# My presentation on Non performing Mortgages to  the Oireachtas Finance Committee tomorrow



## Brendan Burgess (16 May 2018)

I will be sharing a platform with David Hall and Martha O'Hagan Luff tomorrow at 9.30.

We will be speaking about the resolution of non performing loans. 

My main point will be that they must look at the bigger picture. There are 300,000 non-tracker mortgage holders and they pay for the very small minority of borrowers who don't pay.

Brendan


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## Brendan Burgess (16 May 2018)

Presentation attached

*Opening Statement by Brendan Burgess to Oireachtas Finance Committee *

*Matters relating to the Resolution of Non-Performing Loans 17th May 2018 *


*The number of non-tracker mortgage holders:  300,000: *

*The extra interest paid on a €200,000 mortgage in Ireland: €3,000*


These are the two key figures which you should keep in mind whenever you are discussing mortgage related issues.  If you are considering making it even more difficult for lenders to deal with non-payers, keep these figures in mind. When you call in the banks or the Central Bank or the Finance Minister, keep these figures in mind.



Because there is no effective sanction in Ireland for the 10,000 or so irresponsible borrowers, the 300,000 responsible borrowers pay their mortgages for them.



Non-payment does not hurt the lenders – it hurts the other borrowers. The lenders use the difficulty in repossessing houses as an excuse for charging more. When overseas lenders look at the Irish market and see that it takes year to repossess a home from a defaulter, they stay well away.



Most borrowers take their responsibilities seriously

·  They engage with their lender and they get an arrangement

·  They pay the revised amount and they get back on track

·  When the borrower is paying what they can but the  lender is being unreasonable – the courts protect the borrower

But a small minority – around 2% - or 10,000 borrower – exploit the fact that there is no sanction for not paying their mortgage. 

*Case studies from last Thursday 11th May in the Dublin Registrar’s Court *



SM in more detail

·  While legal proceedings began in 2014, this would have been only after two years of the Mortgage Arrears Resolution Process.

·  Showed up at every court appearance since the proceedings started

·  Some years ago she said she hoped to be in a position to start paying soon, so she got an adjournment. But she paid nothing anyway.

·  She got another adjournment on the grounds that she was engaging with MABS. But she did not engage, so they came off record.

·  She spoke to a PIP – but unlikely to be a candidate for a Personal Insolvency Arrangement.

·  She lodged a formal complaint with the lender that she was not receiving correspondence from them.

·  This time she was hoping to look at Mortgage to Rent, but she had got adjournments on that basis before and it had come to nothing

·  Anyway, if she has not paid her mortgage for 6 years, why would she start paying her rent to the Council or Local Authority?

*Some more cases from last Thursday… *

In one case, the borrower had gone to Germany and could not be served with notice of the proceedings. The proceedings were effectively struck out.

In another case, the lender could not serve the summons because the borrower refused to answer the door – that too was effectively struck out.

In 7 other cases, where the lender applied for an adjournment due to problems in serving the borrower or other problems with the paperwork, adjournments were refused, and the cases were effectively struck out.

The only other order granted last Thursday was against the joint executors of an estate. The borrower had died in 2013. The executors didn’t take out probate until 2016. One of the executors was living in the house and refusing to leave. The other wanted the house sold and the mortgage paid off.

*We should make vulture funds redundant by allowing lenders to fast-track repossessions where the borrower is paying nothing. *


The lenders don’t want to sell non performing loans.  But they have no choice. If the borrowers won’t pay and the lenders can’t repossess the property quickly, they have to sell the loan.

We could make the vulture funds redundant by fast-tracking the repossession of homes where the borrowers pay nothing.



*We should protect responsible borrowers from legal action*


The arrears in many of the 26,000 cases over two years are old arrears. The borrower lost their job or was sick 5 years ago and fell into arrears. They have since recovered and are making the normal monthly repayment in full. But they do not have the resources to pay off the old arrears.

These borrowers need protection. The lenders should be prevented from taking legal action against any borrower who has paid, on average, [3%] of the balance on their mortgage, every year for the past 5 years.  (That is the principle – it would have to be fine tuned to allow the banks pursue people who can pay more but won’t.)


