# Greg Connor:"more than 35% of mortgages arrears are strategic defaults"



## Brendan Burgess

Charlie Weston has an article on this which is based on this posting on irisheconomy.ie  

How large are strategic arrears in the Irish mortgage market?

It's a good idea to raise the issue of strategic arrears so those who won't pay will not benefit from any favourable treatment. 



> It seems likely that the proportion of strategic arrears in  Ireland is greater than 35%, which was the measured proportion in the  USA in 2010.
> 
> Ireland has experienced a greater cumulative property price  fall than the USA, and its repossession laws are much stricter, which  strongly influences upward the proportion of strategic arrears.
> 
> Among  the buy-to-let subset, the proportion of strategic arrears in Ireland is  likely higher than 35%, and may be greater than 50%, reflecting the  particular features of this sub-market (wealthier households, a larger  proportion purchased near the height of the boom).
> 
> Cultural and  psychological influences could go either way in a US vs. Ireland  comparison so I am using conservative guesses, taking into account the  influence of very strict Irish repossession laws.



His estimate seems to be based on US research, where most mortgages are non-recourse.


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## oldnick

It's difficult to determine between
- those who deliberately are not paying although they know they can afford to live well and pay...
and
- those who are deliberately not paying because they think -wrongly- that they cannot afford to pay. 

The latter is a bugbear of mine. What I mean is :-

I have a few friends and acquaintances who admit that they are behind on their payments- mainly on BTLs.  Some have bought new cars, gone on holidays, dine and drink out etc etc.
Basically, they believe that the lenders will do to little to "punish" them. Maybe the banks will take their unwanted properties and write off their debts, or at least come to some arrangement. Nothing too drastic.

These people genuinely believe that without their holidays, cars, dining, VHI, private schools etc they are living in poverty and that the bank debts must take second place.

As far as they are concerned they are not deliberately avoiding paying - they feel they just can't afford it. Yes, they'd like to pay the banks but you know we just can't do without private insurance, our annual vacation, Blackrock school blah blah blah...

I submit that this is a bigger group of people than those in the first group who can afford all the pleasures of life and repaying their debts - but still avoid paying.

As long as people believe that there'll be some sort of "arrangement" between lenders and borrowers  both groups will increase. Why be a sucker and pay when nothing too bad will happen ? 
This belief will spell disaster for all of us, as the number of  those "in dsitress" increases.


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## Brendan Burgess

Prof Connor is a great voice of reason when discussing these issues. His contributions to Prime Time, The Front Line etc. have always been excellent, informed and balanced. 

This issue is very difficult to estimate, but I think he has made a few errors in his assumptions here. 



> Not coincidentally, the dramatic growth in Irish mortgage arrears  coincides with the Law and Conveyancing Reform Act of 2009, which made  property repossession more difficult and time-consuming, and the  subsequent Dunne Ruling,


Before the 2009 Act, we had  almost no repossessions in Ireland. We still have no repossessions in Ireland. 

I doubt if the Act itself has changed borrower behaviour.  The Mortgage Arrears Code would have been a far more significant influence on behaviour.  The Dunne ruling may have had some effect. 

He acknowledges the differences between Ireland and the U.S, but assumes that because the strategic default in the U.S. is 35%, then this is a good estimate of the Irish rate.  This is wrong for a number of reasons: 


Irish mortgages are all full-recourse
We have 50% of our borrowers on very cheap trackers
I understand that US margins are higher to allow for such defaults
In the U.S., there is a culture of people going bankrupt, and starting again. We don't have that in Ireland to any extent
Overall, I don't think that the U.S. estimate, which is only an estimate, tells us anything at all about the Irish strategic default rate.

So what is the Irish strategic default rate? 

From my own experience of talking to people in difficulty; from reading the contributions on askaboutmoney and from speaking to MABS, the vast majority of people want to pay their mortgage if they can, even if they are in extreme difficulty.  This is a biased sample, as the strategic defaulters are less likely to go to MABS or Askaboutmoney for advice. 

I have spoken to people in the mortgage arrears divisions of different banks, and for home loans, they think it's much lower than 35% - maybe 10% to 20%. I suspect that the banks tend to overestimate it, so I would guess that it would be around 10%. 

I get the impression that between 10% and 20% are paying nothing at all on their mortgages. This would be a resonable proxy for the "won't pays". Most people in difficulty try to pay something.


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## bugler

I am not sure that those groups are worthy of distinction, oldnick. If anything the latter group may be more odious than the former. At least the former are being somewhat honest about things!

The attitude that you should be allowed maintain private schooling for your children, holidays and "nice" cars in the face of financial strain really annoys me. These attitudes have been encouraged by the likes of New Beginnings and David Hall.

I hope we see a proper rate of repossessions (particularly but not exclusively on BTLs) starting from Q2 2013 which should focus peoples minds on their financial responsibilities.


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## Brendan Burgess

Most people have figured out that strategic default is not a very good strategy anyway. 

It is probably worthwhile in the following situations 


Where you are going abroad and have no intention of coming back - especially if you are not an Irish citizen
Where you are insolvent anyway and will be going bankrupt either in Ireland or England - but is that really strategic default?
Where you have tried your very best to deal with the lender and they are just simply not engaging with you - withholding payments may get them to engage.
Where you have a joint mortgage in serious difficulty and your joint mortgage holder is refusing to engage
It's hard to estimate how many fall into these categories, but I would think it would be few enough.


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## David_Dublin

Heard an interesting conversation between a couple of guys at the bar of a well-to-do golf club the other day. Both have stopped working. Both worked for themselves, and have made a decision to stop working because of the debt they are in. I dont know the ins & outs of their positions, but effectively they were saying that it wasn't worth their while to go back to work, as they would have to put most of their income towards debt they have.


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## 44brendan

Given the current low level of re-posessions, strategic default is an option if your PDH is in negative equity. Otherwise it makes no financial sense, as arrears will just eat up the remaining positive equity in the property. There are however, a large number of people currently paying IO on their loans, who do fall broadly into the category mentioned by Old Nick above.  It's a moot point whether this is a bad thing for the economy, the Banks, or the individuals themselves. I.e. If they are meeting the interest on the loan, their debt position is being maintained. They are spending the excess money, which does in some way help to stimulate the economy. Yes, they will in time have to revert to P&I repayments or make a decision to sell the property, but in my view the emphasis on keeping people (at all costs) in their family homes is misguided. If some people can take a lump off their back by selling their PDH and broadly clearing the mortgage, they have the option of renting a property and this is not necessarily a lower form of lifestyle!! 
I would tend to agree with Brendan B's point from my own experience, that strategic defaulters are out there, but are probably only accounting for a low percentage of defaulters.


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## Dermot

There are 3 couples that I know of who over the last 4 to 5 years have made a stategic decision to withhold in one form or another up to 3 months repayments each year over that period. They are unashamedly doing this even though they are well able to service their mortgages. The all certainly enjoy a very good life style. Two of them in particular have a very good insight on the banking system and the other people have a financial qualification.  A summary of their outlook is that they will get a deal sometime into the future by having this track record. They all keep the banks notified of when they are going to miss a repayment or reduce a monthly payment amount. they are not acting in concert but I believe that they are aware of what each are doing.  This behaviour sickens me and like a lot of other "high profile bankrupts" they will probably be able to get a professional or two to negotiate on their behalf


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## Time

If people can play the system they will. Make no bones about it there are many won't pays out there that know the banking and legal systems inside out and are simply gaming the banks for their own benefit.


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## dub_nerd

Although I dislike this behaviour too, it is absolutely pointless moralising over it. If a property is in negative equity, the bank's loan is unsecured. Where the bank is not getting paid they can either repossess and recognise the loss, or do nothing, in which case strategic defaulting will be a fact of life on some loans.There isn't a third way.


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## Dermot

Time. I totally agree with you. I have great sympathy for the very genuine people who are in financial trouble and that are doing their best, but there are also a lot of " intelligent scammers" out there as well. I am no supporter of the banks but people who owe them money should be making some sacrifice to pay off all of their borrowings or what they really can afford. There should not be any sympathy for people who put life style before repayment of their borrowings or other money that they owe. If everyone done this there would be no banking system or businesses and the more people that deliberately renege on paying their debts puts the country's recovery further down the road


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## Bronte

I must say I find it absolutely shocking that people do not think if they borrow they should repay. I would be mortified if I missed a mortgage payment. 

