Monday 27 February 2017

Repossessions to surge as mortgage crisis deepens

25,000 families now more than a year behind on their repayments

Jerome Reilly and Maeve Sheehan

MORE than 25,000 families in Ireland are in turmoil this weekend, living with the terror of being more than a year behind on their mortgages and past the point where they can ever hope to pay back the money they owe.

The shocking finding follows an analysis of figures compiled by the Central Bank of Ireland and released without fanfare during the high profile visit of Queen Elizabeth and on the day that former Taoiseach Dr Garret FitzGerald died.

The figures show that more than 35,000 people are now over six months in arrears on mortgages worth more than €7bn.

But leading mortgage expert Ciaran Phelan of the Irish Brokers' Association has analysed the figures and says the situation is even worse than that portrayed by the regulatory authority.

He says even a "back-of-the-envelope" assessment of the latest statistics indicates that 25,000 of those families in long-term arrears must now be between 12 and 24 months behind on their mortgages.

"Unfortunately, that is the point of no return and way beyond the scope of the current forbearance measures," he says.

While repossessions in Ireland are rare, the official statistics show that more than 600 residential properties have been repossessed since the downturn began -- 49 homes in the first three months of this year alone.

Lawyers acting for troubled mortgage holders who face losing their homes have mounted a fresh legal challenge to repossessions.

They are questioning a section of legislation upon which financial institutions rely when they apply to the courts for repossession orders.

The relevant section was repealed in 2009 but lenders are still using it to apply to the courts for orders to repossess family homes.

The legal advocacy group New Beginning is questioning the legality of house repossessions that are enforced on the back of a law that is no longer on the statute books.

The group of volunteer lawyers acts for families in repossession cases.

David Hall, its spokesman, said the alleged anomaly was a "significant legal issue" that could have implications for repossession orders granted since then.

"This issue has come to light through the volunteer lawyers who undertake this work for clients on behalf of New Beginning," he said.

"A significant number of repossession cases have been adjourned at the request of the lenders in recent weeks. I believe this is directly related to the lack of clarity that now exists over this issue."

The matter has been raised in the High Court with Ms Justice Elizabeth Dunne. She is due to give a decision on June 22.

Meanwhile, Trevor Grant, managing director of Select Finance Group, one of the largest mortgage intermediary services providers, said thousands of householders were now coming under unbearable pressure.

"The mental stress experienced by those homeowners who are currently in arrears and those only a few pay cheques away from it is enormous and the implications and repercussions for their family life are horrendous," he said.

Mr Grant said that the number of homeowners currently in arrears was highly disconcerting.

"This is particularly so in light of the fact that a number of these homeowners are currently on relatively low interest rates, which are only set to rise, or interest-only repayment structures which will have to expire," Mr Grant said

He also pointed out that the Central Bank figures appeared to relate only to those in arrears of 90 days or more and therefore did not include those in arrears of one or two months.

"It is unclear whether they include those customers who are technically in arrears but are adhering to a revised and reduced repayment schedule.

"Nor do the figures include customers with investment property or holiday-home mortgages. The arrears problem is much greater than these already distressing figures illustrate," he warned.

The Central Bank figures suggest that a tsunami of home repossessions is building up across the country.

Mr Phelan said the numbers revealed a significant rise of 55 per cent in the level of long-term arrears in the last nine months.

"The figures would appear to indicate that once families enter the 'long-term arrears club', there is little chance of solving the issue using forbearance alone.

"The lack of any meaningful political intervention to date and a general tendency for consumers to service non-mortgage debt are exacerbating the problem," he said.

"Those unfortunate to be in this group will typically be 12-18 months behind in their mortgages and have to be suffering from huge stress -- regardless of the temporary forbearance being offered by the banks."

Mr Phelan said that while there is a slowdown in the number of new people falling into arrears for the first time, the problem of long-term arrears is accelerating -- ballooning by a record 4,000 in the last quarter.

"There is clearly a solid group of 25,000-plus individuals who haven't been able to meet their mortgage payments for 12 months or more and are therefore largely outside the protection of various consumer codes," he said.

Mr Phelan argued that the figures showed that some form of debt restructuring or debt forgiveness was now inevitable because of the sheer numbers involved.

"Assuming that the banks will ultimately choose to enforce the mortgage contract at some stage, the Government will need to co-ordinate a debt solution, unless the State has 25,000 social homes lying empty somewhere.

"Whether the solution is called 'debt forgiveness' or 'debt restructure', it will ultimately happen as the vast majority of these people will never be able to repay these mortgages," he concluded.

The Director of Consumer Protection, Bernard Sheridan, has urged people struggling with mortgage repayments or who are at risk of falling into difficulty to contact their lender as early as possible, so they can benefit from the protection offered by the Central Bank's revised Code of Conduct on Mortgage arrears.

In all there are 782,429 private residential mortgage accounts held in Ireland, with a value of €116bn. Of these, 49,609 accounts or 6.3 per cent are more than 90 days in arrears. Perhaps the most telling figure is that 62,936 residential mortgage accounts have been restructured.

Sunday Independent

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