Wednesday 13 December 2017

How lenders have been dealing with those in trouble

Donal O'Donovan

Donal O'Donovan

The Central Bank confirmed this week that the four main banks have been told that 15pc of the around 100,000 mortgages in the deepest arrears must be resolved by the end of the year.

"Resolving mortgage arrears" can be achieved by bank and borrower agreeing a new loan repayment plan such as a split mortgage or reduced interest burden, but repossessions or "voluntary" home sales by families under pressure from lenders will also count.

Previous targets only set out the number of offers to resolve mortgages that the banks had to make.

So how is the process shaping up?

The best guide we have is data that came out of a series of Dail hearings earlier this month.

AIB, Bank of Ireland, Ulster Bank and Permanent TSB each had a separate session in front of the Joint Oireachtas Finance Committee to provide details on how their banks measured up to the first Central Bank target, i.e. to have offers out to 20pc of arrears by the end of June.

So what did we learn?

1) Threatening legal action is the most commonly used solution to arrears at all the main banks.

Between them the four lenders have legal action either under way or threatened against 15,000 mortgage customers.

It suggests that for many in the banks the mortgage is in large measure about repayment delinquency among borrowers, who need to be whipped back into line.

2) The banks think the legal threats count towards the Central Bank targets for "sustainable treatments". They are almost certainly correct.

3) The Central Bank guidelines are open to interpretation.

The Central Bank set clear targets on how many troubled mortgages the banks need to work through and how quickly.

By the end of June a deal had to be offered to 20pc of account holders who were three months or more behind on their repayments.

It rises to 30pc by the end of this month and 50pc by the end of the year.

But the targets are vague when it comes to what is or is not a "sustainable treatment".

4) Your options as a struggling borrower vary from bank to bank.

All lenders offer a split mortgage, for example. That's where a borrower will make interest and capital repayments on only a share of the debt.

The rest gets "parked" to be dealt with later. But no two banks offer quite the same deal.

In other cases a bank might have an option that is not available elsewhere.

Ulster Bank, but no other lender, will reduce the interest rate on mortgages to make it easier to pay some of the debt.

AIB will let customers walk away debt free if they sell their house, even if the price is less than enough to pay off the home loan.

5) The take-up of the different options varies hugely from lender to lender, but that is no surprise once it is clear all of the banks have a different set of options available.

6) Voluntary may not mean what you think it means.

The option of an "assisted voluntary sale" is one of the most frequently made offers to customers of Permanent TSB.

However, anyone turning down the chance to sell faces repossession.

Irish Independent

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