Martina Devlin: We must protect citizens from our ruthless banks
Fancy a career in banking? There are still some promotion opportunities -- although you do realise 'banking' is now a euphemism and that a banker's function is to act as a debt collector.
This struck me forcibly on a plane journey between Liverpool and Dublin a few days ago when I sat beside two bankers. There was a lot of talk about their duty to shareholders and how personal feelings mustn't colour commercial decisions, which translated as: "We have to do things we really aren't comfortable with -- but better that than unemployment and mortgage arrears for ourselves."
Banks are doing virtually no lending. Staff's focus is money retrieval. Banking always had a debt-collection element, but today it is the primary role.
And it has become more aggressive because so many mortgages are in distress and because banks need to improve their balance sheets if they are to be sold -- the ultimate aim.
The focus is not to keep people in their homes. It is not even to work with them to find solutions when the money dries up. It is to squeeze cash from borrowers at all costs. In a banker's world view, the mortgage takes precedence above food and utility bills and later this month it supersedes Santa visiting the children. Once homeowners can no longer pay, banks apply for repossession orders.
I was thinking about those two men on the Ryanair flight from John Lennon Airport -- how they chose a career in banking maybe 20 years ago and now find themselves working as debt collectors -- when I tuned in to Tom Dunne's Newstalk106 show on Tuesday.
His guest was Dave Hall from New Beginning, a group established by lawyers and business people to engage with this most pressing of issues -- crippling mortgages.
Mr Hall spoke about the intrinsic unfairness that banks -- only in existence because taxpayers saved their bacon -- are meting out harsh treatment to those with repayment difficulties. The group has lawyers working pro bono to represent homeowners facing legal proceedings.
Some €114.4bn is owed in residential mortgages in the Republic, according to the Central Bank. Accustomed though we are to stupendous sums, this is an eye-popper.
But figures don't convey emotion -- the stress, desperation and outright terror coursing through a proportion of those mortgage-holders. The fear of losing the roof over your head is an atavistic one, particularly engrained in Ireland, with our history of forced evictions.
The radio interview sent me back to take another look at the Keane Report, released in September. Already 100,000 mortgages are either in arrears or have been restructured and this is a fast-rising upward trend, according to the report.
You may be among the 88pc able to pay your mortgage this month. But a few interest-rate rises, some pay and benefit cutbacks and you too could be struggling. There but for the grace of God go any of us. No wonder the middle-classes are hollering about the children's allowance -- anecdotal evidence suggests it is being diverted into supporting mortgages.
Undeniably, it is a problem for the economy that our disposable incomes have been gobbled up by vast mortgage repayments. Spending money has withered away. New Beginning suggests only 35pc of net income should go towards servicing a mortgage. While this might be desirable, it's a luxurious state of affairs for many borrowers.
But the real problem isn't Exchequer cutbacks, mortgage rate rises, or even negative equity. It is the lack of balance between the interests of debtors and creditors. All the power is on the banks' side -- theirs is the only interest safeguarded. That lopsided approach needs to be addressed. Quickly.
It is unfair not just in the context of their bailout, but because of banks' culpability. Bankers encouraged potential borrowers to inflate earnings -- it was unofficial policy.
However, the Keane Report recognises the imbalance, with its recommendation for an independent mortgage-advice function to help people in arrears and to act as an advocate.
"The Government is not in a position to force solutions on the market," notes the report. Tell us something we don't know. We saw that when Bank of Ireland resisted political pressure to pass on an ECB interest-rate cut for standard-variable mortgages. But the Government does need to act to protect borrowers, using whatever powers it can, because hoping for banks to do it is like imagining a greyhound might chaperone a hare.
Reformed bankruptcy laws, which are expected before the Oireachtas early next year, may help. Some mortgages are unsustainable and can never be repaid. These borrowers could be declared bankrupt -- the report suggests a three-year time-frame, rather than 12 years under current law -- and make a fresh start.
An answer to their housing needs put forward by Mr Keane is repossession, but with either the lender or an approved housing body renting back the property to the occupier. There are drawbacks, but at least it minimises the humiliation.
The report also recommends new types of mortgages, such as trade-down ones allowing people to move into a more affordable house, although the debt goes with them; and sale by agreement, where a homeowner sells up -- provided there are no low-flying pigs in the atmosphere -- and moves to avail of a job offer. Again, the shortfall goes with the borrower.
So no get-out-of-jail free cards for anyone. In fact, neither amnesties nor absolution nor any form of debt forgiveness is on the table. Clemency only applies to bankers. To bolster this decision to withhold grace, the Keane Report estimated the negative equity in mortgages taken out between 2006 and 2010 would cost the State €10bn. Unaffordable, it says.
Maybe, but it's a fraction compared with the €65bn pumped into the banks. Banks, however, have been prioritised above citizens: VIP billing that promotes neither social cohesion nor loyalty to the State.
It means some families inevitably will lose their homes; a chilling reality on a street near you. The Government must get cracking to ensure as few people as possible experience this appalling situation.
The overriding concern has to be helping householders to stay put. It makes sense financially, socially and from a humane perspective -- plus it keeps the debt collectors off people's backs, if initiatives are properly organised.
It's called defending your citizens from attack.
Irish Independent
