Brendan Burgess
Founder
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What have we learnt from the lenders’ presentations to the Oireachtas Finance Committee?
Summary from Brendan Burgess askabotumoney.com
Around 30% of proposed long term solutions involve losing the family home
|AIB| ptsb|Ulster|BoI
90 days in arrears|24,990|22,109|14,231|11,054
% of accounts >90 days|11%|16%||7%
Split mortgages{br} interest rate reductions|1,106|7,000|1,847|693
|
Legal/AVS|8,275|3,624|4,459|4,489
%|33%|16%|31%|41%
Interpretation problems
Some banks have provided figures just for those over 90 days in arrears. Others are for all their customers. For example, Bank of Ireland and ptsb note that most of the split mortgages are agreed before the accounts go into arrears. It’s not clear if the 1,106 AIB splits are just for those over 90 days.
The Committee members quoted figures for homes only and total figures including buy to lets inconsistently.
The only way to hit the Central Bank targets is to issue legal proceedings
The targets are for “sustainable solutions” which includes restructuring and legal action. The targets make no distinction. If the borrowers don’t engage, the lenders can do nothing to achieve those targets other than initiate legal action. And in a minority of cases where the borrower does engage, the mortgage is not sustainable, so they have to go for Assisted Voluntary Sale as well.
Ulster Bank’s Stephen Bell was particularly strong on this telling Pearse Doherty that he might like to take up the issue with the Central Bank.
A lot of borrowers are still not completing the SFS or engaging
15% (2,354 borrowers)of UB customers are not making any meaningful engagement (Down from 35% last March)
20% of Bank of Ireland’s customers have not completed an SFS.
Ptsb: 15% to 20% are not engaging
3,500 AIB customers have not returned an SFS.
The big increase in legal proceedings is due to the build-up of a backlog.
Under the CCMA, the banks could only call a customer 3 times a month, including missed calls. This caused a big problem in early arrears not being faced up to early enough. Because of the Dunne Judgment, the banks could not threaten repossession.
There has been a big increase in engagement since these restrictions were lifted, but there is still a big backlog to work through.
Only 15% of customers offered Assisted Voluntary Sales by ptsb have accepted them.
While the AIB split mortgage is very generous, it is also very rare
Attitude to debt write down to make the mortgage sustainable
Only AIB writes down debt while leaving the borrower in their home.
They have written down debt in approximately 60% of the 1,100 split mortgages agreed to date.
The amounts are usually small. The three cases quoted in the media recently are massive outliers and not remotely typical.
Attitude towards the mortgage shortfall after the house is surrendered, voluntarily sold.
Ulster Bank will do a deal after the house is surrendered, but not beforehand.
Bank of Ireland does not write off debt. “We seek full recovery of the shortfall.”
Ptsb does not write off debt. After a home is repossessed, it does not write off the shortfall, but may decide not to pursue it. Ptsb is doing a pilot study with 200 Assisted Voluntary Sales where they are agreeing the treatment of the shortfall as part of the agreement.
AIB agrees in advance what will happen to the shortfall in an AVS. The period will be up to 5 or 6 years “less than an Insolvency Arrangement”. 60% of AVS’s have received debt write down.
Personal Insolvency Arrangements have little or no role in resolving the mortgage debt problem
Ulster Bank has not yet seen a situation where they could approve a PIA, because they could come up with a solution outside the PIA.
BoI has voted for two PIAs, but vote against any PIA which involves the write down of secured debt.
AIB has voted for 3 out of 4 PIA so far.
The Positive Equity Paradox
Approximately 50% of borrowers in arrears over 90 days have positive equity in their home.
The Committee repeatedly questioned the banks on their attitude to borrowers in positive equity. It is alleged by the consumer groups that the banks are targeting borrowers in positive equity as they don’t lose anything through repossessing such properties. Kierán O’Donnell said that the banks are like bloodhounds searching out cases of positive equity to repossess
The banks all stated that they do not distinguish between positive and negative equity when developing a solution. They could not provide figures on split mortgages offered to cases of positive equity vs. those offered to negative equity.
[This makes no sense at all to me. Taxpayer owned banks should not be offering split mortgages to borrowers in positive equity. Nor should they be seeking to repossess them –BB]
Unsecured debt is a huge problem
According to Ulster Bank, for every €1 in mortgage debt repayment, the borrower is paying 60 cents in unsecured debt. This unsecured debt is
· At a higher interest rate
· Of a much shorter term, so
· The repayments are much higher
They can almost always come up with a solution for the mortgage debt, if the unsecured debt is dealt with. They often cannot come up with a solution if the borrower insists on repaying his unsecured debt.
The banks have agreed a protocol amongst themselves for and will write off debt to make a mortgage with another lender sustainable.
Mortgage to Rent is not working
Between the 4 banks, only one Mortgage to Rent has been done
The lenders have approved a lot but can’t get them over the line. (AIB has approved 300 of them)
The Housing Agency must approve them – plenty of limitations – maximum house price and the house must be a suitable size for the family.
If they are approved, the Local Authority must approve the person for social housing
It’s then sent to the Housing Association
The borrower then has to take legal and financial advice
Then an agreement has to be reached on surrendering the property
Forecasts for repossession
Bank of Ireland don’t make such forecasts. They hope that those who are not engaging will engage.
Stephen Donnelly estimates it at 1,700 for Bank of Ireland on the basis of 1 in 5 of legal actions.
Ulster Bank: Between 1,000 and 1,500
AIB said it would be in the hundreds .
