Sunday 17 December 2017

Banks leading us on a merry dance on crisis around arrears

Help Is There: Eamon O Cuiv at the MABS office in Loughrea. MABS - the Money and Advice Budgeting Service - can help mortgage holders under pressure
Help Is There: Eamon O Cuiv at the MABS office in Loughrea. MABS - the Money and Advice Budgeting Service - can help mortgage holders under pressure
Charlie Weston

Charlie Weston

THE banks are running rings around regulators, again. That is the only conclusion it is safe to come to when one looks at the most recent figures on arrears and the dismal number of debt deals being processed through the new Insolvency Service.

And this stuff matters to all of us, because families that are in a mortgage mess are economically inactive, which is a cost to the economy.

And banks, buckled by unpaid debts, are not able to function properly. Much though we hate them for the damage they have done to us, we need our banks to work efficiently.

But the banks plainly do not want to deal with people in debt distress.

Yes, the numbers in arrears are beginning to come down.

But they are only easing off because of a sleight-of-hand type operation being engaged in by the lenders.

Just over 20,000 residential mortgage account holders have now been facilitated with what is known as an "arrears capitalisation" - this is the largest category of permanent mortgage restructure engaged in by the six main domestic banks, according to the Department of Finance.

Arrears capitalisation is where the amount owed in arrears is added to the principal of the mortgage.

But capitalising arrears does not deal with the reasons why people are behind on their repayments or their inability to pay. It merely ticks a box for the bank.

The Central Bank has set targets for the banks on the numbers of problem mortgages they must resolve. The banks initially used another trick to meet these targets - by sending out in excess of 30,000 letters threatening repossession and having them counted as resolutions.

And the latest figures from the Insolvency Service, showing just 27 mortgage-related debt deals were agreed in the three months to June, highlight the disdain bankers hold for the system.

Even the numbers opting for bankruptcy are small, and a fraction of the scale predicted by some bankruptcy pushers.

Banks do not want to do mortgage deals for a number of reasons. They fear a diminution of their capital if they do.

Bankers have convinced themselves that most of those in arrears are strategic defaulters, who are holding out for an improving economy to lift them and other homeowners out of the financial quicksand.

It seems the regulators and the Department of Finance are powerless to force the banks to deal with the mortgage mayhem.

The banking tail is wagging the dog.

It is time we stopped cowering around the banks and forced them to face up to a problem that they share much of the blame for. Six years of the mortgage arrears stand-off between banks and homeowners is six years too long.



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