Wednesday 22 May 2019

The opportunists who prey on fear are real predators

Misinformation and repetition of falsehoods are no substitution for facts, so let's stop the hearsay

'At a university talk Barack Obama bemoaned what he calls a rejection of 'fact and evidence'; a strain of anti-intellectualism marking what he said, was the path of decline' Photo: Reuters
'At a university talk Barack Obama bemoaned what he calls a rejection of 'fact and evidence'; a strain of anti-intellectualism marking what he said, was the path of decline' Photo: Reuters

Ross Maguire and Karl Deeter

In politics, as in life, ignorance is not a virtue. Recently at a university talk Barack Obama bemoaned what he calls a rejection of "fact and evidence"; a strain of anti-intellectualism marking what he said, was the path of decline.

In much of what passes for debate on a range of important issues in Ireland, blind emotion, bordering at time on hysteria, predominates. This is not a good thing and it doesn't solve very real problems.

One such issue is the mortgage arrears crisis which has been with us for just short of a decade. The arrival of investment funds is the most recent development in a response to defaulting borrowers. It has provoked an outcry of the most extraordinary hyperbole and falsehoods.

So let us look at the actual facts.

A borrower's contractual rights and duties under the original loan agreement with a bank remain entirely unchanged by the transfer of the loan to a fund. This is a legal reality and would be enforced in the courts. Opinions of the buyers doesn't matter; the power of contract is a fact in law.

The servicers of the loans are also legally required to comply with the Central Bank Code of Conduct on Mortgage Arrears and they do so fastidiously.

The very powerful insolvency system which can restructure a mortgage debt, even against the will of a bank or fund, remains open to all borrowers, regardless of the lender. A Personal Insolvency Arrangement can write off debt, extend term, reduce interest rates and can be enforced by an order of the court where it results in the borrower retaining the home, at the same time the arrangement can eliminate all other debt in an ordered and fair way.

In recent weeks large debt write downs have been imposed on banks and funds by the courts despite their objection, but this isn't making the news headlines.

The funds make money when they fix defaulting loans quickly. It makes no commercial sense for them to pay lawyers to chase defaulting clients through the courts. They expect to be able to repair the vast majority of loans; they are by far the most active in the mortgage-to-rent programmes; and for those recognising their loan as unsustainable and who are willing to surrender their property, debt write off can be taken as a given.

So why the hysteria and misrepresentation?

Fear, just like sex, sells. It is very hard to make the technical nuances of a Personal Insolvency proposal interesting, but images of vultures feasting on the carcasses of debtors is box office gold in Ireland.

In a country where there is deep and understandable distrust of the financial industry the population can easily be misled into believing that tens of thousands of families are to be evicted from their homes. But just because somebody claims such nonsense does not make it true, and repetition of this doesn't make it a fact.

Those who make these false claims don't have borrowers' interests at heart. They are usually politically motivated and their vision is a profoundly negative one offering nothing by way of solution. The hard Left and other opportunists who prey on fear and confusion are the real vultures.

Insolvency practitioners all over the country, without seeking headlines, are delivering the help that people need. Their effort is not aimed at promoting themselves - it is to provide professional help in a rational and ordered way.

Nobody is saying we should dehumanise this problem, thinking of the world in strictly financial terms is a massive error, but so is seeing it only through an emotional lens of the story of some of the people involved.

To date this nation has dealt with a monumental financial crisis in a very humane fashion compared to other countries and that cannot be overlooked.

Factual performance matters, has any vulture actually raised mortgage rates? We were told that was something to fear. They haven't, no loan buyer has increased their interest rates in all the time these sales have been happening so this 'what if' argument is false to date.

Lonestar sold repaired loans from Irish Nationwide to Bank of Ireland recently, that is a vulture selling back to regular banks.

Here's the twist, the loans in INBS were typically at a lower rate than the prevailing BOI rate so the first increase those borrowers might face isn't from a vulture, it's from going from a vulture to a high street bank. The very place that fear-mongers say you're safest. Where is the protection for Irish borrowers from the good banks? Where is the representation body for those people?

Another overlooked fact is that the structure often used to purchase these loans (like a section 110 company which receives preferential taxation treatment) doesn't allow a 'purchase to possess' business model, which is part of the reason that often the vultures do the best deals around.

That this is never mentioned isn't coincidence, it's a choice of the accepted narrative which goes unchallenged. A borrower who gets a great deal often can't disclose that they got one, the buyer who feels hard done by faces no such constraint and can go on national TV.

Having sat through thousands of possession hearing court appearances, there was never a single incidence where 'vulture funds' was mentioned, or of a person receiving anything less than the standard treatment in the eyes of the law based on who the loan owner is.

Sometimes the upset is that the banks won't do the same deal for the individual. Banks don't do the deals with the borrower that they do with loan book buyers for many reasons, but the most fundamental is that if a buyer won't pay for their existing loan, then how can they afford to pay off the full amount the loan is sold for?

Can a person who can't pay €680 a month muster up €140,000? If they can, should they be in arrears? A child can see the circular argument in this, the ­unofficial mandarins in our Ministry of Fear cannot, yet who is listened to the most?

Many loans on homes in two years of arrears are empty, so much so that we could solve homelessness tomorrow if we merely took them all back, where is the tragedy in that apart from having people needlessly in hotels and B&Bs when they could have a house?

About half of the very deep arrears cases make a zero payment, how do you engage with a person who pays zero? Can you do a mortgage to rent for zero? Even a council flat costs more than zero.

Misinformation and repetition of falsehoods are no substitution for facts. In this debate to date few have been challenged about their assertions of tsunamis of repossessions or other incendiary remarks when these predictions don't come true.

It has become a depressing mixture of hearsay, opinion, and a complicit media that lends credibility to the financial equivalent of a 'Chicken Little' who year after year tells us the sky is falling.

@RossMaguireNB is a Senior Counsel & founder of

@karldeeter is the Compliance Manager at

Sunday Independent

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