Key Post How to negotiate with banks on your mortgage arrears

[ang1170]

Moved from another thread as this discussion has application to others beyond the original poster

Thanks Brendan/ Ang1170 for replies.

Tbh we took out a mortgage that we could just about afford, our financial situation worsened and we have tried to keep our head above water . We have contacted the bank at the first sign we began to struggle, remained in contact and never missed a payment at the agreed rate due.

Even if we voluntarily surrender or are re-possessed I would expect there to be an outstanding debt of around 80k which we would be liable for. With both of us luckily working we won't qualify for social housing so we would have to rent paying 800 to 1000 per month which is not affordable so I suppose we are heading for insolvency. It really is a very depressing situation .

I'd repeat my words of encouragement and support: try and be positive. You are far from being alone in this situation, and it looks (to me) that it is far from hopeless.

Brendan: don't get me wrong, I'm not advocating hold onto your present home at all costs, and expect a free ride from everyone else, including those who themselves are struggling. I'd agree the first thing that horatio1 should do is step back and assess do they really want to keep the house, and could they afford some restructured arrangement. From everything they've said, it seems the answer is "yes" to both of these, but if it isn't it may be best to give up the house (in a structured and agreed way, I should add).

A big mistake I made at the start was to assume the bank would act in a business-like way and have a degree of competence. I think you (Brendan) are too willing to make the same assumption.

Two examples of my own experience that should be useful to horatio1:

1. We luckily only had one other debt when trouble first hit (my partner's redundancy): a term loan with my partner's bank (with whom she'd banked with a perfect record for 20+ years, with both personal and business accounts). Before we ran out of our meagre savings, we approached both our mortgage provider (Danske) and the term loan provider (one of the so-called pillar banks). We said that we could not afford the repayments on the term loan, but could afford the interest and enough capital that would equate to extending the term to about 10 years (from the 3 left to run). Could they extend the loan to that? They'd get all their cash back (with a whole load more interest, due to the extended term). To me, it was a no brainer: the alternative was to kick off a chain of events where who knows what would happen, other than there was a high risk they'd get less than nothing (no loan, and a load of costs on their part). Answer: "no, we won't extend to more than 5 years". As I said, we had to go through multiple meetings and three levels of hierarchy to get them eventually to agree an 8 year term. I'm glossing over a lot here: their attitude was appalling. There was no sense of sitting down to resolve a problem to mutual satisfaction.

Lesson: don't assume banks will act in a reasonable way; set out some clear alternatives for them and use it to force them to a point where you can agree something. Document every single contact. Get help in dealing with them if you can.

2. Second example (sorry for rambling on, but I think my experience in these will be of some help and encouragement). It takes may hours of work, spread over a couple of weeks, to fill out the SFS and provide supporting documentation. You would think the bank would at least evaluate it with some degree of care. We did the vast bulk of our cut-backs with the first, so they are largely copied from one to the next. We were queried on why some particular line-item had gone up from one SFS to the next. It hadn't: both the individual item and the totals had gone down. I know mistakes can be made, but this was put into a formal letter that must have taken some time to prepare. You would think they would check.

Lesson: don't assume they are actually taking on board what you are saying, or even that they are competent in their assessment. The only thing that keeps me sane on this point is to keep pointing out explicitly to them exactly what horation1 has said: we have at all times kept to our agreed payments, have done everything asked and worked tirelessly to reach a resolution. I prepare this correspondence with the view that they may well at some point be seen by a third party (a judge?) who will have to decide the merits of our respective positions. The information now available on reasonable living expenses is a huge help here: we are below the figure, but even so have to keep pointing it out.

My own belief is that what we have is the worst of both worlds. The government have said there would be no general solution to the problem (you can argue whether this is a good or bad decision), but that people would be dealt with on an individual basis. My belief is that we claim to be doing this, but the reality is that people are dealt with using an absolute minimum of care and attention, and are in fact dealt with at a macro/general level. You really, really have to force them to deal with you in a business-like way (i.e. two parties working together to reach a mutually agreeable solution).

Sorry for ranting on this point, but all this does take its toll. It's certainly helped me to make these points by getting it off my chest, and I hope if offers some level of support and encouragement to the OP and anyone else in a similar position.

