Banks doing as little as possible on mortgage arrears crisis
ARE banks finally getting to grips with the mortgage arrears crisis? To read some reports you would think that is the case. The reality is rather different.
True, the overall number of homeowners in mortgage arrears is falling.
But there are worrying reasons why this is not all good news.
Firstly, banks are picking off the easy cases and dealing with them.
This emphasis on those in arrears for less than a year is helping to flatter the overall figures.
It is little wonder then, that the latest data from the Central Bank shows that the overall number of residential mortgage accounts in some form of arrears fell for the fifth consecutive quarter.
Then there is the fact that around 110,000 mortgage accounts were restructured up to September.
But the majority of restructures are so-called arrears capitalisation solutions.
This is where the arrears are added to the overall mortgage balance and repayments are restarted. Arrears capitalisation is the most popular form of restructure offered by the banks.
However, the Central Bank figures show that around a third of those offered an arrears capitalisation end up back in arrears.
This shows that arrears capitalisation is a sticking-plaster solution which is masking the true extent of the ongoing crisis. This charade is permitted by a weak Central Bank.
And sure enough, there has been a rise in the number of homeowners who are two years or more in arrears on their mortgages. The number has risen to almost 37,500 mortgage accounts.
These are the thorny mortgage defaults, and there is little evidence the banks are doing much about these long-term arrears. Instead, they are letting them fester, with the numbers growing by the quarter.
These people are ripe for a personal insolvency solution under the new Irish Insolvency Service, which would see them getting a write-off on debts they will never get on top of, if they hold to the court-approved deal over a set number of years.
However, David Hall of the Irish Mortgage Holders Organisation has claimed the banks are back trying to undermine the personal insolvency option by drafting in the British debt charity StepChange to attempt to resolve customer over-indebtedness among the banks themselves.
This was tried before by the Central Bank - but fell apart when the credit unions pulled out, seeing it as little more than an attempt by banks to screw the credit unions and avoid them writing off customer debt.
The five main banks are involved in the attempt to provide resolutions for borrowers with debts with multiple lenders. The hope is that StepChange will be seen as more trustworthy than the banks.
Tread carefully if you are offered one of these deals. Banks don't do charity.
Sunday Indo Business