How anyone can justify purchasing a car or going on holidays when they have mortgages that go unpaid. Well I really struggle to understand the thinking on this.

About 2 or 3 years ago I was listening to the son of a developer Simon Kelly, he speaks really well, no doubt money carefully spent on eductation (I think he wrote a book) and I guess this is the new way of thinking or justifying. I remember thinking at the time how extraordinary that he could have so much debt but could go into court, live in a mansion and pay school fees but yet the courts accepted this state of affairs, no change of lifestyle, no expectation that one would curtail or compromise one's lifestyle. To me it's a topsy turvey way of viewing things but maybe I'm old hat. Or missed what I call the celtic tiger cub mentality. 

More dangerously it's just another step away from deciding I'm not going to pay my decorator, my solicitor or my accountant. 

People who cannot repay I understand.


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## bugler

It's an interesting area. The closest parallel behaviour I can think of is that of the illegal downloading of TV shows / music / movies. That's another area in which people who would describe themselves as moral, law-abiding people allow themselves to engage in very obviously immoral, illegal behaviour. They wouldn't dream of robbing a DVD out of a retail store, but will download something for free without a second thought. And why? Because they can, it's easy, and there are no real barriers to doing so or fears of any repercussions. There is no man in black standing by the door. 

Then they justify it to themselves and others, by railing against the profits the movie business makes, or a music artist or a recording company makes.

Similarly, in Ireland there is a certain class of borrower who feels aggrieved at how they perceive they've been treated since the demise of the Celtic Tiger. Many of them experienced a feeling of being rich, maybe briefly, and since then it's been all bad news. The property or properties they purchased have turned from being things of pride to, almost, things of shame. They will often refer to the immorality of the banks and government in the decisions they have taken as justification, but really this is a moral smokescreen. 

They feel they have made bad decisions, or more likely that they have been unlucky and are victims of circumstance, and they are seeking to get something back. Like the illegal downloader, they don't fear any consequence (based on the evidence so far they believe there may be none, or what consequences there are will be positive), and like the illegal downloader they act because there is no man in black at the door.

There is also the factor of common public sentiment. This remains on the whole biased toward "people", and against "business". So in any dispute between a person and a bank, or a person and a recording company, public opinion falls overwhelmingly on the side of the person. That the person may be undeserving, conceited, dishonest and totally in the wrong is secondary. People = good; Banks = bad. This is ably illustrated by the few high profile eviction cases where, egged on by an often moronic and lazy media, the inexcusable is excused. This is further comfort to those who might strategically default - they do not fear public opinion. They might be embarrassed if their personal circumstances were known (though based off some of the anecdotal evidence above it seems many of them may be beyond embarrassing) but they know that at a macro level there is a deep well of misguided goodwill to be exploited. "The banks ruined the country, and now they want *my *house!"

This attitude and behaviour has been fostered, facilitated and indulged by politicians, regulators, banks and the court system. Occasionally it has been further compounded by pure incompetence (the lacuna in the Land and Conveyancing Act).

I'm not sure if Ireland has seen much serious psychological study yet to assess the impact on a society that endures huge economic shocks, but I think there is a wealth of interesting information there to be found on decision-making and moral relativism and so forth.


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## Time

mugga said:


> I don't understand how someone who won't pay but could pay can get away with it--surely if a bank is going to 'let someone off' with part of their debt they will check into their assets and income and that of their partner if married?
> I too know someone who has been underpaying for quite a while in the hopes of debt relief although they could pay in full.



How could a bank find out such information? They have no statutory powers.


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## 44brendan

> How could a bank find out such information? They have no statutory powers


 
No, obviously they can't! However the strategy appears to be one of "waiting for debt forgiveness to kick in". This really makes no sense unles the debtors actual financial position (excluding partners) is such that the Bank has no real option of any ultimate recovery, other than the sale of the property. Do people still believe that there is some prospect of a form of universal "debt forgiveness" being introduced?


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## Delboy

Some people are simply squireling away money out of sight of the banks and withholding mortgage payments on the other side of the equation.  This keeps them in the lifestyle they built up during the bubble and which they now don't want to let go.

They believe the banks will strike a deal and write off part of the debt....thats the basis of their actions. They don't think the debt will be parked and left aside for 20/30 years....they simply believe that by not paying their mortgage regularly/at all, they will receive substantial write downs. And 1 things for sure...they feel very very confident that there will be no repossessions of the Family home and most likely not of the Buy to Lets either (only the really hopeless cases in this latter category will have to give up some or all of the BTL's)
And they'll have a nice war chest to wheel out once the deal is done....to invest in more property,get the latest Range Rover etc.


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## Bronte

Delboy said:


> And they'll have a nice war chest to wheel out once the deal is done....to invest in more property,get the latest Range Rover etc.


 
And I hope that such people never get away with their oh so clever plan. And I certainly don't want to pay for it. Hopefully the banks will get clever with finding where all this squirrelled away money is. Plus the new insolvency regime seems to have some stings in it, in addition to being quite a long drawn out process. 

I have no problem with anyone going bankrupt who is plainly broke. The other one's outlined on here make me sick. But more fool me maybe. Time will tell. I will not change my belief that if you borrow you repay. But I'm probably seen as old hat in my viewpoint. And it's looking more and more that one can not voice such opinions in the current climate. Everybody's at it etc and where did we hear all that before.


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## itsallwrong

Surely when people walk into the bank with thier 'poor me' story, the bank will ask for verification of all their debts.
With the 'Dunne' ruling being changed, they are going to get harder on people in 'suspect arrears'. 
Anyone faking their situation and strategically defaulting will be flushed out quickly.
It's one thing saying you can't pay.
It's another proving it.

As a previous poster point out, the holiday, the car and so on is still been expected by some. 

When they actually get examined, they will get told to cut a lot more than they have which will show they can pay the mortgage, 
or more than they claim they can pay.
Then they get told to go away and pay up or the bank will get harder.

Are these people not leaving themselves open to being 'found out' when they go in with their waffle?

Are they not going to put themselves in a worse position with their lender by having their cards 
marked when they are found out to be be both telling lies and have made little effort to *really* cut the cloth to suit the table?

I really think a lot of 'strategic defaulters' are in for a big shock when they chance their arm with their lender.

Q: How could a bank find out such information? They have no statutory powers.
No powers needed. The request of the customer and the circumstances leave them all the power they need to get the information.

Meeting with lender.
Morning Mr. X.. So you want a writedown do you?
Yes Mr. Lender - I can't pay my mortgage (tissue in hand)
Right so - your salary is Y and your mortgage is not being paid (partly/fully). 
Kindly show us where every single euro of your salary goes?

Most people get paid on the books. 
Very hard to make money vanish and just give the blanket excuse of debt.


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## Time

Again how is a bank supposed to verify someones salary? They are not the revenue.


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## Delboy

I think your all giving the banks too much credit here for intelligence. They're not going to go looking through each defaulters finances with a fine tooth comb...some they might, most they wont. And even those they do check will still get away with it if they try hard enough.
I can just see it happening....this is Ireland


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## The_Banker

mugga said:


> I don't understand how someone who won't pay but could pay can get away with it--surely if a bank is going to 'let someone off' with part of their debt they will check into their assets and income and *that of their partner if married?*
> I too know someone who has been underpaying for quite a while in the hopes of debt relief although they could pay in full.



Would a married couple be responsible for each others debts?


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## Bronte

No married couples are not responsible for each others debts unless they've signed up for them.  But if one is trying to sort out a financial meltdown it might be better that all assets and income were included.  Depends completely on the situation.


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## Time

I know a judge that would disagree there.


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## Delboy

Greg Connor was on the Pat Kenny show, 1st thing this morning. Went through his case for their being strategic defaults accounting for around 35% of the current total in arrears. Made his points in a rational manner I thought.
The other participant in the discussion was David Hall....when Pat asked him for his thoughts on what Greg said, he went off on the usual tangent, answering a totally different question to suit his 'forgive everyone in arrears' agenda. He did at 1 stage say 'what would anyone stand to gain from attempting to strategically default' !!!!!!!!!!

The mind boggles


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## gaius

Bronte said:


> No married couples are not responsible for each others debts unless they've signed up for them. But if one is trying to sort out a financial meltdown it might be better that all assets and income were included. Depends completely on the situation.


 You also need to take into account that the banks seem content to be bailed out by the taxpayer so they'll have no problem doing a half-assed job as consequences for them will be limited.