Appeals process
Ptsb reported that 20% of appeals are successful
Summary from Brendan Burgess askabotumoney.com
Around 30% of proposed long term solutions involve losing the family home
90 days in arrears|24,990|22,109|14,231|11,054
% of accounts >90 days|11%|16%||7%
Split mortgages{br} interest rate reductions|1,106|7,000|1,847|693
|
Legal/AVS|8,275|3,624|4,459|4,489
%|33%|16%|31%|41%
Interpretation problems
Some banks have provided figures just for those over 90 days in arrears. Others are for all their customers. For example, Bank of Ireland and ptsb note that most of the split mortgages are agreed before the accounts go into arrears. It’s not clear if the 1,106 AIB splits are just for those over 90 days.
The Committee members quoted figures for homes only and total figures including buy to lets inconsistently.
The only way to hit the Central Bank targets is to issue legal proceedings
The targets are for “sustainable solutions” which includes restructuring and legal action. The targets make no distinction. If the borrowers don’t engage, the lenders can do nothing to achieve those targets other than initiate legal action. And in a minority of cases where the borrower does engage, the mortgage is not sustainable, so they have to go for Assisted Voluntary Sale as well.
Ulster Bank’s Stephen Bell was particularly strong on this telling Pearse Doherty that he might like to take up the issue with the Central Bank.
A lot of borrowers are still not completing the SFS or engaging
15% (2,354 borrowers)of UB customers are not making any meaningful engagement (Down from 35% last March)
20% of Bank of Ireland’s customers have not completed an SFS.
Ptsb: 15% to 20% are not engaging
3,500 AIB customers have not returned an SFS.
The big increase in legal proceedings is due to the build-up of a backlog.
Under the CCMA, the banks could only call a customer 3 times a month, including missed calls. This caused a big problem in early arrears not being faced up to early enough. Because of the Dunne Judgment, the banks could not threaten repossession.
There has been a big increase in engagement since these restrictions were lifted, but there is still a big backlog to work through.
Only 15% of customers offered Assisted Voluntary Sales by ptsb have accepted them.
While the AIB split mortgage is very generous, it is also very rare
Attitude to debt write down to make the mortgage sustainable
Only AIB writes down debt while leaving the borrower in their home.
They have written down debt in approximately 60% of the 1,100 split mortgages agreed to date.
The amounts are usually small. The three cases quoted in the media recently are massive outliers and not remotely typical.
Attitude towards the mortgage shortfall after the house is surrendered, voluntarily sold.
Ulster Bank will do a deal after the house is surrendered, but not beforehand.
Bank of Ireland does not write off debt. “We seek full recovery of the shortfall.”
Ptsb does not write off debt. After a home is repossessed, it does not write off the shortfall, but may decide not to pursue it. Ptsb is doing a pilot study with 200 Assisted Voluntary Sales where they are agreeing the treatment of the shortfall as part of the agreement.
AIB agrees in advance what will happen to the shortfall in an AVS. The period will be up to 5 or 6 years “less than an Insolvency Arrangement”. 60% of AVS’s have received debt write down.
Personal Insolvency Arrangements have little or no role in resolving the mortgage debt problem
Ulster Bank has not yet seen a situation where they could approve a PIA, because they could come up with a solution outside the PIA.
BoI has voted for two PIAs, but vote against any PIA which involves the write down of secured debt.
AIB has voted for 3 out of 4 PIA so far.
The Positive Equity Paradox
Approximately 50% of borrowers in arrears over 90 days have positive equity in their home.
The Committee repeatedly questioned the banks on their attitude to borrowers in positive equity. It is alleged by the consumer groups that the banks are targeting borrowers in positive equity as they don’t lose anything through repossessing such properties. Kierán O’Donnell said that the banks are like bloodhounds searching out cases of positive equity to repossess
The banks all stated that they do not distinguish between positive and negative equity when developing a solution. They could not provide figures on split mortgages offered to cases of positive equity vs. those offered to negative equity.
[This makes no sense at all to me. Taxpayer owned banks should not be offering split mortgages to borrowers in positive equity. Nor should they be seeking to repossess them –BB]
Unsecured debt is a huge problem
According to Ulster Bank, for every €1 in mortgage debt repayment, the borrower is paying 60 cents in unsecured debt. This unsecured debt is
· At a higher interest rate
· Of a much shorter term, so
· The repayments are much higher
They can almost always come up with a solution for the mortgage debt, if the unsecured debt is dealt with. They often cannot come up with a solution if the borrower insists on repaying his unsecured debt.
The banks have agreed a protocol amongst themselves for and will write off debt to make a mortgage with another lender sustainable.
Mortgage to Rent is not working
Between the 4 banks, only one Mortgage to Rent has been done
The lenders have approved a lot but can’t get them over the line. (AIB has approved 300 of them)
The Housing Agency must approve them – plenty of limitations – maximum house price and the house must be a suitable size for the family.
If they are approved, the Local Authority must approve the person for social housing
It’s then sent to the Housing Association
The borrower then has to take legal and financial advice
Then an agreement has to be reached on surrendering the property
Forecasts for repossession
Bank of Ireland don’t make such forecasts. They hope that those who are not engaging will engage.
Stephen Donnelly estimates it at 1,700 for Bank of Ireland on the basis of 1 in 5 of legal actions.
Ulster Bank: Between 1,000 and 1,500
AIB said it would be in the hundreds .
Appeals process
Ptsb reported that 20% of appeals are successful