'Counselling' service for mortgage difficulties
Tuesday March 11 2008
IT was interesting to hear a receptionist at a leading mortgage bank tell people that the arrears department was the most popular section when it came to calls and visits from the general public.
It would appear that there are far more people who have become overstreched on their mortgage repayments than the banks and building societies are owning up to.
Banks, it seems, have taken to dealing with these problematic loans quietly. They are encouraging people to reschedule their loans.
In this context it was not surprising that last week a new company said it had begun operations here to help banks and building societies get a fix on the scale of the arrears of individual customers.
Britain's White Horse Mortgage Services is now operating for three lenders in the Irish market. Calling itself a mortgage-arrears counselling services, it is called in by banks and building societies to go out to borrowers who have fallen into arrears and find out the full extent of their different debts.
It then goes back to the banks and sets out the income and expenditure of the customer, the level of their debts and the value of the house.
Banks then use this information to decide whether to reschedule the loan or go to the courts to repossess the house.
Financial mismanagement was the main reason people defaulted on their mortgage repayments last year.
Typically, people who mismanage their financial affairs take out a new loan to pay off other loans, stacking up debts on debts. But there can be other reasons for the loan going bad like ill health or unemployment.
Welcome
White Horse would not reveal which banks or building societies it represents but it did admit that one of its main clients here is a subprime lender. So the further winding down last week of the operations by a number of subprime operations can only be a welcome development.
Subprime lenders target people with poor credit history offering them mortgages and other loans are interest rates often well above the market norm. This is why a large number of customers of subprime lenders were now coming to the State-fund Money Advice and Budgeting Services (MABS) for advice.
But it is not just subprime lenders who are guilty of inappropriate lending. Expect the arrears departments of all the lenders to remain hives of activity for the next while.
