Monday 16 December 2019

Martina Devlin: Save your sympathy for the real victims of this recession

This is a tale of two types of borrower, both in difficulties over loans taken out during the years of mass delusion known as the Celtic Tiger.

Let's start with the Farrellys of Westmeath. A property owned by builder Seamus Farrelly, put up on his father Michael's land, was repossessed by the lender after no mortgage instalments were paid for some considerable time.

Judging by the scale of this Southfork of a house, Farrelly had ambitions. But they fell flat, and he racked up a number of judgments against him, including €233,000 owed to the taxman. Push came to shove, and he relocated to Australia.

When his house went on the market, his sister attended the auction and managed to buy it. A lucky break didn't keep the property in family hands, however, but a game plan strategically devised in advance.

Before bidding began, Orla Mulvey took the floor to talk down the house's desirability, saying access was through her farmer father's land and would not be available to a new owner, while the same applied to the water supply. Then she added the emotive information -- which could not fail to deter some interested parties -- that it was her brother's house. No mention was made of Farrelly's adventures as a developer or his unpaid taxes or the judgments registered against him. Some people would have surmised he was simply an unlucky homeowner who bought at the peak, with a family clubbing together to do right by him.

Once the action got under way, tactics once more emerged when Orla Mulvey turned away from the auctioneer and eyeballed rivals bidding for the house at Templanstown in Castlepollard. Despite a well-spoken woman lending the episode a genteel gloss, it played out like a variation on John B Keane's 'The Field': back off, this is ours by right.

She paid €76,000 for Lot 21, landing a sweet deal even at €6,000 above the guide price for a property valued at €300,000 at the peak.

Next, let's consider another class of borrower whose plight was highlighted on the same day as that dramatic auction in Dublin. The voices of Permanent TSB borrowers were heard, outlining how they are swamped by punitive interest rates and are flailing to stay afloat.

In both cases, homeowners were caught out by the crash, but only one type of borrower counts as a valid victim. The Westmeath house was re-mortgaged with subprime lender GE Money, an offshoot of US giant General Electric; Farrelly was using it to raise money for another property venture. He took a gamble, which turned sour.

Sour, too, has been the experience of Permanent TSB customers, but their difficulties are not of their own making. They weren't trying to cash in on the boom. They were simply looking for a home. And now they are suffering to an unjust degree.

Remortgaging, as Farrelly did, can be a risky business. It was not reckless of Permanent TSB borrowers to try to put a roof over their family's heads, however. Orla Mulvey was applauded at the auction after securing her brother's house. But let's not presume all cases involve hapless owners and implacable lenders.

GE Money is keen to exit the Irish mortgage market and would have considered any half-decent deal put on the table. Farrelly's family offered €20,000, a small sum which the lender turned down.

GE Money acted astutely in rejecting it, in view of the subsequent payment of almost four times that amount -- which shows this was not a family scrabbling together every last farthing. They were in the haggle zone and were hanging tough.

On the face of it, good luck to the Farrellys. Somebody had to buy the house and it might as well be them. But let's not regard this as victory for the hard-pressed little man against financial institutions, any more than Brendan and Astra Kelly of Killiney, with their considerable property portfolio, were genuine eviction victims.

And let's not be surprised if GE Money feels provoked and pursues Farrelly for the residue of the loan, whereas its track record shows it might have cancelled the outstanding debt under different circumstances. The lender wrote off around €140,000 in the State's first mortgage-to-rent scheme, when a west Dublin family were allowed to stay in their home after it was sold to housing charity Cluid.

Distress is undeniably being experienced by homeowners, with one-in-10 home loans in arrears. However, the Westmeath case isn't an example of real misfortune, but of a family playing the system.

To taste the misery that is mortgage debt, look no further than Tuesday's annual general meeting of Irish Life and Permanent, owners of Permanent TSB. Many borrowers there are quite desperate, and their plight should not go ignored.

Permanent TSB was charging a standard variable rate of 5.19pc to 75,000 or so customers until recently, when the rate was trimmed to 4.69pc. Compare this with the 3pc paid by some mortgage-holders at AIB, state-owned like Permanent TSB, while others at part-state-owned Bank of Ireland pay 3.84pc. No wonder "extortionate" was the description one Permanent TSB shareholder applied to their monthly instalments.

At the agm, a number of borrowers called on other customers to show solidarity by withdrawing deposits, and taking their credit card and insurance business elsewhere.

Boycotts can be effective. If this was a foreign bank, such sanctions would make sense, but when the Irish people own the bank it can only cause self-inflicted wounds.

Nevertheless, we spent €4bn to bail out the parent company, and have a right to insist borrowers should not be left floundering. Concerted pressure at government level ought to be exerted on Permanent TSB to reduce its rates.

New borrowers are advanced loans at 1pc less than the rate imposed on existing ones, an unfair burden. It seems more reasonable for all standard variable customers to pay the same. And let it happen quickly. We should expect no less from a bank whose bacon we saved.

The economic collapse continues to spotlight hard luck stories, but not all bear scrutiny.

Anyone who attempts to meet their obligations needs to be cut some slack. But don't waste sympathy on those who ship out and leave others to use the poop scoop on their tiger droppings.

Martina Devlin tweets @DevlinMartina

Irish Independent

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