Charlie Weston: Banks should take action against freeloading mortage defaulters

(Stock photo)

Charlie Weston

The failure of banks to make greater attempts to repossess properties where the mortgage is not being paid is curious. Nobody wants to see people, especially families, turfed out of their homes.

But with so many people in a situation where they have paid nothing on their mortgage for more than two years, and predictions of a flood of repossessions, it is odd the banks are so reluctant to act on the problem.

The latest figures show that number of legal proceedings issued by banks to repossess homes has halved in the past two years.

A total of 3,665 proceedings were issued across the country last year, new figures from the Courts Service show.

The huge drop in the number of proceedings shows that claims of a flood of repossessions have not materialised.

There was a 20pc fall in 2016 in the number of repossession orders granted for family homes, to 1,072, compared with the previous year. In contrast, there are around 33,400 residential mortgage accounts in arrears for more than two years. The average arrears on these accounts for owner occupiers is €66,000, according to calculations by Investec.

The vast majority of those in long-term arrears are in a desperate situation and deserve our sympathy.

But some of the 33,400 in arrears more than two years are freeloaders, who have effectively been living rent-free for years. Yes, they have the threat of repossession hanging over them, but who would blame a strategic defaulter when there is so little repossession action from the banks?

The figures mean that someone who is more than two years in arrears has only a one-in-20 risk of losing their home.

Banks blame the slowness and the expense of the courts process for their reluctance to take cases, even when they suspect a customer is playing the system. Cases are subject to repeated adjournments.

A better explanation is the stench around repossessions. Cases often attract protests. That is why banks are planning to step up selling off bundles of non-performing loans to vulture funds, and others who will organise mass mortgage-to-rent schemes. Once AIB gets its flotation out of the way it is likely to effectively outsource its problem mortgages by selling them to investment funds.

Yes, that is a cop-out by the banks, but who could blame them when it is so difficult to repossess a property?