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## Delboy

Gregory Connor is standing over his figures on high levels of Strategic arrears currently happening

http://www.irishtimes.com/business/...-the-mortgage-arrears-crisis-crisis-1.1334707
"Despite the paucity of data, the issue must be faced. Is it credible that this explosive growth is entirely due to distressed arrears?
The classic source of distressed arrears is loss of employment. A Central Bank sample study showed that 32 per cent of residential mortgage holders in serious arrears were unemployed, or had a mortgage co-payer who was unemployed. Unemployment does not explain the remaining 68 per cent of arrears cases.
Another source of distressed arrears is unsustainable increases in mortgage payments relative to after-tax income. There has been a general decline in after-tax incomes, but also big declines in required mortgage payments due to falls in interest rates.
Consider a 30-year mortgage with a principal balance of €250,000, paying 1.2 percentage points over the ECB rate (a typical tracker mortgage). In 2006 when the ECB rate was 3 per cent, such a mortgage had a required monthly payment of €1,223; with the decline in the ECB rate (now 0.75 ), the monthly payment has fallen to €918. Banks are offering temporary interest-only periods to many customers. If this mortgage is switched to interest-only, it requires a payment of €405 per month, a fraction of the true capital cost (and much lower than the cost of renting). For standard variable rate mortgages, monthly payments have fallen only slightly, but interest-only restructurings have been on offer."


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## Brendan Burgess

Some very interesting figures from Ulster Bank in recent days

Ulster Bank warns of action against strategic defaulters



> The bank said yesterday it had witnessed a substantial rise in the number of mortgage borrowers strategically defaulting.
> 
> 
> 
> It attributed the increase to a number of  factors including the introduction of the mortgage code of conduct and  the halting of repossessions following the discovery of a loophole by  Justice Elizabeth Dunne in the 2009 Land and Conveyancing Reform Act.
> 
> 
> Speaking  during a call with investors during which the bank outlined plans to  reduce its number of branches, Ulster Bank’s chief risk officer *Stephen  Bell said about 35 per cent of mortgage borrowers in arrears are not  currently paying anything.*



I am shocked by that figure. 35% of borrowers are not paying anything? 

I have met two  people recently who told me that they had not paid anything at all for the last 12 months, and I assumed that they were exceptions. But it's much more common than I had assumed. 

I wonder if this 35% figure is typical of the other mainstream lenders? 

If a family has no income, they will generally qualify for MIS after 6 months. So they should be paying this over to the mortgage lender. 

So who is not paying their mortgage? 

Most of these must be strategic defaulters, so Gregory Connor's estimate may be right after all. 

I would have thought that the vast majority of people go to extreme lengths to pay their mortgage - maybe 95% of all borrowers. 

That would classify 5% as strategic defaulters or people who are paying a lot less than they can afford. 

There are 761,000 mortgage accounts. 

If 5% are strategic defaulters, that would be around 38,000 accounts. 

There are 83,000 accounts in arrears over 90 days. 

That would give a 45% strategic default rate. 

This seems too high. But the rate must be at least 20% and could be as high as 40%. 

Brendan


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## MortgageGuy

The strategic defaulter doesn't exist according to many people, the figures suggest otherwise. 

We'll never really know who the 'true' ones may be because some may be happy to go for insolvency, others might come to an informal arrangement, and others will self-cure once the true threat of repossession comes. 

Paying literally 'nothing' for 12 months is difficult to understand, there are state supports there for this, and even €10 a month would be 'something'. There are people in terrible poverty, but that doesn't seem to account for those numbers. Even people in state housing have to pay rent, so a zero payment for a year seems odd. It could be that ulsterbank have their figures wrong or are replacing '12 months arrears' (which can build incrementally) with 'have paid nothing' and these are two very separate things, in one you don't pay a penny for a year, in the other you might make a 50% payment for 2 years and be a year behind.


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## Brendan Burgess

It was reported in the Irish Times as well, although they may be both using the same source. It's clearly 35% of those in arrears are paying nothing. It's not a different type of arrears. 

The 35% figure is shocking. But then I was shocked that two people whom I knew were paying nothing. 

I have heard it said before that when a borrower's direct debit bounces, they often stop paying completely.


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## shtall

On this subject here is and example I have given sfs wages slip bank statements to show where my money goes, I earn 500 per week working fulltime my car is off the road now 3 months as I cannot afford the bill of 1400 todate due and a further 1000.00 for a part needed so I get lifts as there is no direct route to my place of work some weeks I am lucky to have anything in my account after direct debits and buying food. I am divorced and he has his own rent to pay and took the car we had so he pays this and we have children to support so yes its wrong to stop paying and live a luxurious life I agree. I do not have holidays nor am I out every week and the children are taken to free places for a day out ! I now buy clothes in different cheaper shops and groceries in cheaper stores as this is what you do. 
My money vanishes alright but not on me !


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## Gerry Canning

Brendan Burgess said:


> It was reported in the Irish Times as well, although they may be both using the same source. It's clearly 35% of those in arrears are paying nothing. It's not a different type of arrears.
> 
> The 35% figure is shocking. But then I was shocked that two people whom I knew were paying nothing.
> 
> I have heard it said before that when a borrower's direct debit bounces, they often stop paying completely.


..................................................................................
Very hard to get to grips with this 35% + !!
Can I suggest the word Strategic is the wrong word.
If it is replaced with Surviving Defaulters then 35% is ok.
Let me explain.
Most of what are called (Strategic) have no strategy , most are ostrich like ignoring the issue and hoping it will all magically blow over.
They may well have reckoned that the best they can do is to hang in and wait !!They may also reckon , what,s the point in paying one-third and still have no security. They may also have paid down other debts.In NO way am I condoning these actions.
We couldn,t have it messier.

If everyone was TOLD they must @ least pay 35% of disposable income ,would that not quickly flush out the Strategic ones? as distinct from the hopeless cases.

I really COULD NOT see 35% as truely Strategic. BUT IF IT IS, @ 35%THE PROBLEM IS NEARLY UNMANAGEABLE.

I await wisdom !!


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## Brendan Burgess

Hi Salmon 

A good point about the word "strategic" being inappropriate for a lot of cases.

Even the word "default" might be wrong, as most of these will get back on track when the lender is allowed to take effective action. 

David Hall and Ross Maguire say there are almost no strategic defaulters but then acknowledge that people pay their credit cards and credit unions ahead of their mortgage.  That is tactical preference of another creditor at the expense of the mortgage lender. 

There are strategic defaulters who are paying nothing and hope to get a debt write down. 
There are people who have no strategy except to bury their head in the sand. 
And there are people who are choosing to pay other creditors ahead of their mortgage. 

The three groups could well add up to 35% and the level of arrears would be a lot less if they paid their lenders a reasonable amount.


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## Gerry Canning

Brendan Burgess said:


> Hi Salmon
> 
> A good point about the word "strategic" being inappropriate for a lot of cases.
> 
> Even the word "default" might be wrong, as most of these will get back on track when the lender is allowed to take effective action.
> 
> David Hall and Ross Maguire say there are almost no strategic defaulters but then acknowledge that people pay their credit cards and credit unions ahead of their mortgage. That is tactical preference of another creditor at the expense of the mortgage lender.
> 
> There are strategic defaulters who are paying nothing and hope to get a debt write down.
> There are people who have no strategy except to bury their head in the sand.
> And there are people who are choosing to pay other creditors ahead of their mortgage.
> 
> The three groups could well add up to 35% and the level of arrears would be a lot less if they paid their lenders a reasonable amount.


............................................................................................

The  3 groups you mention are as you hint all resolvable to a greater or lesser degree and at worst the write off will probably be sustainable.


I worry about the 4th case ie the Hopeless one.
In this case Bank loses circa 50% due to value drop.
Customer ends up on stretched social housing .
Ends up WE get caught for 100% of the cost .  

I have sympathy will Hall&Maguire but they do NOT help their other good arguments by stating there are almost no strategic defaulters. That gets peoples backs up and we end up in 2 self justyfying camps .
I see this whole (Default/arrears) issue getting sucked into absolutes.

It is always easy to search for Black & White arguments .. This one is GREY !!


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## Delboy

Brendan

David Hall was on Drivetime yesterday eve (or it could have being Weds) and Mary Wilson mentioned your name and the 20% strategic default level.
He basically said you were talking hot air and that Ulster banks 35% figure was pure bull. He started using new terms for the people not paying....'debt prioritisers' or something like that.