*We should pay a “Mortgage Assistance Payment” to those who genuinely can’t afford to pay their mortgage who would otherwise qualify for Housing Assistance Payment*


If someone would qualify for Housing Assistance Payment if they were renting, then we should be prepared to pay that amount as a Mortgage Assistance Payment if they have a mortgage.

A borrower who can’t pay their mortgage gets no assistance at all from the government. However, if they sell their home to an investor, and rent it back from the investor, they will get help with my rent.

This makes no sense for anyone apart from the investor

·  The home owner loses ownership of their home

·  The home owner loses the opportunity for capital appreciation

·  The tax payer pays a lot more in Housing Assistance Payment than they would in a Mortgage Assistance Payment.

·  A home owner who retains ownership is more likely to recover and no longer need the MAP.

·  The lender has probably had to write off the mortgage shortfall

The Mortgage Assistance Payment in the UK is treated as a loan and not a social welfare payment. It becomes a second mortgage on the home.  When the house is eventually sold, if there is a surplus after paying off the bank mortgage, the MAP is repaid to the government.

*A Mortgage Assistance Payment would be far cheaper and simpler to organise than Mortgage to Rent *

A MAP would cost the taxpayer much less

·  Take a house worth €300k with a mortgage of €300k. Under Mortgage to Rent, the government pays about €18,000 rent. Mortgage interest would be about €12,000 if it’s an SVR mortgage or as low as €3,000 if it is a tracker.

·  With a Mortgage Assistance Payment, the owner remains responsible for maintaining and insuring their home. Under MTR, the Housing Agency or Local Authority bears these costs.

·  The MAP can be set up as a  loan rather than a social welfare payment, so the cost to the taxpayer is further reduced

A MAP would be much easier to set up.

·  Mortgage to Rent is unbelievably complicated as there are so many qualification criteria and legal procedures involved in a change of ownership of a property

·  Because of this complexity and cost, the qualification criteria are necessarily very high.

·  A MAP is relatively simple, it requires a housing needs assessment and a social welfare assessment

A MAP can be a part-payment, MTR is all or nothing

·  If a person qualifies for MTR, they get their housing free with only a token contribution. But someone who could afford half their mortgage, could get the other half via a MAP.

A MAP can be terminated when it’s no longer needed – MTR is forever

·  Once a person gets social housing via the MTR, they keep it forever. In many cases, they can pass it on to their children. If their circumstances improve, they can buy the property back at a discount.

·  If the circumstances of a person in receipt of MAP improve, the MAP can be terminated. In fact, as it would be a loan, there would be an incentive for the mortgage holder to terminate it as soon as possible.



The MAP could help far more people

·  MTR is expensive, it’s all or nothing and it is forever. If someone who should not qualify for Mortgage to Rent, gets it, it’s an expensive mistake for the administration and can’t be undone. So the qualification criteria are rightly very tough.

·  If a person is granted a Mortgage Assistance Payment in error, the potential cost of the error is much lower and it can be rectified easily 

*Appendix 1  Data sheet on non performing loans and planned sales to vulture funds *
*Compiled by Brendan Burgess for the Oireachtas Finance Committee 15th May 2018 *

*Source: Central Bank **Mortgage Arrears Statistics** December 2017 *

Central Bank figures are for accounts. I have adjusted them to refer to homes. Each home has, on average, 1.2 mortgage accounts.

Retail Credit Firms include : Dilosk (who bought ICS mortgages), Start and Pepper. These are regulated by the Central Bank.

The Vulture funds include : Tanager, Mars Capital, Cerberus and Shoreline Havbell

Danske sold 10,000 performing loans in October 2017 to Proteus, a vulture fund. However, they are included under Retail Credit Firms because, as the Central Bank explains: “The 10,000 accounts you refer to are not legally owned by an unregulated loan owner, but rather by another institution, with the beneficiary ownership been held by the unregulated loan owner.”