 

[Bronte]

Two examples of my own experience that should be useful to horatio1:

1.

Lesson:

2.

Lesson: .

That's a very informative post Ang1170. Very helpful, might be good in a key posts on how to deal with banks.

Two other lessons I got from your post.

3. If you want the term to be increased to 10 years, ask not for 10 but 15.

4. Better where your actual outgoings are less than the standard minimum, to bring them up to the standard minimum, but keep the savings in your drawer for unexpected costs.

 

[Buddyboy]

I second Brontes proposal to combine Ang1170s' two posts into a sticky on how to deal with banks. It is a very sensible, businesslike approach (that will go a long way if it every does come in front of a third party, e.g. judge).

 

[Brendan Burgess]

Hi ang

You had a tough time deaing with your bank.
Most of the people who post on askaboutmoney had a tough time dealing with their banks.
All of the people who go onto Joe Duffy had a tough time.

But that is a biased sample.

Many people have had a reasonably good experience of dealing with their banks on mortgage arrears issues.

According to a Central Bank report last year, 73% of those in MARP were positive about their experience.

But these guys don't often post on askaboutmoney.
They don't need to visit their TDs to tell them how nice the bank were to them
And Joe Duffy doesn't want to hear from them.

I have been surprised by the generosity of deals offered by banks as often as I have been surprised by the stupidity of the bank. I have told people that their mortgage is not sustainable, only for them to be offered a long-term interest only deal or a split mortgage. Of course, I have often seen mortgages deemed as unsustainable, which are clearly sustainable.

So my advice would be as follows:

1) Figure out what you want - be that a split mortgage, voluntary sale, interest only, etc.

Le's say that you want a split mortgage.

2) Think about it from the lender's perspective

What do I need to do to make this make sense for them?

3) Make the initial assumption that the mortgage lender will act reasonably but be prepared to abandon that assumption as the staff are often very poor and mess up.

4) Submit a propert Standard Financial Statement ( around 30% of people in arrears don't)

5) Reduce your expenditure to around 110% of the Insolvency Service's Reasonable Living Expenses.

6) Prioritise your mortgage if you want to keep your home

7) Deal professionally and firmly with your unsecured creditors such as your Credit Union and credit cards.

8) If at all possible, pay the interest in full to all creditors.

9) It makes no sense to be paying less than interest only on your mortgage while repaying an unsecured credit union loan in full. I tear my hair out when people complain to me that the evil mortgage lender won't split their cheap tracker but the borrower won't cut back on repayments to their credit union because their neighbour is on the committee.

10) Correspondence with the bank
Take all calls
If you miss a call, return it as soon as possible
Always get a name, contact number and email address of the person to whom you speak.
Grit your teeth - Be prepared to repeat your story from start to the new person who has not read your file.
Make a note of the call - the person, the time, what was said
Follow up with an email to them to confirm what was said.

I do not agree with asking the bank to conduct all their correspondence in writing. We are social animals and are much more likely to get a good result from talking to someone. By all means, ask them to confirm what was discussed in writing.

11) Recognise that this is a long, tedious frustrating process and remain calm.
Don't read the Riot Act.
But don't bend over backwards either.
You share a problem and you need to reach a solution together.
Remain calm and remain firm but not stubborn.

If the bank refuses to restructure your loan as you have asked ...

Get an independent view on it to sense check what you are asking for. A lot of borrowers are entirely unreasonable.

If the bank's offer is reasonable, but disappointing, accept it.

If the bank's offer is not reasonable, appeal it. If you have not already done so, use New Beginnings or The IMHO to help you.

If you lose your appeal

This depends on the situation. For example, let's assume that they insist that your mortgage is unsustainable and they want you to sell it. But you want to hold onto your house.

Don't just stop paying your mortgage.
Continue to pay as much as you can afford.
Write to the bank and tell them that this is what you are doing.

Your priority now is to make sure that you are way down their list of targets for repossession. This gives you time to recover.

Most repossessions up to now have been for people who have been paying nothing, and even then the banks find it very difficult to get an order for possession.

If you can show that you have engaged at all times, that you have tried your best and a file to show that you have acted responsibly at all times, they haven't a chance of repossessing your home.

