Central Bank figures 'overstating' number in mortgage crisis
OFFICIAL figures on the "mortgage crisis" overstate the number of households in real trouble – and lack key insights into how deep the problem really is.
An investigation by the Irish Independent has revealed the Central Bank's figures include several types of borrowers who are no longer in trouble.
A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving.
The latest statistics, however, indicate that 77,630 households are at least three months behind on payments.
But these figures include: - Those who missed payments long ago and have since resumed paying normally.
- Those who fell behind and agreed ‘restructuring' deals with their banks to lessen monthly payments.
- Those who have successfully done more informal deals to work through their mortgage problems.
The Central Bank's quarterly figures also lack key detail that would help clarify how bad the mortgage crisis is. The Central Bank yesterday confirmed it has no information on:
- The financial situations of borrowers in arrears.
- The number of borrowers in arrears making zero repayments on their mortgages or the number who have done informal deals.
It means that although more than 40pc of homeowners are still living with negative equity, the number of borrowers unable to pay their mortgages is far lower than the official figures suggest.
The Central Bank figures -- which show that more than 10pc of households are in arrears -- also fail to capture a "significant" improvement in payments that some senior bankers claim they have seen.
This is because the quarterly reports focus on households that owe more than three months of mortgage payments. This means that a change in arrears cases won't be reflected in the figures for three months.
Since the last set of figures only goes to the end of March, the "latest" surge in mortgage arrears could be due to an increase in people running into trouble late last year, and not a fresh crisis.
Our investigations also found that even if a homeowner missed their payments long ago, and are now paying their mortgage normally, they can still be counted as being "in arrears".
This can continue for many months until the old arrears are added on to their mortgage balance, or paid off.
People who have agreed restructuring deals are also being counted as 'in arrears' until they have worked up a track record of making their new repayments.
There is also a distinct lack of information on how many borrowers are unable to pay because of temporary factors such as losing their jobs -- and how many are never likely to be able to pay back the home loan.
There are no figures on the amount of people who have completely stopped paying, nor how many are actually making an effort to work with banks despite being in arrears.
And the Central Bank could not give a number for borrowers who are have agreed informal deals with their banks. Such deals might include overpaying a mortgage for a number of months in order to clear a backlog of arrears.
The Central Bank figures suggest that less than half those in arrears have agreed 'restructuring' arrangements with their banks -- leading to the common view that the other half are doing nothing about their situation, when in fact many of the others may have informal deals.
The Central Bank is gathering some of the missing information, but has not yet made any of it public.
Senior bankers say that even though it might "look like" the mortgage crisis is getting worse, things are actually getting better. This is because it takes time for 'solved' cases to find their way out of the statistical backlog.
One major mortgage lender says it has seen a fall in new arrears' cases every month for the past five months. Other banks say they have also seen a "significant improvement" in new cases in recent months.
Industry insiders say banks face "major challenges" over the coming months as they begin the difficult process of pairing struggling borrowers with "longer-term" solutions that will soon be rolled out.
Many banks will also have to significantly improve their customer relations so that mortgage holders who fall into difficulty will no longer be afraid to contact their banks.
Banks that have begun these efforts say they are already seeing results. "The vast majority of mortgages can be made sustainable," says one senior banker. "We just haven't had the tools to do it so far."