*Family homes on the market at present *



*What permanent tsb has said about its planned sale*
7,800  PDH loans are typically owned by customers who have not engaged with the Bank, whose mortgages are unsustainable or who have been unable to meet the terms of various treatments put in place. Of this portion of Project Glas, some account holders have not engaged with the Bank for over 7 years and on average the loans are 3.9 years in arrears. 
1,560 paid nothing at all in 2017.

*What Ulster Bank has said about its planned sale *
Average arrears: 3 ½ years.  €52,000 73% cent of these mortgage holders first went into arrears between seven and nine years ago and have entered on average three forbearance arrangements.

*What the Central Bank has said *

·  There were 24,000 family homes in arrears over two years (Peak was 32,000)

·  10,000 of these are over 5 years in arrears

·  3,000 of these are making the full mortgage repayment

·  10,000 are not engaging


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## IdesofMarch (16 May 2018)

Brendan Burgess said:


> I will be sharing a platform with David Hall and Martha O'Hagan Luff tomorrow at 9.30.
> 
> We will be speaking about the resolution of non performing loans.
> 
> ...



Crunch the numbers Brendan, the difference in the variable mortgage rates and fixed rates charged to Irish borrowers by banks operating in Ireland compared to those charged by European banks to their customers, far exceeds the costs Irish banks have to absorb from those borrowers who do not pay. This is the real elephant in the room. Do not forget Brendan, that an awful lot of borrowers who are in arrears in this Country are still making payments in excess of the interest portion of their mortgage loan. Maybe an area that could be looked at is the excessive cost to banks in legal fees in obtaining possession orders. Just how many adjournments do the bank's legal counsels look for before a hearing date is finally decided upon. Hmmm!


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## Brendan Burgess (16 May 2018)

IdesofMarch said:


> the difference in the variable mortgage rates and fixed rates charged to Irish borrowers by banks operating in Ireland compared to those charged by European banks to their customers, far exceeds the costs Irish banks have to absorb from those borrowers who do not pay.



Hi Ides

I have made this point frequently. 

I have also pointed out that while there is a justification for mortgage rates in Ireland to be higher for 90% LTV mortgages, there is no justification for  50% LTV mortgages to be any dearer as there is a virtually zero cost of default.

Brendan


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## IdesofMarch (16 May 2018)

PRICE GOUGING plain and simple.


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## mtk (17 May 2018)

isit on tv?


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## demoivre (17 May 2018)

Brendan Burgess said:


> Hi Ides
> 
> I have made this point frequently.
> 
> ...



Why would a permanent, full time teacher with a 90% LTV mortgage be more likely to default than a self employed builder with a 50% LTV mortgage?


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## Foobar (17 May 2018)

demoivre said:


> Why would a permanent, full time teacher with a 90% LTV mortgage be more likely to default than a self employed builder with a 50% LTV mortgage?


"Cost of default". If someone with a 50% LTV mortgage does default, the outstanding mortgage amount should be easier to recover, as the bank could (in theory) repossess and sell the house cheap, if they needed to, to recoup their money. There is also a 50% buffer here should property prices fall at the time when the owner defaults.


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## Delboy (17 May 2018)

https://www.irishtimes.com/business...-trigger-thousands-of-repossessions-1.3498819


> Vulture funds are a “cancer” in Irish society that will trigger thousands of home repossessions, debt campaigner David Hall has warned.
> “They have one thing on their agenda and that is feasting on the carcasses of those who suffered because of the gambling by banks,” he told the OireachtasFinance Committee.
> Mr Hall said that vulture funds had no interest in restructuring loans or working with those in arrears.
> “ They buy to obtain the asset and sell it and profit. If you want to lose your home and possibly have a debt written off then vultures are for you. If you want somewhere to live , well that’s an issue,” he said. - -
> ...


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## Niall56 (17 May 2018)

Its extraordinary that someone can be in default of their mortgage for over 5 years in this country and still expect to live in their home. it just doesn't happen in other countries.
No one want to see families evicted or new homeless people but if a mortgage can't be put on a sustainable footing after a year or two then reality needs to kick in.