 

[Brendan Burgess]

Dealing with your credit union

to be continued

 

[44brendan]

Even approaching this from a bankers perspective I fully endorse the levels of incompetence and inconsistencies that can arise in dealing with various banks (and sometimes in dealing with the one bank). Unfortunately it is largely a matter of luck as to whether your application is dealt with competently and professionally. I have some across cases where files have gone missing and decisions have been made with no real rationale behind them. As per Brendan B's posting above, when you commence dealing with the ASU section of a bank, be prepared to for an intensive scruitiny into all of your spending and a series of objections if the spend on certain items is out of kilter with the norm. Most staff are polite and reasonable, but sometimes it can become frustrating when you are asked why don't you buy your cornflakes in Aldi/Lidl instead of Supervalu! You will be asked to prioritise your mortgage over other payments and cutting down on external loan repayments is now becoming much more of a priority from the Bank holding the mortgage. It is essential that you respond promptly to all calls and correspondence. Nothing precipitates a change in action more than unanswered calls/correspondence!

 

[ang1170]

Hi ang

You had a tough time deaing with your bank.
Most of the people who post on askaboutmoney had a tough time dealing with their banks.
All of the people who go onto Joe Duffy had a tough time.

But that is a biased sample.

I don't disagree with pretty much everything you say in how you should deal with the banks, but I think there's still an undertone in your comments above that banks are generally OK to deal with and we only hear about the problem cases. I appreciate my own experience is a sample of one, but I don't believe it to be atypical.

Firstly, I didn't post to give out about the banks, but to offer support to someone who was dealing with them and say essentially: "this is what to expect, and here's some pointers on how to deal with it". In other words, I'm not one of life's complainers (not to disparage all of Joe Duffy's callers), but someone with direct experience of the situation and who can give some flavour of what it's like and one way of dealing with it.

I'm no expert in banking or finance, but have many years’ experience in business, including dealing with banks and raising finance from them and other sources. As I mention above, I naively assumed they would deal with personal debt issues in a business-like and professional way. Instead, I was genuinely shocked at how they managed someone who approached them about restructuring a term loan before it went into arrears. As I say, I don't think it atypical or the result of individual failings within the bank.

It's my belief that it is structural, deliberate and contrary to how the banks publicise how they are dealing with the issue. It is not accidental when it is next to impossible to get a meeting with anyone with any degree of authority; it is not accidental when junior officials write threatening letters and e-mails as a first rather than last resort: this is what they have been told and trained to do (or maybe they’ve all “gone rogue”?); it is not accidental when a detailed SFS that’s taken days to prepare is given only cursory examination.

Most of all, it is not credible to hear the banks claim they are dealing with people on an individual basis: information may flow to and from individuals, but the overwhelming sense one gets is that it goes straight to and from a bucket marked X or Y. That is, you are categorised and fed a steam of communication according to your category, not in response to what you are saying in return. Maybe given the volume of problem cases there are this is inevitable. As I say, though, I am not complaining, just describing my experience and saying “this is what to expect”.

A couple of final observations: it is a very unequal dialog dealing with the banks, and the protections that are there, weak as they are, are extremely valuable.

It’s hard for those not involved to appreciate the impact of the inequality in power between an individual and the bank, especially when you are told “we don’t do that”. It’s a bit like getting on a bus and asking the driver to make a detour from his normal route: you will be made to feel that it is just as likely for you to be successful in a request like that as it is for the bank to answer positively to what you are asking them. You are made to feel they are in the driving seat, they make the rules about where they go, and you have to toe the line. All I can say is to stick with it, and continue making a paper trail record of all communication that show your efforts and if they don’t come to a position you can live with that some third party (ombudsman or judge etc.) will side with you rather than the bank.

The other point is that the MARP, weak and one sided as it is (where are the sanctions for non-co-operating banks?) is hugely beneficial, especially when added to the information on reasonable living standards. I shudder to think what would happen if it were not there. I think it is an absolute disgrace the government won’t extend the protection, limited enough as it is, to mortgages that are sold. I can only assume it is because despite everything, they are still in thrall to the banks and their advisors. The government are there to work for the people as a whole: it is not in people’s collective interest to exclude some from the protection, even if certain transactions may yield a slightly lower return for them (itself a highly arguable contention).

