Friday 20 April 2018

James Fitzsimons: Mortgage crisis will worsen if the banks have their way

It is in the interests of lenders to make better deals with distressed homeowners

DEPARTING: Financial Regulator Matthew Elderfield
DEPARTING: Financial Regulator Matthew Elderfield

James Fitzsimons

The banks have passed their first milestone in trying to get distressed mortgage holders back on track. According to the Governor of the Central Bank, Patrick Honohan, they are not doing as well as they could. By the end of June they were to have solutions for 20 per cent of those in arrears and 50 per cent by the end of the year. Ulster Bank claims it has met its June target. For the rest, we'll have to wait and see. The mortgage crisis is a minefield for distressed borrowers. When will we see sanctions to deal with banks that are not co-operating?

Honohan doesn't like interest-only arrangements. They put off taking decisive action and are likely to make things worse. He would like to see more split mortgages. This involves working out what the borrower can afford to pay and warehousing the rest. Forbearance alone won't solve the problem. It delays the inevitable and that's not what the Central Bank wants. The banks, supported by their legal teams, are willing to burn borrowers, when even the Central Bank wants them to share the burden.

They don't like split mortgages because they might create losses for the banks. The Central Bank knows this should be part of the solution. We recapitalised the banks, but they must have used the money for something else. That's why there are nearly 200,000 cases in arrears, and of the 100,000 that have been restructured, nearly half have slipped back. The problem won't go away while the banks can have it their way.

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