Business Irish

Thursday 22 March 2018

Banks 'overwhelmed' by mortgage crisis: Elderfield

Laura Noonan

Laura Noonan

BANKS must get into a "completely different mode" to deal with the escalating mortgage arrears crisis that has "really overwhelmed them", financial regulator Matthew Elderfield said yesterday.

His comments came as Central Bank Governor Patrick Honohan described mortgage arrears levels -- which are now above the 10pc mark -- as "not comfortable" but said there was no evidence of people making a "strategic" choice not to pay.

The Central Bank has spent months trying to force lenders to take a more proactive and creative approach to dealing with troubled mortgages, and has written to them numerous times requesting action plans.

Yesterday, Mr Elderfield and Mr Honohan spoke publicly about the struggle to get banks to really get to grips with a crisis that's affecting more than 71,000 households.

"I don't know what the motives are [for not facing up to it]," Mr Elderfield said. "The scale of the problem has overwhelmed the banks and they weren't well prepared for it.

"The banks were geared to sell . . . now they need to get into a completely different mode."

Mr Elderfield said banks needed to hire more people to deal with mortgage resolution, and implement "major operational changes".

The Central Bank has also asked lenders to 'segment' their books into those where forbearance measures can work, and those with an "unsustainable" mortgage they'll never be able to pay.

Banks will have to show "distinct" strategies for how they're going to deal with both categories of borrower.

"Simply putting them on 'interest only' isn't going to work," Mr Elderfield said. "The solutions need to be more long- term."

At the end of December 24,811 mortgages -- or about a third of all the Ireland's restructured mortgages -- were on 'interest only'. Another 11,097 were making reduced payment of less than interest only.

As well as asking banks to come up with new and more innovative plans, Mr Elderfield said he and other senior CBI officials would "over the course of the next month" meet with bank boards and tell them to take a "direct" interest in how their institutions were dealing with arrears.

The latest figures from the Central Bank show 9.2pc of home owners (or about 71,000 cases) were in arrears at the end of last year -- new figures due out this week will show that figure has gone well past 10pc.

As well as interest only, just over 9,000 people had their arrears 'capitalised', where the arrears they had built up were added to the total of the mortgage, and 3,520 were taking payment holidays known as 'moratoriums'.

Irish Independent

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