 

[Brendan Burgess]

I think there's still an undertone in your comments above that banks are generally OK to deal with and we only hear about the problem cases.

That is my practical experience that they are generally ok to deal with. But the impression is given that they are all useless which is just not the case. The CB survey said that 73% of those in MARP were happy - even I was surprised by that.

It's my belief that it is structural, deliberate and contrary to how the banks publicise how they are dealing with the issue.

I think you are wrong that it is deliberate. They are inundated and don't handle stuff well, so maybe it's structural. But it's not deliberate.

It is not accidental when it is next to impossible to get a meeting with anyone with any degree of authority;

Of course it's not accidental.

May I remind you of what you said in the other thread

Try and avoid phone calls

There are plenty of well meaning people like you telling borrowers to avoid phone calls and some advise insisting that the the bank only deal with them in writing. It's practically impossible for the banks to get some borrowers to meet them. After writing to them, they have to give notice that they are calling out. And the borrower simply won't answer the door.

A couple of final observations: it is a very unequal dialog dealing with the banks, and the protections that are there, weak as they are, are extremely valuable.

I agree it's very unequal. The Code of Conduct and the Targets regime has effectively tied one of the bank's hands behind its back. That is why you have people, like the OP who kicked off this discussion, paying his unsecured credit union loan and not his mortgage lender and there is very little the mortgage lender can do about it.

It’s hard for those not involved to appreciate the impact of the inequality in power between an individual and the bank, especially when you are told “we don’t do that”.

I fully appreciate it. Bank employees have told me often that borrowers simply say to them that they can't pay the mortgage because they are paying off the credit union loan for the holiday or the car or the kitchen. The lender can often do nothing about it, other than issue an unsustainable mortgage lender. They don't like doing it , but they have to as a last resort.

It’s a bit like getting on a bus and asking the driver to make a detour from his normal route: you will be made to feel that it is just as likely for you to be successful in a request like that as it is for the bank to answer positively to what you are asking them.

Ask the 73% happy with the MARP. They didn't make an unreasonable request to the bus driver. They entered into discussions, in the context of MARP, with a bank, knowing that the bank had little real power to enforce it.

Why do you think arrears have shot up, when employment and interest rates have come down?

 

[ang1170]

That is my practical experience that they are generally ok to deal with. But the impression is given that they are all useless which is just not the case. The CB survey said that 73% of those in MARP were happy - even I was surprised by that.

A survey published by an organisation into the effectiveness of a process for which they're responsible? How meaningful is that? Part of the govt/CB narrative that says the problem is being dealt with: the evidence would suggest it's not.

By the way, it was my practical experience over many years that banks are OK to deal with. Hence my surprise verging on shock when it came to their behaviour on this issue.

I think you are wrong that it is deliberate. They are inundated and don't handle stuff well, so maybe it's structural. But it's not deliberate.

Deliberate in the sense that banks set up and control the structure. The front-line staff dealing with this are trained and resourced to act in a particular way, which they do.

Of course it's not accidental.

May I remind you of what you said in the other thread


There are plenty of well meaning people like you telling borrowers to avoid phone calls and some advise insisting that the the bank only deal with them in writing.

This was a piece of practical advice to get round the lack of competence and/or resources of the bank: you cannot rely on what they say on the phone as being accurate or anything they will stand over. To be honest, it's a pretty moot point: your chances of actually speaking directly with anyone with whom you can make any headway are practically non-existent.

It's practically impossible for the banks to get some borrowers to meet them. After writing to them, they have to give notice that they are calling out. And the borrower simply won't answer the door.

I can well believe that's the case, but I'm not talking about people who won't cooperate. My point relates to those who are trying to engage as positively as they can: they face an uphill battle, as they are not dealt with in a business-like way on the merits of what they say.

I agree it's very unequal. The Code of Conduct and the Targets regime has effectively tied one of the bank's hands behind its back. That is why you have people, like the OP who kicked off this discussion, paying his unsecured credit union loan and not his mortgage lender and there is very little the mortgage lender can do about it.