As usual he got a free ride with no counter balance on the show against him


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## Brendan Burgess

Hi Delboy

I heard that. I thought that Mary Wilson challenged him hard enough.  I think that the majority of people listening to this or watching such debates on TV are much more balanced and know that there is some serious level of strategic arrears.  

The problem is that few  are prepared to say this in public.  Greg Connor is one. I am another. We get accused of being "spokemen for the banks" or as I was once described on radio "The repossession Czar" .


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## mercman

IMO, the Ulster Bank have come out now quoting figures as they left it so long to deal with their non payers. It does appear there are thousands of people who simply are unable to afford these payments.

The other side of the equation is that people are awaiting 'Debt forgiveness' to start. Personally, I do believe this will happen. The ECB are so slow in getting anything done that their in decisions have left the entire Europe in the debts of recession. 

They are aware of the problem but are so slow in dealing with the issues. If anybody listened to Draghi on the radio yesterday, he more or less said that they have a massive problem. They didn't reduce interest rates yesterday but will in the future. What a joke. Problem is that the Banks keep increasing their margin so the rates and repayments barely move.

DEBT FORGIVENESS WILL HAPPEN not just in Ireland but throughout Europe. And these idiots throughout Europe better hurry up before it really is to late.


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## Time

So the Dunne loophole has not yet been closed? 

Personally I knows a couple who have paid not a cent for the last 4 years. They are still in the house and nothing has happened. They don't believe anything will happen.


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## Delboy

Time said:


> So the Dunne loophole has not yet been closed?
> 
> Personally I knows a couple who have paid not a cent for the last 4 years. They are still in the house and nothing has happened. They don't believe anything will happen.



It passed in the Dail the other evening and goes before the Seanad next. On target to be passed by all before the summer recess.
Should be actual reporssessions by xmas but I won't hold my breath


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## Gerry Canning

Time said:


> Again how is a bank supposed to verify someones salary? They are not the revenue.


 ................................................................

If a customer is looking for forebearance , it is NOT up to Bank to verify salary/income it is up to the customer to supply details.
If customer does not readily supply information , the Bank would be well within their rights to go hard on the customer.


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## gaius

It actually could be higher than 35% because that figure only counts the ones paying zero. It doesn't count the ones paying 1-99% of mortgage repayment amounts to get the banks off their backs when they are able to pay more.

I think it's fair to assume that the vast majority of those paying zero are strategic. Even unemployed people contribute a small amount to their own rent. Nearly 70% of households in arrears still have an employed person in the household!


----------



## Brendan Burgess

gaius said:


> Nearly 70% of households in arrears still have an employed person in the household!



Hi gaius

Where are you getting this information from?  Governor Honohan quoted it from an unpublished study. Has it been published yet?


----------



## gaius

Brendan Burgess said:


> Hi gaius
> 
> Where are you getting this information from? Governor Honohan quoted it from an unpublished study. Has it been published yet?


 Same study. Reference to it here.


> A Central Bank sample study showed that 32 per cent of residential mortgage holders in serious arrears were unemployed, or had a mortgage co-payer who was unemployed. Unemployment does not explain the remaining 68 per cent of arrears cases.


Not yet published formally as far as I know.


----------



## Brendan Burgess

Davy's has published a report on mortgage arrears which says



> Yesterday, we launched our new report on Irish mortgage arrears. At  16.5% by value, Irish owner-occupier 90+day mortgage arrears have now  met our expected peak. With early stage arrears still substantial, the  90+ day rate looks set to rise further. This is doubly disappointing  given the 1.1% employment growth in the year to Q1 2013. It appears that  mortgage payment discipline has weakened – hurt by constraints on banks  in contacting delinquent borrowers and the lack of a credible threat of  repossession.
> 
> 
> 
> However, the impact on banks’ provisioning of higher arrears cases is  offset by the stability in the housing market. Also, to the extent that  the higher rate of rate arrears reflects strategic non-payment,  performance can be restored with a credible threat of repossession.


----------



## thunder

maybe there is a link between a increase in standard variable rates on mortgages and an inability to service ones mortgage. I for one am finding it next to impossible to keep up the repayments on my mortgage.


----------



## Brendan Burgess

A few more quotes from the report



> These developments are especially disappointing given the stabilisation in labour market conditions. With employment rising by 1.1% in the year to Q1 2013, job cuts can no longer be blamed for the persistent and extended rise in arrears rates. Unfortunately, a confused regulatory approach, far too favourable to delinquent borrowers, has encouraged a weakening in payment discipline. Ireland now has significant numbers of solvent borrowers who can service their mortgage debt but choose not to do so.
> 
> Strategic non-payment of mortgage debt is probably more concentrated in the BTL  sector, evident in banks' appointment of rent receivers to ensure rental income is not diverted. However, Central Bank Governor Patrick Honohan recently acknowledged that many delinquent owner occupiers in arrears are solvent. That is, they can pay their mortgages but have been slow to adjust their expenditure to their new circumstances,  choosing instead to go into arrears on their mortgages.
> 
> Exacerbated by a confused regulatory response
> The initial iterations of the Code of Conduct on Mortgage Arrears (CCMA) placed severe limitations on banks in contacting delinquent borrowers, breaking the golden rule that early engagement can avoid longer-term arrears. Furthermore, the government has only just passed legislation to address the 2011 Dunne ruling – preventing banks' from repossessing properties associated with delinquent loans. Without the credible threat of repossession and with limitations in contacting delinquent borrowers, it is not surprising that a weakening in mortgage payment discipline has emerged, especially with politicians encouraging unrealistic expectations for debt forgiveness.


----------



## demoivre

> These developments are especially disappointing given the stabilisation  in labour market conditions. *With employment rising by 1.1% in the year  to Q1 2013, job cuts can no longer be blamed for the persistent and  extended rise in arrears rates.*


.

Maybe Austerity measures and higher variable rates on borrowers can ? Part time jobs are contributing to the marginal fall in unemployment rates.


----------



## Sunny

There is also an element of people using savings to continue paying their mortgages after job losses. There is always going to be a lag between unemployment and arrears. Just because employment figures are stabilising doesn't mean that a rise in arrears can be automatically linked to people choosing not to pay.


----------



## dub_nerd

demoivre said:


> .
> 
> Maybe Austerity measures and higher variable rates on borrowers can ? Part time jobs are contributing to the marginal fall in unemployment rates.


 
+1. The numbers in full time employment have not increased. And most of the increase in part time employment are considered "underemployed".


----------



## demoivre

> Furthermore, the government has only just passed legislation to address  the 2011 Dunne ruling – preventing banks' from repossessing properties  associated with delinquent loans. Without the credible threat of  repossession and with limitations in contacting delinquent borrowers, it  is not surprising that a weakening in mortgage payment discipline has  emerged, especially with politicians encouraging unrealistic  expectations for debt forgiveness.



I suspect massive negative equity coupled with the enactment of the new Insolvency/ Bankruptcy legislation has the banks worried about what they will have to deal with if they increase the rate of repossessions.
I don't think removing the limitations in contacting borrowers is going to make one bit of difference to arrears cases other than causing distress to families. The strategic defaulter will probably have the savy to deal with the additional phone calls and those who are in genuine distress can't pay anyway.


----------



## Delboy

demoivre said:


> I suspect massive negative equity coupled with the enactment of the new Insolvency/ Bankruptcy legislation has the banks worried about what they will have to deal with if they increase the rate of repossessions.
> I don't think removing the limitations in contacting borrowers is going to make one bit of difference to arrears cases other than causing distress to families. The strategic defaulter will probably have the savy to deal with the additional phone calls and those who are in genuine distress can't pay anyway.



Perhaps we're finally gone past the stage of daily phone calls and the odd later....maybe, just maybe the Banks are finally going to start getting real and start repossessing properties that are lost causes, thereby also flushing out the strategic defaulters who either start paying up again (incl arrears and interest) or surrender the asset

Charlie Weston in today's paper, based in part on the Davy report
http://www.independent.ie/business/...s-targeted-for-seizure-by-banks-29458021.html
BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.
A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.


----------



## demoivre

Delboy said:


> Charlie Weston in today's paper, based in part on the Davy report
> http://www.independent.ie/business/...s-targeted-for-seizure-by-banks-29458021.html
> BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.
> A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.




