AIB approves 78 out of 92 PIAs proposed and 100% of DSAs

[Brendan Burgess]

Interesting figures from AIB at the Oireachtas Finance Committee


Deputy Regina Doherty:

In 2014, how many offers by PIPs, individuals or representatives of individuals did the bank veto?

Mr. Brendan O'Connor: Where we control the vote?

Deputy Regina Doherty: Yes.

Mr. Brendan O'Connor: In 2014, we approved 78 of the 92 cases on PIA, so the percentages are 85% and 100% of the DSAs. In respect of the latter, I refer to 24 of 24. All told, we approved 88% of the cases put before us where we control the vote.

Deputy Regina Doherty: It is quite a high proportion. Regarding the 12% rejected, is there an underlying reason?

Mr. Brendan O'Connor: There is no commonality. In a particular set of cases, where somebody is party to a loan with somebody else, only one party might arrive in. There could be a joint mortgage. In some respects, one wonders why it goes to a vote because one cannot just tear up the mortgage contract of somebody else unless he or she is present. This makes it very different because there could be separation circumstances where somebody is trying to move on. However, one cannot just tear up the mortgage and recontract. A second reason concerns where the proposals from the PIPs seek to have some assets placed outside the arrangement. We had one case in 2014 — I do not want to get into the specifics — in which there were assets overseas that an individual wanted to leave out of the arrangement but we were just not going to agree to something like that. The third reason concerns the nature of the forbearance sought.

Regarding a mortgage, a certain type of forbearance may be sought although we will offer a different type. We are trying to remain consistent with people in terms of what restructuring arrangements we offer. People may seek a principal write-down although standard forbearance or a different type of mortgage restructuring would do. In all cases that we turned down, we offered an alternative, with the exception of one where we did not believe the mortgage was sustainable in any shape or form. In that case, we offered, on the basis that the house would be sold, to write off the residual in full. The mortgage could not be sustained otherwise. In all the other cases, all the offers we had allowed the person to stay in his or home. In bankruptcy cases, this would not happen. I am happy about our interaction. We vote commercially across all of these cases.

Deputy Regina Doherty: In the 12% of cases where an alternative was offered, were the offers taken up?

Mr. Brendan O'Connor: No.

Deputy Regina Doherty: According to media reports, there is an unconfirmed suggestion that the Government is considering an appeals mechanism, potentially through the courts or, perhaps, some other arbitration body. What is the view of the bank on that? Does it believe it would be unconstitutional in light of its ownership of the asset? How would it affect the bank's ability to retain or recoup owed moneys that could not otherwise be recouped?

Mr. Brendan O'Connor: I do not have a view on the constitutionality of it; I will leave that to somebody else. From a commercial perspective, it is fine. I believe our decisions stand up to scrutiny. To the extent that somebody else wants to examine them and comply or explain — that is the language I have seen — that is fine. The decisions are pretty easy to explain. We do not have that many to explain. We say "Yes" in 88% of cases because it makes sense.

 

[Sarenco]

If we are to take Mr O'Connor at his word, and I see absolutely no reason not to, then it is clear that the proposed appeals mechanism would be a complete waste of time and money.

i am always fascinated that politicians' default reaction to any problem is to establish yet another expensive, pointless QUANGO. Why don't they accept that most people are perfectly capable of understanding and representing their own financial interests?

 

[TryingHard]

That assumes that all the other banks are similar to AIB in their dealings / decisions / approvals.

 

[epicaricacy]

That assumes that all the other banks are similar to AIB in their dealings / decisions / approvals.

Very valid observation. In fairness to AIB / EBS - they appear to be the most reasonable bank to deal with when in mortgage distress. Boucher et al are a different kettle of fish entirely.

 

[Sarenco]

That assumes that all the other banks are similar to AIB in their dealings / decisions / approvals.

Fair point. Do you think other lenders are less pragmatic in their negotiations of loan modifications?

Incidentally, I think that BoI's stated position that they will never write-off outstanding loan amounts following the disposal of a property is completely unrealistic. I wonder are they actively pursuing these balances? If not, surely it would be better to allow people to get on with their lives and not perpetuate the fiction that the balance is recoverable.

 

[epicaricacy]

Fair point. Do you think other lenders are less pragmatic in their negotiations of loan modifications?

Incidentally, I think that BoI's stated position that they will never write-off outstanding loan amounts following the disposal of a property is completely unrealistic. I wonder are they actively pursuing these balances? If not, surely it would be better to allow people to get on with their lives and not perpetuate the fiction that the balance is recoverable.

I found our bank - state owned - to be very unreasonable in their dealings with us.

In the Agreement to Sell Recommendation which the bank posted to us in the last month of the one year MARP period - the bank expected us to revert to full mortgage payments throughout the sale period, even though we were on SW and the underwriting department had deemed our situation unsustainable due to SW being our sole source of income. In addition, the bank gave us 30 days to decide on whether to accept their proposal, arrange a valuation from their list of valuers, to get a solicitor on board and to nominate our own estate agent.

As I've written here before on many occassions, the bank then sought the full shortfall amount plus 90K interest over 27.4 years. We received this documentation a month after completing the sale of our house on behalf of the bank and a mere 2 months after forwarding the bank a detailed SFS, in which we included pay checks from our minimum wage zero hours contract employment and our corresponding outgoings.

I believe it's reasonable to come to the conclusion that our was anything but pragmatic in its dealings with us.

 

[Sarenco]

I'm struggling to understand why you agreed to the voluntary sale in the first place without an agreement on the outstanding balance. What was the upside from your perspective?

