33,000 mortgages are in arrears by two or more years. It's an arrears bill totalling an estimated €2.4bn.
"There are a lot of mortgage holders who are in a very bad place," says Hall, who was the founder New Beginnings in 2010, but has since left the organisation. It successfully helped some borrowers get a write-down from their banks. But that was then. There appears little mood for such negotiations today. "We've entered a very difficult phase where vulture funds are swooping," he says.
Already, there's been considerable criticism levelled at banks who are selling off distressed loans at knock-down prices to such funds.
"I can't overestimated the sort of misery that's out there," Hall says. "We've just had one of our roughest days here at the office - we were dealing with a man who was holding a shotgun and was in a very bad way. And some situations really are bad. We don't have a magic wand, there are no easy solutions now and there are no free houses. The vulture funds have no skin in the game, so to speak, and they don't care about the emotional fall-outs from repossessions or the fact that some people end up in hotel rooms with their families."
Jerry Beades, founder of the New Land League, believes estimates of indebtedness surrounding mortgages and other large loans are far too conservative. "I believe anything up to half a million people are in serious difficulty," he says. "I see it all the time - old people who can't afford to retire, farmers who are pushed to breaking point due to mounting debt, people who ran small businesses but were burnt in the recession and now find their commercial debts are being registered against their homes. But all these problems are being brushed under the carpet."
Beades' organisation draws attention to evictions, although he came in for considerable criticism last year, when the New Land League blocked an attempted repossession of the luxurious Killiney, Dublin home of Brian O'Donnell. The solicitor and his wife owed Bank of Ireland €70m and later turned in their keys to the bank.
"I'd love to be able to sit here," a Dublin-based mortgage broker says, "and say that for every single person who is granted a mortgage, everything goes hunky dory, the repayments are always made and the loan is paid off. That happens most of the time, but sometimes it doesn't and in cases where the borrower is really struggling the make the payments, the lender is perfectly entitled to sell.
"It's illegal to sell a mortgage without the proviso that the home in question can be lost if repayments aren't kept up. Everyone who takes out a mortgage knows this and they're not just idle words. At the end of the day, banks are not charities. They're offering a financial product - with conditions. I have sympathy for borrowers who struggle to make repayments because of job losses and severe pay cuts - I know what that's like because this business was hit hard six or seven years ago - but that's the gamble with mortgages."
Such sentiments are not good enough for Dylan Owens, a documentary maker working on a film about "legal battles between ordinary citizens and big banks". He has first-hand experience. "Like many others, I got into mortgage difficulties when the crash happened," he says. "I felt compelled to make this documentary when I discovered some frightening truths about the repossession 'industry' during my own legal battle with the bank. I've been representing myself in the High Court against a lender who, despite my best efforts, will not settle for anything less than repossession.
"It's an absurd situation where they are seeking repossession of a family home which they cannot even sell on because of a planning issue. They have ignored affidavits, third-party reports, and land-registry evidence. They will not engage in any discussion to find a resolution."
Bad as his situation is, he says he has seen far, far worse in the course of making his film, whose focus is on lay litigants, such as himself, who have no funds to take on the highly paid barristers employed by the banks. "The phenomenon of distressed mortgages is endemic, and the real crisis is the disgraceful way borrowers are being treated by the banks, while the government do nothing, and the courts system facilitates it," he says.
He insists he has never come across cases of 'strategic defaulting' - a common misconception. "There's this idea that anyone in the 'eviction courts' must be there because they didn't bother to engage with their bank," he says. "There's a presumption that the banks are open to discussion and will entertain reasonable offers. Not so. Without exception, the people I am speaking to are saying that the banks will not engage or do deals. They just want the house. I'm hearing stories where banks are refusing to settle a debt for, say, €120,000. They then evict the homeowner and subsequently sell the debt for €90,000 to a vulture fund."