And the article continues :


> "These are made up of residential and buy-to-let properties, according to calculations contained in a new report by [broken link removed].
> An analysis estimates that what it calls non-cooperative borrowers number between 23,700 and 43,700.
> 
> *FEARS*
> Letters threatening legal action have been sent to these borrowers."






So are the banks *threatening* legal action or have they* issued * proceedings ? Big difference !


----------



## Delboy

demoivre said:


> So are the banks *threatening* legal action or have they* issued * proceedings ? Big difference !



Yes, big difference but this does look like a step up in the way they've being dealing with this so far. I think we're entering the a new phase....be interesting to see how it plays out over the next few months


----------



## Time

With the Dunne loophole still active, they can do little more than sabre rattle.


----------



## Delboy

Time said:


> With the Dunne loophole still active, they can do little more than sabre rattle.



Are you sure the bill has'nt been signed off to close the loophole? Both houses of the Oireachtais passed it before the break. President then must sign off within 7 days. So I think it's now in force


----------



## Time

It was signed on the 24th of July according to Iris Ofigiuil.


----------



## Brendan Burgess

Delboy said:


> Yes, big difference but this does look like a step up in the way they've being dealing with this so far. I think we're entering the a new phase....be interesting to see how it plays out over the next few months



Under the Mortgage Arrears Code, they must give notice of intention to take legal action to repossess.
Then, I think, they must issue a legal notice that they will issue proceedings.
Only then can they actually issue the legal papers. 

Brendan


----------



## demoivre

The new Insolvency laws and the Land and Conveyancing reform act 2013 are effective from today so nothing in the way of the banks from repossessing houses, other than the fear of the potential hammering to their balance sheets ! The quarterly arrears  stats going forward will be interesting but I would wager that arrears will rise, a negligible amount of long term solutions will be reached with borrowers and repossessions will remain low. In fact I'd bet my house on it.


----------



## Delboy

demoivre said:


> The new Insolvency laws and the Land and Conveyancing reform act 2013 are effective from today so nothing in the way of the banks from repossessing houses, other than the fear of the potential hammering to their balance sheets ! The quarterly arrears  stats going forward will be interesting but I would wager that arrears will rise, a negligible amount of long term solutions will be reached with borrowers and repossessions will remain low. In fact I'd bet my house on it.



Bet all you want but the scenario you outline is what has being happening for the past 5 years. And see where we are now.
It simply cannot go on like this forever....something has to give


----------



## Brendan Burgess

David Duffy, the Chief Executive of AIB, said on today's Morning Ireland that he estimated that the level of strategic defaulters was in excess of 20%.

In this, he included people who were paying their unsecured creditors such as the credit unions ahead of the mortgage.   I have come across this a lot recently including one case, where I think that the mortgage is sustainable but the borrower has paid nothing to the lender for three months because they simply had nothing left over, while paying the Credit Union in full. 

Brendan


----------



## Time

People don't want to blob their own copybook locally. There is shame in defaulting on the local CU.


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## Brendan Burgess

Hi Time

While I agree, I am concerned that some people will lose their homes, because they have not prioritised their mortgage.

If my mortgage was so unsustainable that I had no hope of retaining my home, then it would make sense to prioritise the CU. 

Brendan


----------



## ClaireM

There is also the difficulty of work place credit unions where repayments operate by way of salary deduction. People sometimes don't want to have to tell their payroll department to stop making the deduction or it can be difficult to persuade them to do so.


----------



## demoivre

Brendan Burgess said:


> David Duffy, the Chief Executive of AIB, said on today's Morning Ireland that he estimated that the level of strategic defaulters was in excess of 20%.



I suspect Mr Duffy arrived at that figure in much the same way as the head of Capital Markets at Anglo arrived at the €7bn funding requirement figure from the Central Bank in 2008. Given that AIB lost €758m in the first six months of 2013 it will be interesting to see how quickly AIB start running to the courts to repossess houses and crystallise losses where there's negative equity.


----------



## demoivre

Time said:


> People don't want to blob their own copybook locally. There is shame in defaulting on the local CU.



+1 and they often shout the loudest and get paid first where there are multiple creditors.


----------



## Sunny

There is also an element of people trying to clear high interest unsecured loans before tackling their mortgage. Just because debt is unsecured doesn't mean there aren't any consequences for missing payments because every penny is going into your mortgage because the bank is threatening to take your house. Are AIB freezing interest in their customers who have unsecured debt with them so they can pay more off their mortgage? Bet they are not. So people continue to be trapped in debt until they have no option but to look at bankruptcy.


----------



## Cantalia

Can someone explain clearly the difference between non recourse mortgage and full recourse mortgage so I can put the American stats in context???? How can there be such a thing as a non recourse loan....isn't that an oxymoron????


----------



## Time

A non recourse mortgage is one where the bank cannot chase any shortfall. Once they take the house the mortgagee is free and clear of the loan. Common in the US.


----------



## Cantalia

Interesting. Do european especially German banks also have this kind of mortgage product or is it peculiar to US? And if so then why has no Irish punter taken a reckless lending case to te European courts as nt only have we full recourse but we have all sums due clauses converting unsecured debt into secured debt. Maybe all te strategic defaulters should take a class action.


----------



## Gerry Canning

Please define (strategic defaulter).
Mr Duffy Ceo of a seriously incompetent Bank now states that 20%+ are strategic defaulters !!
Show me the defination of strategic, not his self serving headline grabbing words, he has neatly spun us all.

Show me the facts, show me the defination.

I am not insolvent (unlike AIB) , I am 30 credible years in finance.
So I state that strategic defaulters mean those who can yet won,t pay are @ 5%
I present NO facts , but why not believe me?   

I would be inclined to distrust AIB, on the basis of their past shennanigans and that most of the shennanigan staff are still in situ.


----------



## gaius

The Ulster Bank figure regarding those in arrears paying ZERO is a big red flag. Even unemployed people make a contribution to their accommodation so paying zero is definitely strategic default (or selective prioritising of repayment) in my book.


----------



## Brendan Burgess

Gerry Canning said:


> So I state that strategic defaulters mean those who can yet won,t pay are @ 5%
> .



I agree with you. 

But around 12% are in arrears over 90 days

So 5% of mortgage holders is around 40% of borrowers in arrears over 90 days. 

You are estimating it at twice the level David Duffy is estimating it at. 

He is too low. You are too high. It is somewhere between 20% and 40% of those in arrears over 90 days.


----------



## Gerry Canning

I explained that 5% badly,
What I meant is that of those in arrears only 1 in 20 are can and won,t pay variety.
I just can,t see it @ 20% . 
From a pure sums view if it is @ 20% on the can,t won,t pay ,the 20 Billion AIB have got ain,t enough and = more trouble.

I see the Boss of KBC in todays Independent States no one knows the (strategic default) figure = more uncertainty . 

I would be of the opinion(not knowledge) that when the insolvency legislation gets up and running the 20% figure on cant wont pay will suddenly evaporate.
I hope I am correct .


----------



## Delboy

Karl Deeter talks to a strategic defaulter
http://www.mortgagebrokers.ie/uncategorized/talking-with-a-strategic-defaulter/
The person in question is a white collar professional and the director of a relatively well known company, she agreed to speak to us on the basis that we kept her identity private. She has a family home and six investment properties.

Some lowlights:
Karl: Did you make a concious decision to default on your loans? If so why?
-Yes, because the bank were insisting I go on interest and capital repayments on the investment properties and the figures just wouldn’t add up so I chose to default

Karl: You are, by your own admission, a strategic defaulter. Do you think there are many others like you?
-Without a doubt, on investment properties it’s endemic, I don’t think it’s fair to paint normal ‘family home’ owners as strategic defaulters, there probably aren’t many of them. But on the RIP’s (residential investment properties) we are (landlords) all at it. If I tried to pay the contractual amount of capital and interest it would be impossible, so instead I’m at this stand off instead which I hope will force the banks into making a more reasonable deal. Ultimately these loans, on a full repayment basis, are unsustainable, so either write them down or get nothing from me, the choice is simple.

Karl: When you hear ‘banks are going to get tough’ on borrowers, do you think they are being honest?
-No, they won’t repossess me or anybody else, they’ll get wiped if they take all the houses back, their true plan, the one they won’t talk about publicly, is to keep everybody on contract and pray the property market recovers some day and then in fifteen years or so move in on people or at least have borrowers who can break even in a sale. They don’t want to get burned any more than I do.