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## IdesofMarch (17 May 2018)

Niall56 said:


> Its extraordinary that someone can be in default of their mortgage for over 5 years in this country and still expect to live in their home. it just doesn't happen in other countries.
> No one want to see families evicted or new homeless people but if a mortgage can't be put on a sustainable footing after a year or two then reality needs to kick in.



Niall56, I agree in principal with what you have said. In other countries this would not be allowed to happen, the reason being, that these countries have an ample stock of state owned housing. So mortgage defaulters can be readily rehoused. The Irish State, I am afraid, took their eye very much off the ball in this regard, the amount invested in State owned housing in the last 15 years is paltry. This, coupled with the fact that there are very few private rentals available in the main cities in Ireland only exasperates the situation. Who knows, maybe it is in the Government’s interest to slow down house repossessions!


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## Brendan Burgess (17 May 2018)

Niall56 said:


> Its extraordinary that someone can be in default of their mortgage for over 5 years in this country and still expect to live in their home. it just doesn't happen in other countries.



Hi Niall

Agree fully. I said this clearly and repeatedly at the Finance Committee today. Martha O'Hagan-Luff agreed with me. But all the Senators and TDs without exception were strongly opposed to the idea - as indeed was David Hall.

Brendan


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## Open air (17 May 2018)

Nobody and i mean nobody in this country has the stomach or courage to solve this crisis. It has to be reviewd as a case by case situation. The recession in this country was catastrophic, some poor souls may never recover, or have since taken their lives, others have got back on their feet, but are still being dragged through the courts like pieces of dirt. Your right only in good old ireland would this happen


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## MrEarl (17 May 2018)

Hello,

I think a very clear line needs to be drawn, between those in long term arrears who are paying nothing and could afford to pay something, and those who genuinely cannot afford to pay anything.

My own feeling is that the large majority of those who pay nothing could pay something, but have elected not to do so because they know they can get away with it.  This situation has been caused by a combination of our government and our judicial system, both of whom need a good kicking to get them to put things right, otherwise, those on SVRs will just continue paying for others who strategically pay nothing on their loans.

It's all well and good saying we need to build more social housing and Yes, we do, however it's wrong to expect the State to provide a roof over peoples heads because they want to continue being "freeloaders".


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## Brendan Burgess (18 May 2018)

I have attached my presentation to the second post in this thread.

https://www.askaboutmoney.com/threa...nance-committee-tomorrow.208335/#post-1568929

And here is some of the coverage: 

*Variable rates so high 'because thousands are choosing not to pay their mortgages'*

*Vulture funds are a ‘cancer’ that will trigger thousands of repossessions*

*10,000 borrowers should lose homes, says expert*


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## Brendan Burgess (20 May 2018)

I will be on with David Hall tomorrow morning at 8.05 am on Newstalk


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## RedOnion (21 May 2018)

Brendan Burgess said:


> I will be on with David Hall tomorrow morning at 8.05 am on Newstalk


Did David call you a "bank lover"?
There was background noise and it was either that or something else I heard....


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## rob oyle (21 May 2018)

Hi Brendan,

Your position was much better presented this morning than it was in The Journal over the weekend.


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## Brendan Burgess (21 May 2018)

RedOnion said:


> Did David call you a "bank lover"?



Yes, he frequently calls me a "bank lover" and a "vulture lover". 

I don't mind. I am quite convinced that this reflects more on him than on me. 

Brendan


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## Brendan Burgess (21 May 2018)

rob oyle said:


> Your position was much better presented this morning than it was in The Journal over the weekend.



Hi Rob

The article was fine. It was the heading which was a bit problematic. That is often the case.

But overall, the attitude of the media is changing.  The penny is beginning to drop that there are a lot of irresponsible borrowers out there. Interviewers, like Shane Colman this morning, are asking the David Halls of this world: "Are you saying that when people know that there is no sanction for not paying their mortgage, that they will pay their mortgage anyway?". 

Brendan


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## MrEarl (21 May 2018)

RedOnion said:


> Did David call you a "bank lover"?
> There was background noise and it was either that or something else I heard....



