# Does it matter how many strategic defaulters are out there?



## Brendan Burgess (8 Aug 2013)

There has been a discussion  now for some time about how much of the mortgage arrears is due to strategic default including this discussion: 
Greg Connor:"more than 35% of mortgages arrears are strategic defaults"

Since David Duffy of AIB estimated their strategic defaulters at 20% of those in arrears, he has been criticised for producing no evidence of the figure. 

It was discussed on Vincent Browne last night and the general view was that it didn't matter why people were in arrears - we had to face up to the issue anyway.

Eugene McErlean has expressed a similar view here

*Are strategic defaulters a myth?*



> However, from a practical point of view, it doesn't matter how many  strategic defaulters there are. It is counting angels on a pinhead.



I don't get this at all. 

People are accusing the lenders of doing nothing about the mortgage arrears crisis.   But it has been very difficult for the lenders to deal with the part of the problem which is due to strategic arrears.  


I have no problem with taxpayers' money and banks' money being used to write off debt for those who have made genuine efforts.  But I do not want my money to go to those who are deliberately in arrears or who are in more arrears than they need to be, because they are paying their credit card or their credit union ahead of their secured loans. 

If 35% of borrowers in arrears are strategic defaulters, it will be very difficult for the banks to meet the Central Bank's targets. As a result, they will be repossessing houses from borrowers in genuine difficutlies to meet their targets.


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## Jim2007 (8 Aug 2013)

Brendan Burgess said:


> It was discussed on Vincent Browne last night and the general view was that it didn't matter why people were in arrears - we had to face up to the issue anyway.



Well it is true, the issue must be addressed, but that does not mean that in addressing the situation we can not deal with strategic defaulters at the same time!  Any kind of write off is going to have to enjoy wide spread support and I geather that most people are on the same side as yourself Brendan, which is exactly why it has not happened so far.

Regardless of how some people like to see it, the Irish people have spoken on this - the majority are not on the streets protesting for the simple reason that they do not support such ideas and they have voted for the tighter budget constraints proposed for the Euroland.


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## MrEarl (9 Aug 2013)

Hello,

Strategic Defaulters are doing little more than attempting to break the law, either by pretending they cannot afford to pay their loans or perhaps simply refusing to honour their legally binding contracts by refusing to pay.

In simple terms, I think they should be brought to court and if found guilty, jailed ....

If we could put a stop to these type of people the Banks might be in slightly better shape and hence not require as much funding from the taxpayer, while they woudl also have more staff resources to try and work with the genuine borrowers in difficulty.


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## callybags (9 Aug 2013)

MrEarl said:


> Hello,
> 
> Strategic Defaulters are doing little more than attempting to break the law, either by pretending they cannot afford to pay their loans or perhaps simply refusing to honour their legally binding contracts by refusing to pay.
> 
> ...


 
+1.

Well said.


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## TTI (9 Aug 2013)

mrearl said:


> hello,
> 
> strategic defaulters are doing little more than attempting to break the law, either by pretending they cannot afford to pay their loans or perhaps simply refusing to honour their legally binding contracts by refusing to pay.
> 
> ...



+1


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## TRS30 (9 Aug 2013)

callybags said:


> +1.
> 
> Well said.



+2

Is this just not a type of fraud?


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## huskerdu (9 Aug 2013)

Brendan Burgess said:


> If 35% of borrowers in arrears are strategic defaulters, it will be very difficult for the banks to meet the Central Bank's targets. As a result, they will be repossessing houses from borrowers in genuine difficutlies to meet their targets.



I agree, Brendan. The problem is that it is not a black and white issue. 
There are those who are doing everything they can to pay their debts and making huge sacrifices. There are those who are cynically refusing to pay and not making lifestyle sacrifices and there are a lot of people in the grey area in between, who are not engaging with their lenders, ignoring the problems, are not making the same efforts as others to pay, but are not completely cynical strategic defaulters. 

Some are confused and scared, some are naive, some are lazy, some are just sticking their head in the sand, some are a mixture of all these things. 
Sifting through each case and getting a fair settlement for each case is a messy job and 

I would love to see those who are defrauding the banks ( i.e. us) caught and punished, but I am cynical enough to know that there will be some that will get away with it and some who will be treated more harshly that they deserve.


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## Brendan Burgess (9 Aug 2013)

huskerdu said:


> The problem is that it is not a black and white issue.



Good point, although it will be very hard to classfiy and measure. 

I would think that someone who has paid nothing at all on their mortgage in the past year is a strategic defaulter who deserves to be repossessed in some fast-track system.  These are the equivalent of squatters.  It should be made absolutely clear to struggling borrowers, that they must pay something towards their mortgage every month or face the consequences. 

There might be some who could genuinely pay nothing. But it's not up to the lender to provide them with cost-free housing. If they can pay nothing, let the state look after them.


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## Gerry Canning (9 Aug 2013)

There is NO dispute that those who can yet won,t pay must be hammered.
...........................................................................
With respect ,we are being suckered into accepting the glib term (strategic)
............................................................................................
Why have Mr Connor and Mr Duffy AIB got a difference of 15%+ in their (strategic) defaulters?. Why do any of us in the absense of facts accept these plucked %,s?
After 5 years AIB have discovered these stratagists!!
Come on folks , let them define (strategic defaulters) . We comment on AIB,s unscientific 20% as though we SHOULD just believe a Bust Bank, that has proven themselves to be at best incompetent.

I have 30 years credible Finance experience, I am solvent .
So I ask you to accept that strategic defaulters , by which I mean can pay yet won,t pay are at 5%.