 

[epicaricacy]

Sarenco

Anyone who has had to deal with the various arms of a bank's Kafkaesque machinery re. mortgage distress - with their wonderful Orwellian names e.g. The Arrears Support Unit - will understand why someone accepts his / her fate.

Our dealings with the bank's machinery reminded me of the parable of the door keeper (Before the Law) in The Trial (Chapter 9 - In The Cathedral).

'Before the law stands a doorkeeper. To this doorkeeper there comes a man from the country and asks to be admitted to the law. But the doorkeeper says that he cannot at present grant him admittance. The man considers, and then asks whether that means he may be admitted later on. 'It is possible' says the doorkeeper 'but not at present.' Since the gate leading to the law stands open as always and the doorkeeper steps aside, the man bends down to look through the gateway into the interior. When the doorkeeper sees this he laughs and says: 'if it tempts you so, then try entering despite my prohibition. But mark: I am powerful. And I am only the lowest doorkeeper. In hall after hall stand other doorkeepers, each more powerful than the last. The mere sight of the third is more than even I can bear'. The man from the country has not expected such difficulties: the law, he thinks, should be accessible to everyone at all times; but as he now takes a closer look at the doorkeeper in his fur coat, at his large pointed nose, his long, sparse, black Tartar beard, he decides it is better, after all, to wait until he receives permission to enter. The doorkeeper gives him a stool and lets him sit down to one side of the door. There he sits for days and years. He makes many attempts to be admitted and wearies the doorkeepers with his entreaties. The door keeper often conclues little examinations with him, questioning him about his home and about much else: but they are impersonal questions such as dignitaries ask, and he always concludes by repeating once again that he cannot yet admit him. The man, who has equipped himself well for his journey, uses up all that he has, however valuable it is, in order to bribe the doorkeeper. The latter always accepts everything, but saying as he does so 'I only accept so that you won't feel there's anything you haven't tried'.

 

[Sarenco]

Could you translate that for those of us of a less literary persuasion?

Are you saying you accepted a poor offer from the bank because you found them so intimidating and/or difficult to deal with? That's not a criticism, implied or otherwise, I'm genuinely trying to understand the position.

 

[Sophrosyne]

epicaricacy,

Would it be true to say that you had never been in debt before and that dealing with any form of debt much less mortgage arrears would not have been your particular area of expertise?

 

[epicaricacy]

Could you translate that for those of us of a less literary persuasion?

Are you saying you accepted a poor offer from the bank because you found them so intimidating and/or difficult to deal with? That's not a criticism, implied or otherwise, I'm genuinely trying to understand the position.

There was no other offer. We appealed the offer, to the internal appeals board, and unsurprisingly, our appeal was rejected.

I used the passage from The Trial to illustrate what it can be like to deal with opaque organisations that are much more powerful than oneself. We had already had 13 months - 3 month moratorium and 10 month restructure agreement when we received the first Agreement to Sell Recommendation - of dealing with a bank that continued to harrass us and frequently 'lost documents' thoughout the period. It seemed as if 'The Arrears Support Unit' never communicated with 'Collections' and vice versa.

It was typical to receive very threatening documentation at least once a month from the Collections Dept, even though we were fulfilling our side of the restructure arrangement with the ASU. We received phonecalls from private numbers at 9.20 pm questioning why we weren't paying our full mortage or why we weren't paying something off our arrears. We would tell our story over and over again to a different person every time and forward the necessary documentation to prove we were on a restructured agreement and the following month another threatening letter would arrive from the Collections Dept - as if the phonecalls had never happened.

Our contact with the machinery of the bank was characterised by 'clueless cop' and 'bad cop'. In effect, we were exhausted by the time the 'offer' arrived.

I had my suspicions that my life would become more like the 'man from the country' in 'The Trial' with each passing year. I was in my early 40s and didn't want to be still arguing with the bank as I approached 50 - especially when a positive result was far from guaranteed.

 

[epicaricacy]

epicaricacy,

Would it be true to say that you had never been in debt before and that dealing with any form of debt much less mortgage arrears would not have been your particular area of expertise?

Sophrosyne

You are correct - neither my wife nor I had ever been in debt before that we couldn't repay. I think that people seem to assume that dealing with powerful banks is much easier than it is.

 

[Sarenco]

Thanks for the follow up epicaricacy.

Would it be fair to say that you ultimately accepted a bad deal, from your perspective, under pressure (intimidation?) from the bank? If that's the case, then your experience would suggest to me that borrowers should insist on having some form of representation available to them in any loan modification negotiations.

I don't think anybody is assuming that any negotiations in these circumstances are easy - I think any reasonable person would assume that they are extremely stressful.

 

[epicaricacy]

My advice is to always get an expert on side when negotiating. I must say that the first time we met with Anthony Joyce (just before signing the Agreement To Sell Recommendation) - we felt an enormous relief as we felt hopelessly outgunned and frightened up to that point.

It's still difficult to arrive at a conclusion re. whether in hindsight it was a bad deal or not.

The reality is that the house sold for 28% of the price we'd paid for it and by successfully petitioning for UK bankruptcy we were able to walk away from the 170K shortfall.Of course, if we had waited and fought it out, we may have got a write off and avoided the enormous stress - and long term implications - involved in petitioning for bankruptcy in a foreign jurisdiction.

On the other hand, we're now paying through the nose for rent and if we pay for the next 40 years or so - we will pay 430,000 euros (at current rates) over our life (I'm considering average age of mortality for my wife).

Time and circumstances will reveal whether it was a good or a bad deal.