That's a bit silly, as anyone who knowns Mr. Burgess and has heard him speak on various topics over the years, would know he's far from a Bank Lover.

I fear David Hall has moved from trying to do right by mortgage holders who the Banks were not treating properly, to wanting social housing for all and that is not something I would ever support.



Brendan Burgess said:


> ....
> But overall, the attitude of the media is changing.  The penny is beginning to drop that there are a lot of irresponsible borrowers out there. Interviewers, like Shane Colman this morning, are asking the David Halls of this world: "Are you saying that when people know that there is no sanction for not paying their mortgage, that they will pay their mortgage anyway?".
> 
> Brendan



Maybe the penny has finally dropped with them, that if people won't pay for their homes, then the odds are they also won't pay to read their newspapers, or pay for a TV licence etc.


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## Open air (21 May 2018)

So i repeat myself again, when will this be sorted on a case by case basis, and not have everyone tarred with the same brush


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## MrEarl (21 May 2018)

Open air said:


> So i repeat myself again, when will this be sorted on a case by case basis, and not have everyone tarred with the same brush



Probably never, because that's the way we do things in little old Ireland... .we just move on to the next mess, then sweep the remains of the previous one under the rug 

Until the large majority of people in Ireland stop tolerating the way things happen in this country, nothing will change.


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## demoivre (22 May 2018)

Brendan Burgess said:


> Interviewers, like Shane Colman this morning, are asking the David Halls of this world: "Are you saying that when people know that there is no sanction for not paying their mortgage, that they will pay their mortgage anyway?".



Did the interviewee not put him back in his box fairly quickly?


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## Brendan Burgess (23 May 2018)

Not sure what you mean by "put him back in his box". This is what was actually said.   I can't make head nor tail of David's answer. He just keeps talking, whether it makes sense or not and changing the topic. 

Shane: David , are you saying that there is no link between a failure to repossess houses and the level of arrears and the interest rates? Are you saying that there is no link between the two of them?

David:  There is a miniscule link of people who have the ability to pay – the point is that people don’t have the ability to pay – there are politicians there are financial advisors in organisations like our own throughout the length and breadth of the country – the Abhaile Scheme is the greatest of evidence to show

Shane: But do you accept that repossessions are sometimes necessary?

David: Yes. Absolutely. My point here is unnecessary repossessions and random execution of repossessions which Brendan is suggesting without any evidence is not acceptable. I am not saying that repossessions should be outlawed , nor have I ever said so . What I am saying is that there are unnecessary repossessions which need to be presented in the midst of a housing and homeless crisis the likes of which the state has never seen before


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## demoivre (23 May 2018)

Brendan Burgess said:


> Not sure what you mean by "put him back in his box"



Well it's rubbish and irresponsible to suggest their is no sanction for not paying your mortgage. Ultimately the house will be repossessed though it may take several years because of a very protracted legal system. Only last month a couple was jailed in Dublin for contempt of court for not vacating their repossessed house on foot of a court order.


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## Brendan Burgess (23 May 2018)

demoivre said:


> Well it's rubbish and irresponsible to suggest their is no sanction for not paying your mortgage.



Hi demoivre

Go down to the Registrar's Court and see it for yourself. 

There is effectively no sanction.  As they say, justice delayed is justice denied. 

Brendan


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## demoivre (23 May 2018)

I've been to the courts several times and I have seen what goes on and I fully accept that the process is slow and repossessions don't happen often but they DO happen. Unless a borrower in arrears comes to an alternative arrangement with their bank the borrower will eventually loose their home, but the process could take 7 or 8 years.


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## MrEarl (23 May 2018)

demoivre said:


> ...the borrower will eventually loose their home, but the process could take 7 or 8 years.



..or even 8-10 years, if the borrower turns up each time and turns on the tears etc.

The fact is that anything near that length of time is wrong.  

3-4 years should be the max and even then, that should be the exception to the rule, and exclude those not willing to many any sort of payments and / or cooperate with their lender.


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