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IMF plays a very unlikely hero to those struggling to pay mortgages

IT'S not often that struggling mortgage holders find their cause trumpeted by the International Monetary Fund but its comments last week that said household debt reduction -- including writing down mortgages -- could help the economy were seized on by many as a sign of hope on a grim horizon.

More than 70,000 people are three months in arrears with their mortgage repayments, according to the Central Bank. There is another category of possibly up to 40,000 mortgage holders (according to Free Legal Advice Centres) who are slowly sinking into arrears, in the first stages of an accelerating downward spiral.

These people don't make the statistics because the Central Bank only counts those who are 90 days behind in their payments. Those who are less than 90 days in arrears don't count. They are considered too well off to qualify for benefits and reliefs yet too poor to service their mortgages.

Some of them, like Ann, seem to be doing alright from outside. Once she closes her front door, it's a different story. Ann and her husband are in their late thirties, both commute to work in Dublin from the home they built in Wexford, and their teenage son is intent on going to college next year. "In theory, we both earn good wages, [but] by the time we take all the increased charges and our mortgage, we are way down," said Ann.

They are in arrears on their €1,900 a month mortgage repayments since January, as increased government levies and charges took chunks out of their incomes. Even if they wanted to sell the house, they couldn't, as they chose to build it in a rural area in the south-east.

"We have a tin on the counter and what's in that tin has to do us for four weeks. That's the only way we can do it. The first thing we do is pay as much of the mortgage as we can, and then the ESB."

They have dropped their private health insurance and AA cover. But there is only so much you can cut back on, she said. They don't go on holidays.

Shopping is "between Lidl, Aldi and Dunnes, wherever the special offers are". A wedding invitation is regarded as a "crisis". A doctor's visit will put them "over the line" on their household budget and, as for the household charge, they can't afford to pay it. "My fear is what it will become next year," she said.

Compounding Ann's financial concerns is her son's ambition to go to college when he finishes school next year. "As far as I am concerned that should be his right. My big fear is as we both work, we are going to fall into the catchment of you earn too much to get assistance," she said.

She readily admits that she is embarrassed about her predicament. "I am embarrassed we found ourselves in this position. It's not like we are all driving 10/11 cars or going skiing or on two-week holidays. Most of us didn't go crazy: we bought our houses."

Finding people of all ages and from a variety of backgrounds that are currently in mortgage arrears to talk about their problems was the simple part. There are a lot. But, still, despite the fact that there is most definitely strength in numbers, they wish to remain anonymous. "I don't think it would be good for my job prospects," said one. "It might make my bank even more difficult to deal with," said another. "I don't want my parents to know the trouble we're in," said yet another.

This is a story in itself: the fear people are in and the power these financial institutions have over them. Some people argued that they were encouraged to invest by their banks in a second property, especially if they had no pension. Despite it originally being a two-way arrangement with some banks/brokers doing everything possible to push the "you can't lose" idea on the buyer, it turns out that what they really meant was: "we can't lose".

For instance, 'John' has two mortgages -- one property is rented out. "I was doing grand until the bank changed mortgage one from 'interest only' to full repayment in the space of two weeks. Our payments went from €500 to €1,200 over Christmas. We tried to sort out something with the bank but we were told they would do nothing until we were in arrears. We tried to make interest payments but they wouldn't allow it (Ulster Bank). We are still trying to get it sorted despite about eight phone calls and two trips to the local branch. We have since made a payment every month but we are currently in arrears."

'Mary' is unemployed despite being a highly qualified finance professional. Her savings are now gone and she can't emigrate due to visa and financial restrictions -- even, as she says, "If I were to hand over everything I possess".

She and her partner were very upset that they had to approach the bank "cap in hand" in order to get their payments onto an interest only basis. "It's just pushing the

boat down the road -- they end up with us owing them even more".

"Banks funded their lending in three ways (deposits -- retails and corporate, interbank lending -- a closed market since summer 2007, and bonds -- lending to banks) and the latter have been the subject of redemption (repayment) by the banks at large discounts (ie debt write-off for the bank) and yet they are refusing to pass that on to distressed borrowers," she says.

"Banks should be a conduit for the real economy, but instead they're taking too large a slice of the pie. They were recapitalised. They got their debts paid -- by us. And now they're institutionalising inequality and denying the inevitability that there will have to be some form of debt restructuring."

"I'd also like to clarify that we're not one of the cases that Karl Deeter talked about," says Mary.

"Mr Deeter suggested on Newstalk radio that some people were deliberately withholding money in the hope of a better deal from their bank. We very much want to pay but I'm finding it impossible to get a job in the current climate in Ireland."

'Clare' has a mortgage that is so far in arrears she says: "I know I will never, ever be able to pay it off, especially as the only job I can get at the moment is one of those job-bridge yokes. They're near next to useless for upskilling but anything beats sitting at home getting more and more depressed at the insanity of it all."

Sunday Independent