I have presented NO proof. But neither has Mr Duffy . 
Should you believe a failed entity or me ?

I suggest NEITHER, until someone asks and gets PROOF and clarity around strategic.

We are being spun!!


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## Cantalia (9 Aug 2013)

Everyone despises the SD's but it will be a logistical nightmare to comb through every cases domestic spending. Especially where one or both parties are earning cash. Obviously the PAYE or civil servant case is easy enough but this being the case I doubt such people make up much of the SD's. The only way to flush them out is repossession. If repossessed they won't get another loan to buy a new home no matter how much has been squirrelled away. Those who can pay something will most likely cough up at that stage, while those that truly cannot pay have long accepted their fate of losing their home.


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## Delboy (9 Aug 2013)

Gerry Canning said:


> There is NO dispute that those who can yet won,t pay must be hammered.
> ...........................................................................
> With respect ,we are being suckered into accepting the glib term (strategic)
> ............................................................................................
> ...



Unlike you who have based your 5% on nothing, Duffy is the head of a bank and has based his 20% on the bank's mortgage loan book and the arrears as they are currently occurring in there

Here is the latest on KBC's non performing loans:
http://www.irishtimes.com/business/...c-reports-increase-in-problem-loans-1.1488766
The percentage of non-performing loans on the books of KBC Bank Ireland accelerated in the second quarter of this year with just under one-in-four now in arrears of 90 days or more.
This was in spite of an improved financial performance from the Irish offshoot of the Belgian bank, which saw its losses narrow and the level of loan impairments improve significantly.
Results published yesterday show that 24.9 per cent of KBC Bank Ireland’s loans were classed as non-performing for the three months to the end of June. This compared with 24 per cent for the previous quarter and 20 per cent for the same three-month period in 2012.
Just under one-in-three of its €3.1 billion buy-to-let mortgage book is in arrears and 18.8 per cent of its €9.2 billion book of owner-occupied home loans.

Now read that bit about Buy to Lets in particular again. Nearly 33% of them are in arrears and this despite rents being on the increase again for the past couple of years (indeed, they are fast approaching bubble levels again, if not already there).
The Buy to Lets need to be cracked down on asap. Repossessions, repossessions, repossessions. Some landlords are pocketing rent and not paying their mortgages, thereby building up war chests for when they inevitable bankruptcy/insolvency scheme they are ready to enter into expires.

And we have New Beginnings (who have being getting even more media time than normal the past couple of weeks) in the Examiner today:
http://examiner.ie/ireland/debt-deal-may-force-sale-of-homes-239361.html
Ross Maguire, a barrister with New Beginnings, believes many debtors will not accept trade-downs because there is more protection for the family home in bankruptcy proceedings than personal insolvency arrangements. “I think there are going to be a lot of legal challenges to this,” he said.

So now it's not even a case any more of supporting people to have a good home, even in the same area...it's moved on to keeping them in the original family home no matter how far out of their financial reach it is now (or perhaps ever was).
So when you have this type of people in the media practically every day shouting out propaganda like this, then it's no wonder that arrears are continuing to rise as unemployment has levelled off


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## Gerry Canning (9 Aug 2013)

Delboy, I do hear you and I have no time atall for the can yet won,t pay brigades.
....................................................................................................
With respect, to dismiss my 5% is unfair to me. I have ongoing arrears experience.
 I am not a FAILED Bank , I am not in my 2nd Bail out as AIB is , I have no agenda..

Mr Duffy will spin statistics to suit the agenda for AIB.What I still ask for is a defination of Strategic Defaulter. I genuinely, from experience cannot see 20%.
If it is 20% we are going to have to put more Billions into AIB.
 Indeed if it is 20% and wedo not need to re-bail AIB , Mr Duffy should resign. AIB will again have mis-led us.


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## ashambles (9 Aug 2013)

I've been unimpressed by the reaction to AIBs 20% strategic defaulter claim. 

It seems many failed to understand they meant 20% of 15%, and instantly called for their high horse. The bank was effectively saying that 97% of mortgage owners are paying on time or else genuinely can't pay, which is surprisingly good to my ears at least.

Secondly from Duffy's interview where it's fairly clear that he was taking the figure from the analyis they've done to date. While derided by vested interests it's a figure the CEO will expect to have to back up while meeting government officials, AIB can't throw numbers around these days, his 99.8% shareholder will be looking for the reports the number came from. 

Also it's entirely valid to start drawing some conclusions once you've got a decent sample size to work from, that's statistics.

Clearly not all strategic defaults are the same, however it's valid for a bank to claim someone choosing to pay another debt over a mortgage is strategically defaulting and this is almost certainly the basis for Duffy's claim.


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## Gerry Canning (9 Aug 2013)

Ashambles;  So Mr Duffys Strategic Defaulters are not the cant wont pay brigade , mostly people making decisions .It is a bit rich of AIB who we have bailed out by 20 Billion insisting on someone paying them 1st before a Credit Union that we have not bailed out. AIB have been throwing numbers around for years. Why do you give credence to an entity that turns failure into an art form? It should be valid to draw conclusions from a decent sample but not when the sample is drawn up by proven incompetents.
In todays Independent the Boss of KBC (a solvent Bank) comments no one can state the Strategic Defaulter percentage.
I think statments from a solvent lender beats a lender justyfying something ?
Like yourself ,if 97% of mortgage holders  are genuine it means we have hope

Comment. I just have severe difficulty with AIB , I watched their shennanigans over these 30 years, they have the same intelligent people in place to re-spin.


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