So: why wasn't the OP asked to reach agreement with the CU, before they were asked to surrender the house? Answer: because they are not being dealt with on an individual basis in a business-like way on the merits of their case. By the way, what exactly in the Code of Conduct would prevent a bank proceeding on the chosen course by someone who refused to stop prioritising other spending or loans? As for those who don’t engage with the process, they can be declared as not co-operating, and the bank start proceedings to repossess. How exactly are the bank’s hands tied?

I fully appreciate it. Bank employees have told me often that borrowers simply say to them that they can't pay the mortgage because they are paying off the credit union loan for the holiday or the car or the kitchen. The lender can often do nothing about it, other than issue an unsustainable mortgage lender. They don't like doing it , but they have to as a last resort.

As above, they can deal with it. According to the OP in this case, far from a last resort, this was something that came at the end of a period where they had done everything that had been asked of them.

Ask the 73% happy with the MARP. They didn't make an unreasonable request to the bus driver. They entered into discussions, in the context of MARP, with a bank, knowing that the bank had little real power to enforce it.

Three points here:

1. As above: how credible is a survey published by an organisation into the effectiveness of a process for which they're responsible? I’d be curious to see how many people you could get to give a positive view on dealing with banks from contributors to this forum.
2. My analogy was to give some sense of how one feels when trying to deal with a bank in a way they claim to deal with people (i.e. in a business-like way on the merits of the individual case), not in how they respond to unreasonable requests. The specific case I was thinking of was the example I gave of trying to extend the duration of a term loan, not an unreasonable request in the circumstances. The response was to say, this is not something we do, my hands are tied (by implication: by a very large organisation which has its rules and they don’t change for minnows such as you).
3. Far from little power, the bank has the overwhelming power in the relationship, and MARP does very little to constrain them. One can speculate on why they generally haven’t exercised it to date.

Why do you think arrears have shot up, when employment and interest rates have come down?

Maybe it takes a while for the full impact of reduced incomes to work through the system? How many people are there working for less than they were 5 years ago?
Brendan, I don’t think we’re that far apart. I’ve little doubt there are those who play the system; I’d agree that if people don’t engage, it’s not easy for the banks. Where we differ is that I think you’re a bit too willing to believe banks when they say that when you deal with them in a constructive way, you will get a positive result. My experience (and that of the OP in the original thread, which is what triggered my response), is that you don’t: the banks operate to a very narrow and selfish agenda, appear incompetent (my guess this is due to internal resourcing and structural issues rather than a reflection of individuals); you will face a very tough time getting a result from them; and the government and CB efforts are helpful but ultimately of little help (there are no sanctions for example). I’m not complaining about this, just pointing it out. I’m reminded of Aesop’s tale of the frog and scorpion – see http://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog

 

[Gerry Canning]

Point on taking phone calls.

Phone calls are poor at getting real results.
The caller is trying to get through their queries.
The recipient is too often stressed/panicking/fearful/unsure.
On the phone it is too easy to assume acceptance of offers/payments etc ,that in the heat of a phone call are unrealistic.
I would say to anyone taking a call ,that unless they are cool and clear about the call , do not take it and if they do feel stressed to respectfully ask caller to put call in writing and tell the caller, you as the customer finds it difficult to deal on the phone.
Too many phone calls are handled by poorly trained and poorly motivated staff.
Although that is improving.
In turning a phone call to writing , it gives caller and recipient time to properly assess.

 

[Bronte]

It's my belief that it is structural, deliberate and contrary to how the banks publicise how they are dealing with the issue.

I've listened to both sides on this thread and I'm in total and utter agreement with Ang. Especially the above bit. I too am in business, have family in business, and have many years experince and I'm fully convinced that the fault lies with the banks in most cases and that is it structural and deliberate. Before I ever ring or email or write to them I have to steal myself. Not all the time, but too many for it not to be deliberate. I've also encountered very friendly competent staff.

 

[ang1170]

I've also encountered very friendly competent staff.

Just to clarify one point I've made: I've referred to a couple of times about bank's lack of competence. This is very different from saying they are staffed by a bunch of incompetents. Most of my dealings have been with friendly polite and apparently competent people. I imagine the corporate lack of competence comes from organisational structure and resources allocated to those asked to perform particular functions. For example, if they aren't given the time to understand a particular set of customer's issues and previous communication, it's very difficult to appear competent when they start telling them things that contradict earlier correspondence.