She claims to have only put 12k aside since she stopped paying what's due, which I find hard to believe given it's 6 properties we're talking about here. And admits to using the rent to make up for the shortfall in her salary.
It's disgusting to think that people like this actually believe they will get a deal off the bank and the rest of us will have to pay for it


----------



## Time

It may be repugnant but it will probably happen.


----------



## fobs

I would also concur that the stragic defaulters will end up being better off in the long run. Even though they are called strategic defaulters could they actually afford to make full interest and capital repayments anyway?


----------



## Sunny

I don't really get it to be honest. There is and never was anything stopping the banks putting rent receivers into manage these properties if she is keeping the rent roll. The question is why are banks bleating on about strategic defaulters to the media if they are allowing this to happen. The above example is not the same as some family who might have to prioritise other things like medical bills, education costs etc over their mortgage and they are being labeled strategic defaulters as well.


----------



## Brendan Burgess

The bank should simply appoint rent receivers to these properties and that would soften her cough.  She is a professional so she probably has a good record of paying up to now. It will take a while to catch onto her. If it's only one bank, it might be worth their while appointing a receiver. If she has loans with 6 banks, it just might not be a priority for them. 

Depending on what sort of professional she is, this could have very serious career consequences.  If it's one bank which she is messing around, they should go for bankruptcy which would last three years and then get a payment order for another 5 years. 

But worst of all, she is wrecking it for others who are struggling but who are trying. The existence of strategic defaulters like this makes the bank suspicious of everyone in arrears and makes them reluctant to do deals. 

Brendan


----------



## Mrs Vimes

Brendan Burgess said:


> But worst of all, she is wrecking it for others who are struggling but who are trying. The existence of strategic defaulters like this makes the bank suspicious of everyone in arrears and makes them reluctant to do deals.
> 
> Brendan



At the risk of sounding a bit paranoid, I wonder whether the banks are grateful for people like this going public because it allows them to be suspicious of everyone?


----------



## Gerry Canning

Delboys comment quoting Karl Deeter, that few Family Homes are Strategic Defaulters.
.......................................................................................
On a previous comment I believed very few people are strategic defaulters.
............................................................
From reading the previous it appears  that the Strategic Defaulter is  on Buy to Let people.

Can we therefore differentiate in our comments as there is a notion that Family Home owners are serial Strategic Defaulters. To lump home owners with Buy to Let messers sends an incorrect message.  

To Mrs Vimes; I don,t think Banks are suspicious of everyone as they kmow where the defaulters are. But it does suit them to Have  arrears cases in the public domain as Strategic.


----------



## Delboy

Gerry Canning said:


> Delboys comment quoting Karl Deeter, that few Family Homes are Strategic Defaulters.
> .......................................................................................
> On a previous comment I believed very few people are strategic defaulters.
> ............................................................
> From reading the previous it appears  that the Strategic Defaulter is  on Buy to Let people.
> 
> Can we therefore differentiate in our comments as there is a notion that Family Home owners are serial Strategic Defaulters. To lump home owners with Buy to Let messers sends an incorrect message.
> 
> To Mrs Vimes; I don,t think Banks are suspicious of everyone as they kmow where the defaulters are. But it does suit them to Have  arrears cases in the public domain as Strategic.



You can't just say that all strategic defaulters are BtL's only. We don't know of any stats on the breakdown of Strategic Defaulters so there's no need to differentiate yet!


----------



## Delboy

Only in Ireland.....

https://twitter.com/davidmurphyRTE


> AIB's Duffy: Over 2,000 customers have deposits which are bigger than their arrears



And some will still argue that there's no strategic defaulters in this country


----------



## Gerry Canning

Delboy; I did not say all strategic defaulters are Btl,s. From observation they make up the most in strategic default.

I have heard NO-ONE argue that there are no Strategic Defaulters.

What I clearly hear is that Banks are saying there are X % without any statistical facts.

Please give me a REASON to trust AIB ?

Without proper statistics I will NOT believe AIBs version I


----------



## so-crates

I think Gerry Canning the following sentence is where AIB are coming from (From the Irish Times article). 



> Mr Duffy also said approximately 2,000 customers in arrears have cash deposits big enough to clear their debts.



I read that as saying they have identified 2000 customers who hold money on deposit in excess of the arrears they owe. 

That part at least seems pretty unequivocal to me. They have identified people with the means to clear their arrears who are chosing not to and labelling them as strategic defaulters.

It is not to say that a person has income and can afford the repayments, perhaps they have only their savings to live off and hence do not want to use them to clear down what they owe but certainly my suspicion would be that this is not the majority of that 2000 people.

The important question is... does that 2000 represent 20% of their arrears clients (irrespective of whether it is on a PDH or not).


----------



## Gerry Canning

I do not know if the 2,000 represent 20% of arrears customers.

What I do know is that Mr Duffy and AIB should be clearer and more responsible in coming out with unclear stats.

Has any solvent Banker agreed with AIB?

I accept there must be Strategic Defaulters .


----------



## itsallwrong

They can ask for a P60 which will show earnings.
Unlike the good old days when they got the loan,
any request for proof of earnings via a P60 was hit or miss.
I know plenty of people who got false ones made.
If they are now looking for favourable treatment with their debts,
you can be sure they will want proper proof.
The power is still with the bank and they are entitled to demand proof of
whatever they want if the arrears customer wants any sort of help.

Believe me, I have filled in a Standard Financial Statement (10 pages long)
a few times and the bank want proof of everything.
Pretty much like getting a loan but in reverse.
Best of luck to anyone who thinks they can dupe the bank with any
strategic default.


----------



## Delboy

Another nugget from Duffy yesterday:

AIB have found so far 500 mortgaged properties which were supposed to be PPR's but are now in fact rented out....and no payments have being made on them in 3 years+! 

Gerry
if you want to hear people who claim there are no strategic defaulters....listen to David Hall or some of the stuff from New Beginnings. That's a good place to start with the denial


----------



## demoivre

itsallwrong said:


> They can ask for a P60 which will show earnings.
> Unlike the good old days when they got the loan,
> any request for proof of earnings via a P60 was hit or miss.
> I know plenty of people who got false ones made.
> If they are now looking for favourable treatment with their debts,
> you can be sure they will want proper proof.
> The power is still with the bank and they are entitled to demand proof of
> whatever they want if the arrears customer wants any sort of help.
> 
> Believe me, I have filled in a Standard Financial Statement (10 pages long)
> a few times and the bank want proof of everything.
> Pretty much like getting a loan but in reverse.
> Best of luck to anyone who thinks they can dupe the bank with any
> strategic default.



Self employed people can dupe who ever the like, especially bankers, if they have enough savvy.


----------



## Gerry Canning

Delboy said:


> Another nugget from Duffy yesterday:
> 
> AIB have found so far 500 mortgaged properties which were supposed to be PPR's but are now in fact rented out....and no payments have being made on them in 3 years+!
> 
> Gerry
> if you want to hear people who claim there are no strategic defaulters....listen to David Hall or some of the stuff from New Beginnings. That's a good place to start with the denial


 ..............................................
Delboy. If you read my comments I have NEVER said there are NOT strategic defaulters.
I have always said I would go after messers.
......................
My query is ,should we in any way trust selective picking of statistics?.
. Mr Duffy has found 500 PPR,s that are rented out. Looks like messers to me.NO DISPUTE . 
Then ask yourself. AIB has waited 3 years+ to check these NON-PAYERS?
Then ask yourself ,do you know any COMPENTENT business who would wait 3+ years to check.

FINALLY; Ask yourself , why trust stats from any Bank?

How many times are we going to give unquestionning acceptance to what these people peddle?
AGAIN I REITERATE ; I HAVE NO TIME FOR MESSERS.


----------



## Time

Fake P60's were always easy to obtain.

I still don't understand why they are accepted at face value by banks and other bodies.


----------



## commonsense

Delboy said:


> Only in Ireland.....
> 
> https://twitter.com/davidmurphyRTE
> 
> 
> And some will still argue that there's no strategic defaulters in this country




I don't think that' s the argument, David Hall accepts that there are SD's but he is saying that it is not the main issue. He is correct (and I am absolutely no fan of the man) I feell in this case, it is the bank trying to deflect and being allowed to deflect I might add.

