News Comment

Tuesday 23 September 2014

Government is wilfully blind to struggles of families crippled by burdens of legacy debt

Published 17/07/2014 | 02:30

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Picture posed. Thinkstock
Picture posed. Thinkstock

The revised Cabinet has played their last hand of cards. The 'Statement of Government Priorities 2014-2016' was launched on the steps of Government Buildings last Friday. Anyone else think this outdoor pomp and ceremony is ostentatiously over the top, and more appropriate to occasions of visiting heads of state, rather than routine ministerial pronouncements? The 10-page document contains the usual mix of departmental agendas, reheated previous announcements and vague aspirations of future budgets. Six key priorities emphasise job creation, fiscal discipline, housing initiatives, enhanced living standards and modest institutional reform.

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There's a glaring omission – a significant departure in tone and content from their original programme.

Newly 'disappeared' are the tiny Tony O'Reillys. Risk-takers of the Noughties are officially forgotten. We're talking about entrepreneurs and householders in their 40s, 50s and beyond who borrowed from banks to either purchase a home, expand businesses or sought to provide for pension needs. Banks hurled cash at them. They willingly took on associated risks and lost all. They are now airbrushed out of government thinking, no longer on the radar of policy considerations.

There's not one specific proposal to revisit or reform Ireland's personal insolvency regime; no attempt to release families or SMEs from unsustainable legacy debts.

So behind closed doors, phases of legal punishment beatings through intimidating solicitor correspondence, followed by court hearings, judgments, repossessions, evictions and bailiffs/sheriffs' visitations, will all continue apace.

The Government has skin in this game. The hidden agenda is to stand four-square behind the banks. They have placed the needs of financial institutions above struggling hard-pressed decent families. Bailing out banks through €64bn of recapitalisation and taking their toxic debts into NAMA wasn't enough. Ministers look the other way while judicial processes hound debtors into mental misery.

Higher property prices are great news for Irish bankers. As mortgages move towards positive equity, mortgagors are subject to extra stress, so loans and assets can be liquidated, where there's inability to pay or accrued arrears. No proposals are currently considered by Cabinet to alter bankers' vetoes over proffered settlement deals. Financial intermediaries are hamstrung because debtors have no cards to play. Meanwhile, courts systematically rubber-stamp legal instruments to ratchet up hardship.

Aspirational Kenny waffles about "the best small country in the world to do business" and calls to action for entrepreneurs to create jobs ring hollow to the point of nausea, when one considers how former serial entrepreneurs are thrown to wolves.

If AIB can destroy and dismantle an icon, former billionaire Sir Anthony O'Reilly, in the most humiliating manner possible, just imagine what it is doing without any public scrutiny to anonymous Joes and Josephines who are in loan arrears.

Permanent government never had any interest in this agenda. Their personal life outlook, lifestyle and culture, based on job security, abhors risk-takers as gamblers. Former teachers in Cabinet never created a single job or understood what drives founders of small businesses.

Sure didn't Enda explain at Davos how the country "went mad" borrowing money. They believe borrowers have only themselves to blame for their own failures; left to suck up the consequences as now officially abandoned by this administration.

Banks broke the country, wiping out shareholders and clients. Taxpayers bailed them out. Now they are allowed break people.

More than 100,000 people are at the receiving end of their unrelenting hostility. Most recent confirmation comes from last week's report of the Oireachtas finance committee on the mortgage arrears resolution process. It starkly lays out that after six years of attrition against struggling borrowers, there is little resolution in sight. They seek government support for 47 recommendations to in some way level the playing pitch for distressed families.

Their powerless analysis reveals no consistency among lenders to comply with any protocol of forbearance or compromise on debt settlements, based on affordability. They highlight, as some loans move into positive equity, it actually endangers added repossession and eviction risks. Mortgage-to-rent schemes, whereby householders become tenants instead of house owners, are either non-existent or "not fit for purpose".

While the country absorbed reshuffle speculation and Garth Brooks concert mania, this report was virtually ignored. Where borrowers agree to forfeit their home and move out, there still is no protection that they won't be hounded for the rest of their days for outstanding balances. No wonder there is minimal cooperation to bring houses with toxic debts to market and help relieve supply-side residential property market problems.

Instead of facing down the arrogant aggression of bankers, government's Pontius Pilate-like ambivalence leaves vulnerable parents, whose only crime was to procure a roof over their heads at the wrong time, to despair.

The plight of debtors is a key reason why there isn't "social recovery" in the community. The Oireachtas committee looks to the Central Bank to ensure every bank will meet mortgage arrears resolution targets (MART), avoid financial penalties and consider debt-for-equity solutions. Best case scenario is merely recapitalisation of arrears, been stuck onto the tail end of a larger unaffordable mortgage or oppressive split mortgages on the never-never (half of which re-default). It's the same Central Bank that has prudential responsibility for AIB/EBS, PTSB and BoI. Rest assured they won't do anything to undermine forthcoming stress tests or balance sheets.

The fox is running the henhouse – God help the chickens.

Banks aren't required to even be transparent in revealing actions against borrowers. The latest statistics from Insolvency Service Ireland have yielded only pitiful numbers of resolved personal insolvency arrangements, debt settlement arrangements and bankruptcies; less than 1pc of overall cases processed, a mere 27 mortgages, is a joke. Official indifference was confirmed by restatement of new priorities.

The pariah status of defaulters is now embedded to this administration's formally stated amnesia – no second chance, no fresh start. Yet in the US and UK these types have vital experience to create jobs and stimulate recovery.

Rest assured, such victims will be waiting in the long grass on polling day.

Irish Independent

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