Such hedge funds have been a feature of the mortgage arrears story since the 2013 Land and Conveyancing Law Reform Act, known to its critics as the 'Eviction Bill'. "It's an act that has enabled vulture funds to snap up distressed properties really cheaply," says Brian Reilly, co-founder of Right2Homes, a crowd-funded initiative set up to challenge the bill. "It's a phenomenon that is ensuring that more and more people are being forced out of their homes."
Reilly believes some of the TDs who voted for the bill may have thought they were safeguarding homeowners, but he believes it is legislation that has made it easier for banks to take possession of property.
"While we wait, and wait, for a government to be formed, the misery continues," he says. "Something that's not talked about is the amount of debt-related suicides, but it's been happening for several years now and it's something that is not going away."
A fortnight ago, the New Land League led a group of campaigners, some bearing a coffin, to the office of sub-prime lender Carlisle Mortgages in Dublin. They were highlighting the cause of a Tipperary farmer who took his own life earlier this year: he had been weighed down by debt for more than a decade, and had served time in jail for a month after refusing to move his cattle when the lender took possession of his land.
He left a suicide note for his wife, who must now bear that debt. "And there are many others like that poor man," Jerry Beades says. "They were victims of economic circumstances and they couldn't see a way out. There are probably many more people who will read this article and feel the same sort of pressure, the sense that there is nothing they can do."
For David Hall, it's not just fear and isolation that's cutting distressed borrowers to the bone, but shame too. "People don't want to talk to their friends and neighbours about it," he says. "And very few of them would want to tell their story in the media either. They look at their situation and feel they're goosed."
But William Prior believes there's always hope, especially when the problem is shared. "We have seen an increase in the number of people seeking our help and when we talk them through their situation you can almost sense the relief that someone is listening to them. The letters from the banks can be frightening for people. But they need to remember that they are not alone."
'I didn't run away. I was trying the best I could'
In the end, Albert Bagnall felt he had no choice but to block the number. "They used to phone six or seven times a day," the 70-year-old pensioner from Tyrrellspass, Co Westmeath says. "I felt bombarded by them."
He is talking about a collections agency employed by his mortgage provider who were insisting that he pay more. "I was at the pin of my collar - I had nothing else to give and I'd tell them that but they were still rude to me."
Albert could just about manage to pay €500 in interest and €100 in capital off the loan each month, and he says he had very little left in his state pension allowance after that money had been taken out.
"I didn't expect to be in this position at this stage of my life," he says. "I had been working in the construction industry and, like so many others, I was very badly affected by the recession. I didn't run away from the payments, and I was trying the best I could, but it didn't seem to be enough for them. I felt under enormous pressure. It was all I could think about."
Albert, who lived in the UK for 40 years before returning to Ireland, had taken out a mortgage to extensively modernise his father's old house. And, since the downturn that loan has weighed very heavily on him.
The father-of-three doesn't want to name the bank - it's one of the big ones, cheerfully advertising for mortgage business today - for fear of causing further animosity. "It's wrong the way they and others like them deal with honest, hard-working people," he says.
"And there's such a huge problem out there. I was at a meeting for distressed mortgage holders in Portlaoise last week, and you had people there who were afraid of losing their homes. One man stood up and said his house had been repossessed."
Albert Bagnall's fortunes turned around when he noticed a leaflet for the Phoenix Project. "I had been to MABS but they weren't able to do much for me," he says, "but the people at the Phoenix Project have been great. They gave me advice about dealing with the banks - to put everything in writing, for instance, rather than talking over the phone - and they've helped me work out a new arrangement with the lender."
He now pays just over €400 a month and the situation will be reviewed by the bank after a year. It's not a permanent solution, but he is happy for now. "I can live my life now," he says. "Before that, I'd almost need a secretary to help me with all the bank letters that were coming through the post box."
His situation is mirrored by many other pensioners. Mortgage distress is not just a phenomenon for those young people who bought homes at the height of the boom. In fact, Phoenix Project data indicates that some 55pc of its clients are aged 50 or older. One in every five of its clients are aged 60 or older.