Take a look at that statement above. What is shocking is that not one person asked the following questions:

1) Are the deposits actually in AIB? (Presume nothing).
2) How many of those 2,000 are in a formal restructure with the bank?
3) Why did AIB, in those negotiations, not use or insist that some (or all) of these deposits be used in the restructure?
4) If the 2,000 are not in a formal restructure then instead of dipping into these deposits (if indeed they are in AIB) why did AIB waste taxpayers money writing legal letters to them (if they are included in the "unresponsive" sector then this is what he said AIB did).
5) How many of the 2,000 are still employed and bringing in an income?

What's not shocking is what he said, what's shocking is what he didn't say and wasn't asked.


----------



## Gerry Canning

Commonsense; I am with you , 

Mr Duffy threw out an emotive statistic and let it hang out.
Your questions on the 2,000 make sense.

Why should we believe anything from a failed entity? In life would you believe people who had failed ? He was let spout out uncontested statistics.
He was let speak as though he could be trusted or believed.
He went home a happy man ,having been savaged by the sheep in the committee!


----------



## commonsense

Gerry Canning said:


> Commonsense; I am with you ,
> 
> Mr Duffy threw out an emotive statistic and let it hang out.
> Your questions on the 2,000 make sense.
> 
> Why should we believe anything from a failed entity? In life would you believe people who had failed ? He was let spout out uncontested statistics.
> He was let speak as though he could be trusted or believed.
> He went home a happy man ,having been savaged by the sheep in the committee!




To be honest, he's doing it because he's allowed to do it, nobody is asking the real questions.


David Duffy basically said that "some" of the deposits in the bank were compromised, think about that for a moment. 

Now I'm no banking expert, but it seems to me that Mr. Duffy wants to keep his deposits safe on one hand, but he's sticking his hand out to the taxpayer for more money to cover some of the losses that the bank (and those in arrears) can actually cover themselves.


Edit to add another question:

Re the 2,000 - how much money is involved?


----------



## Delboy

Gerry Canning said:


> ..............................................
> Delboy. If you read my comments I have NEVER said there are NOT strategic defaulters.
> I have always said I would go after messers.
> ......................
> My query is ,should we in any way trust selective picking of statistics?.
> . Mr Duffy has found 500 PPR,s that are rented out. Looks like messers to me.NO DISPUTE .
> Then ask yourself. AIB has waited 3 years+ to check these NON-PAYERS?
> Then ask yourself ,do you know any COMPENTENT business who would wait 3+ years to check.
> 
> FINALLY; Ask yourself , why trust stats from any Bank?
> 
> How many times are we going to give unquestionning acceptance to what these people peddle?
> AGAIN I REITERATE ; I HAVE NO TIME FOR MESSERS.



All the stats they put out yesterday were later submitted to the committee for review. You can keep saying why should we trust the banks but that just being emotive and not dealing in plain and simple facts.

You wonder why they have'nt moved on the 500 in particular....I say the plain and simple reason would be the political reaction from every gombeen politican in the country. Plus the media would go into overdrive...Ivan Yates was bringing up the famine last night on TV3 when talking about repossessions!!!
And the Dunne judgement was only very recently reversed which had stopped most repossessions in any case.


----------



## Cantalia

I agree with common sense above.
All AIB mortgages have an "all sums due" clause, if these people had deposits in AIB they can simple commandeer them to the mortgage in arrears. My guess is that they have checked with their colleagues in other banks and have established that Mr. Murphy has €10k on deposit in BOI. Not sure what the data protection people would have to say about that passing of info...... But it must be infuriating for a local bank to see a loan going into arrears knowing there are funds to meet it.


----------



## Time

They cannot touch the 10K held elsewhere.


----------



## Joe90

Could some of the funds referred to by Duffy be held in joint names, and therefore not be touched by AIB?  Say I held funds in trust for a child who was awarded funds from something like a court case, a bequest or an inheritance.  What about with an older, infirm relative who trusted me.  Do they seriously expect me to pay them the money that is my child's or that is being minded for a relative who is going to need full-time care in the future?


----------



## commonsense

Joe90 said:


> Could some of the funds referred to by Duffy be held in joint names, and therefore not be touched by AIB?  Say I held funds in trust for a child who was awarded funds from something like a court case, a bequest or an inheritance.  What about with an older, infirm relative who trusted me.  Do they seriously expect me to pay them the money that is my child's or that is being minded for a relative who is going to need full-time care in the future?




My understanding is that the money is on *deposit* and that this information came from the customer financial statements. 

In this case I doubt very much that a customer would put a childs trust/compensation award or a relatives money into their own financial statements.


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## Joe90

commonsense said:


> My understanding is that the money is on *deposit* and that this information came from the customer financial statements.
> 
> In this case I doubt very much that a customer would put a childs trust/compensation award or a relatives money into their own financial statements.



AIB never said that these funds were disclosed voluntarily.  Depends on how AIB did the search through their accounts for names and addresses of people in default, and how they define deposits. ...


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## commonsense

Joe90 said:


> AIB never said that these funds were disclosed voluntarily.  Depends on how AIB did the search through their accounts for names and addresses of people in default, and how they define deposits. ...




According to David Murphy, they were disclosed voluntarily: 


*"David Murphy*     ‏@*davidmurphyRTE*  3 Sep @*stuartfogarty* It is in the standard financial statements supplied by customers"


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## Gerry Canning

Delboy; 

You are correct things can,t in this Limbo. At least now we are getting to the starting blocks. Let us see how things pan out twix now and New Year.

Brendan: I am not 100% sure that Mortgage should always be paid before other debts, eg if customer got Credit Union Loan as Deposit.


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## commonsense

Gerry Canning said:


> Delboy;
> 
> You are correct things can,t in this Limbo. At least now we are getting to the starting blocks. Let us see how things pan out twix now and New Year.
> 
> Brendan: I am not 100% sure that Mortgage should always be paid before other debts, eg if customer got Credit Union Loan as Deposit.




I thought a 100% mortgage meant that no deposit was required? Am I wrong?


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## Gerry Canning

Commonsense. I phrased that poorly .
What I meant was I am not always sure the Mortgage should be 1st paid.( not a 100% Mortgage) 
Get away with nothing here !


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## commonsense

Gerry Canning said:


> Commonsense. I phrased that poorly .
> What I meant was I am not always sure the Mortgage should be 1st paid.( not a 100% Mortgage)
> Get away with nothing here !




Lol, did you edit it or did I read it wrong? Apologies. 


I disagree with you though, your mortgage/rent is the first priority and should be.


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## Gerry Canning

Commonsense;

No I didn,t edit it . 
You should agree with Gerry ,he is always right!
Ps. Mortgage/Rent should most times be prioritized but if you had a sick child etc. I accept hard luck case s make bad law.


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## commonsense

Gerry Canning said:


> Commonsense;
> 
> No I didn,t edit it .
> You should agree with Gerry ,he is always right!
> Ps. Mortgage/Rent should most times be prioritized but if you had a sick child etc. I accept hard luck case s make bad law.




My apologies so, I misread it. 

I still disagree. I think in this context a sick child and so on, is not the issue. It's where the borrower is in severe financial difficulties and cannot repay all of their debts and is possibly unlikely to be in a position to so in the future. For many people the mortgage is one debt on top of more. 

Some people are going to have to accept that we can go around all the houses, bring in all the proposals/solutions that we can, but ultimately some people are just so deep in debt that the best thing for them is to o let go of the house, renegotiate the debt and move on. Sooner rather than later.


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## Cantalia

Lets all go back to Little Dorrit and let's serve out our debt in time at the debtors prison. There simply has to be write downs for hopeless cases. I believe that in the fullness of time the ISI procedures will get to this point, how long it will take I don't know it could be many years.


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## commonsense

Cantalia said:


> Lets all go back to Little Dorrit and let's serve out our debt in time at the debtors prison. There simply has to be write downs for hopeless cases. I believe that in the fullness of time the ISI procedures will get to this point, how long it will take I don't know it could be many years.




Absolutely not and that is not what I said:

"let go of the house, renegotiate the debt and move on."

I don't believe there is anything to be served by people having a debt around their necks, how could they move on?


