Analysis

Thursday 21 August 2014

Daniel McConnell: Big majority against banks getting tougher on arrears

Daniel McConnell

Published 01/09/2013 | 04:00

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AN overwhelming majority of people are vehemently opposed to banks taking tougher measures against distressed mortgage-holders, a new Sunday Independent/ Millward Brown poll reveals.

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Seventy-one per cent of people polled said banks should not take more forceful action, including repossession, against those who are no longer paying the mortgage on their family home.

The lack of public appetite for tougher action flies in the face of the comments earlier this year of Department of Finance Secretary General John Moran, who said repossessions in Ireland are at an "unnaturally low" level.

The strong findings also come amid claims from the bailed-out banks, including AIB and Bank of Ireland, that there has been a significant increase in those seeking to strategically default on their mortgages.

Only 16 per cent of those polled said the banks should get tougher on home owners in arrears.

The mortgage crisis continues to escalate, with arrears climbing for the 16th quarter in a row.

Latest Central Bank figures show more than 97,800 private residential mortgages – some 12.7 per cent of home loans – were in arrears of more than 90 days by the end of June. This compares with 12.3 per cent in the previous quarter, or 95,554 loans.

When it came to longer-term arrears, the number of mortgages that had fallen behind by more than 180 days rose by 3.8 per cent, while quarter-on-quarter the number of accounts in arrears of more than 720 days was up by 11.3 per cent.

However, early arrears showed a decline, falling by 3.3 per cent to 45,018. The Central Bank said a total of 223 properties were repossessed by lenders during the three-month period, with 160 voluntarily surrendered.

According to the poll, the public are even unwilling to tolerate moves to repossess investment or buy-to-let properties whose mortgages are in distress.

Only 33 per cent of those polled said the banks should take tougher action against those who have distressed buy-to-let mortgages, while 50 per cent said the banks should not take a more forceful approach.

But while the public's mood is very much opposed to the banks seizing homes, financial experts feel that a tougher approach is needed in order to restore proper order to the banks' balance sheets.

Outgoing financial regulator Matthew Elderfield said recently: "Various factors have temporarily restrained lenders, but it is an unpalatable fact in light of the severity of the crisis that repossessions must be expected to rise significantly."

The Central Bank has said banks must propose "sustainable" solutions to 50 per cent of those with mortgage arrears by the end of the year. In addition, the bank wants 75 per cent of all customers with outstanding debts to have complied with new agreements by the end of 2014.

The legislation will help facilitate the banks' attempts to claw back mortgage arrears from workers struggling to make ends meet, with provision for repossession for those unable to make repayments.

The Personal Insolvency Bill due to launch on September 9 is aimed at addressing the €17bn personal mortgage debt crisis in Ireland.

From this date, people unable to pay debts will have a number of options open to them, short of having to avail of formal bankruptcy.

Lorcan O'Connor, the head of the new state Personal Insolvency Agency, said recently that people are likely to see up to two-thirds of their debt written off.

Sunday Independent

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