 

[Bronte]

Ang bank on time for you to read this report from FLAC

http://www.flac.ie/

http://www.flac.ie/download/pdf/redressing_the_imbalanceexec_summary.pdf

They should have consulted you,

Point 5 in particular

5. Prioritising institutions over
consumers
The Central Bank is responsible both for
consumer protection and for ensuring the
stability of our financial institutions. Each
of these things is clearly important, but it is
our conclusion that the Bank is prioritising
the stability of institutions at the expense
of its consumer protection responsibilities​

in some respects.

 

[Dr.Debt]

I think Brendan is half right about banks being reasonable to deal with. In my experience having dealt with a lot of them, half of the banks are very pleasant and progressive to deal with. The other half are not, employ incompetent staff, have very poor processes and engage in endless amounts of tail chasing and duplication / triplication of effort. One of the biggest banks in this country is by far the worst of the whole lot. Dealing with them on any level is akin to herding cats

 

[Kine]

I think Brendan is half right about banks being reasonable to deal with. In my experience having dealt with a lot of them, half of the banks are very pleasant and progressive to deal with. The other half are not, employ incompetent staff, have very poor processes and engage in endless amounts of tail chasing and duplication / triplication of effort. One of the biggest banks in this country is by far the worst of the whole lot. Dealing with them on any level is akin to herding cats

It would be interesting who you think the good half vs bad half are! And the worst offender!

 

[Brendan Burgess]

I think Brendan is half right about banks being reasonable to deal with. In my experience having dealt with a lot of them, half of the banks are very pleasant and progressive to deal with. The other half are not, employ incompetent staff, have very poor processes and engage in endless amounts of tail chasing and duplication / triplication of effort.

Hi Dr Debt

Interesting analysis. I have thought that they were all unpredictable. There is no problem in your naming the ones which are good and the ones which are bad.

Brendan

 

[Kerrigan]

My OH works in debt management and I too have dealt with a lot of them.

BOI - Incompetent
ACC - No rational
PTSB - Rational
AIB - 50/50

 

[ang1170]

BOI - Incompetent

That's interesting - it was BoI who refused point blank to extend the term loan I mentioned above to a length that would make it affordable and threatening all sorts of dire consequences if we didn't stick to the original payments. It struck me as more than a little odd, given their colleagues up the hall were probably giving out about people prioritising unsecured loans. All this at a time when they were running ads on the TV saying how people should come and talk to them if they were in trouble and how they'd listen....

 

[Brendan Burgess]

That's interesting - it was BoI who refused point blank to extend the term loan I mentioned above to a length that would make it affordable and threatening all sorts of dire consequences if we didn't stick to the original payments.

I am confused. Did they not agree to extend it from 3 years to 8 years, but you wanted it extended to 10 years? This is how I understood your original post in this thread.

8 years is a long time for an unsecured(?) loan. The motivation to pay it reduces in time.

You haven't given all the details, so it's hard to assess. I think that the banks have agreed a protocol with the Central Bank whereby a waterfall will apply to unsecured credit. It's not that you pay big lumps of capital off your mortgage and pay nothing to the unsecured creditors. You try to pay both if you can through rescheduling, but you prioritise your home mortgage if there is a danger you might lose it.

In this thread Has anyone had a tracker mortgage permanently restructured? I tell the story of a Bank of Ireland customer who had a cheap tracker worth the value of his house split, although he was on social welfare. BoI were pleasant all the time, but the guy was very laid back and focussed on establishing a good advocate for himself in the local branch. It worked for him.

 

[ang1170]

I am confused. Did they not agree to extend it from 3 years to 8 years, but you wanted it extended to 10 years? This is how I understood your original post in this thread.

That was what they agreed to eventually, after a few weeks of persistence in the face of threats and refusals to meet, discuss or make an alternative proposal. As I said before, their attitude and behaviour was appalling. I suspect most people would long since have given up and consequently ultimately defaulted on an unaffordable loan.

They'd rather put layers of people trained to read off a script to stonewall and threaten people than let them engage with someone with the authority to make a reasoned decision based on individual circumstances.

I should say, by the way, that this was about two years ago: they may well have changed, though I'd be surprised.