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## Conan

I find it amusing to hear Deputy Spring (former Anglo Irish banker) berating the various CEO's for their failure to give write downs. Yet another TD "grandstanding" for the sake of being seen to be hard on those awful Bankers. 
Write downs, interest deals etc are not just a cost to the nasty Banks, but ultimately a bill that taxpayers (Dep. Spring's constituents) will have to pay, since we own most of the Banks. On George Hook this evening, Dep. Spring was arguing that since Banks had made provisions in their accounts for mortgage losses that they should actually pass on these provisions to mortgage holders. That's the type of banking logic that got Anglo Irish - and us- into the mess we are in.
Listening to some Deputies - Pearse Doherty- they would seem to want write downs thrown around like snuff at a wake. If there is to be write downs then we must also see repossessions where the loans are entirely unsustainable. It cannot be only write downs.


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## Delboy

That Spring lad does'nt have a clue....he admitted it himself at 1 stage on George Hook that he did'nt understand some aspects of the banking system he was specifically questioning today!
Only in Ireland would you have quality like that on a parliamentary committee.

How high up was he in Anglo does anyone know?


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## dub_nerd

When challenged on RTE radio news at one today as to whether the banks could make extensive write-downs without needing further recapitalisation he said he was "not an expert at that level of detail". This is a guy who has just come from a Dail Finance Committee which has been interviewing the banks. What on earth _was_ he asking them?


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## dub_nerd

Karl Deeter:  Mortgages are Contracts -- they should be treated as such.


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## Bronte

Delboy said:


> She claims to have only put 12k aside since she stopped paying what's due, which I find hard to believe given it's 6 properties we're talking about here. And admits to using the rent to make up for the shortfall in her salary.


 
If you're original deal was interest only, which a lot of landlords had in the boom times, with the belief it would continue indefinitely, then suddenly the banks started demanding interest and capital the rents in no way matched the new repayments. In addition, all the hidden expenses of property ownership started to dawn on the new landlords. The NPPR, the new prsi, the PRTB, the costs of voids, the costs of repairs. All of these hit at the same time, combined with drops in salary, or one partner losing a job. So when the lady admints that she's actually using up rent to make up the shortfall in her mortgage it's easy to see how she'd have only 12K.

What she didn't admit I'd imagine is that 'subsidy' is not only to pay other debts but it's to keep up a certain lifestyle.


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## Bronte

so-crates said:


> I read that as saying they have identified 2000 customers who hold money on deposit in excess of the arrears they owe.
> 
> That part at least seems pretty unequivocal to me. They have identified people with the means to clear their arrears who are chosing not to and labelling them as strategic defaulters.


 
That is not at all clear to me, as my understanding of the 2000 customers with money saved, well it's ear marked for other bills as they become due.  And if they paid the mortgage, they might not be able to run a car, buy a car, pay any major bills that are due to be paid.  

It would make no sense for someone to have savings AND the ability to pay the mortgage to not pay the mortgage.


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## Bronte

Delboy said:


> AIB have found so far 500 mortgaged properties which were supposed to be PPR's but are now in fact rented out....and no payments have being made on them in 3 years+!


 
And I can inform them of another 2 that I know of.  But it's about 2 years not 3.


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## Delboy

Bronte said:


> ...It would make no sense for someone to have savings AND the ability to pay the mortgage to not pay the mortgage.



It might'nt make sense but there's no doubt it's happening...some people are looking for deals as they don't like the downside of their investment decisions


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## Bronte

Delboy said:


> It might'nt make sense but there's no doubt it's happening...some people are looking for deals as they don't like the downside of their investment decisions


 
If you can afford to pay how will you get a deal?


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## Bronte

commonsense said:


> , but ultimately some people are just so deep in debt that the best thing for them is to to let go of the house, renegotiate the debt and move on.


 
How about an example of someone with a 300K mortgage in a house worth 100K and they cannot afford 300K but they can afford 200K.  Would it not be better to write down the morgage by 100K to 200K rather than the forcing them to leave the house?

It would be different if you were in a house worth 500K with a mortgage of 600K that you are unable to repay, when you could live in a house that you could afford, and the bank could actually get something back out of the property and the borrower would be able to now deal with the shortfall of 100K plus costs.


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## Bronte

*Rent receivers*

Some people on here were mentioning that rent receivers are the answer to strategic defaulters. This to me might make sense where you have a block of many apartments, but not to individual houses with individual borrowers or someone with say 3 buy to lets in 3 different locations. The rent receivers are going to have to be paid, you can be damn sure the banks will hire the top billing receivers for this, and any trouble from tenants has to come out of rent, repairs will be by the most costly repair firms and the banks will end up with I'd say maybe 50% of the rent. If that.


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## commonsense

Bronte said:


> How about an example of someone with a 300K mortgage in a house worth 100K and they cannot afford 300K but they can afford 200K.  Would it not be better to write down the morgage by 100K to 200K rather than the forcing them to leave the house?




This could work if they mortgage holders are in employment for example. A split mortgage would be a very workable solution here. Not a write down though. 



Bronte said:


> It would be different if you were in a house worth 500K with a mortgage of 600K that you are unable to repay, when you could live in a house that you could afford, and the bank could actually get something back out of the property and the borrower would be able to now deal with the shortfall of 100K plus costs.



It depends on how much the mortgage holder could repay, whether or not they are in employment. If they could only repay a 300k mortgage then it makes better sense for all to sell up....


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## Bronte

commonsense said:


> It depends on how much the mortgage holder could repay, whether or not they are in employment. If they could only repay a 300k mortgage then it makes better sense for all to sell up....


 
Except if you're a professional of course.


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## commonsense

Bronte said:


> That is not at all clear to me, as my understanding of the 2000 customers with money saved, well it's ear marked for other bills as they become due.  And if they paid the mortgage, they might not be able to run a car, buy a car, pay any major bills that are due to be paid.
> 
> It would make no sense for someone to have savings AND the ability to pay the mortgage to not pay the mortgage.



My understanding is that the money is on deposit, not saved. The money is _greater_ than their arrears. 

Now personally if you are choosing to set aside money for bills as they fall due, major bills, to run a car or buy a car then you are "choosing" not to pay your mortgage. 

That is classic Strategic Defaulting.


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## Bronte

commonsense said:


> My understanding is that the money is on deposit, not saved. The money is _greater_ than their arrears.
> 
> Now personally if you are choosing to set aside money for bills as they fall due, major bills, to run a car or buy a car then you are "choosing" not to pay your mortgage.
> 
> That is classic Strategic Defaulting.


 
Well is it if you require a car for your job?  

How about a winter heating bill where there are children in the house?


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## commonsense

Bronte said:


> Except if you're a professional of course.


 

That won't wash with the banks. To be honest even if a "professional" was earning a lot of money, if he owed 600k mortgage on a 500k house then the best solution for the bank is to repossess the house, sell it for 500k and looking for the 100k back - as the person can afford it.

The bank get all their money back - no loss. 


House resold to someone who can afford it with a higher interest mortgage....


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## commonsense

Bronte said:


> Well is it if you require a car for your job?



The job that you have an income from as well as more than enough money in the bank to repay your arrears? 

Renegotiate with the bank - ok. But pay your arrears first.




Bronte said:


> How about a winter heating bill where there are children in the house?



Go into arrears with the ESB or Bord Gais.


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## Bronte

commonsense said:


> The job that you have an income from as well as more than enough money in the bank to repay your arrears?
> 
> 
> Go into arrears with the ESB or Bord Gais.


 
What if the bank tell you to pay the arrears and then your old car becomes unusable, how do you get another car.  

And what do you do if the ESB decide to cut you off for non payment.  

I don't consider these type of people to be stratetic defaulters, they are incapable of paying.


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## commonsense

Bronte said:


> What if the bank tell you to pay the arrears and then your old car becomes unusable, how do you get another car.


 
Buy a new one out of the balance left after you pay the arrears.





Bronte said:


> And what do you do if the ESB decide to cut you off for non payment.


You negotiate a repayment scheme with them - including your arrears.

But let's look at this another way. Would you consider it reasonable to have the money for the ESB and Gas and not pay it, rather put it in the bank for something else? 

You see there is a consequence with not paying your utility bills - but none (at the moment) for not paying your arrears.




Bronte said:


> I don't consider these type of people to be stratetic defaulters, they are incapable of paying.



You don't know that and are dismissing the fact that while they "may" not be able to repay the actual mortgage payment, they definitively can repay the arrears. 

A strategic defaulter is someone who makes the decision to stop making payments on a debt despite having the financial ability to do so. 

Now if this person was saving the money or putting it on deposit as opposed to repaying their mortgage and this money "exceeds" the amount of arrears, then this is actual proof that they had the ability to repay the mortgage.


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