I did meet them and made a short submission back in February. It was entirely ignored.
DFIN consultation - 15 Feb 2024
Strategic issues – long term issues - and not just tinkering with the system.
Three issues
- Reintroduction of Mortgage Interest Relief but as a Repayable loan rather than a SW payment
- Make it easier for lenders to repossess properties when people are paying nothing
- Change the Central Bank definition of Non Performing Loan
4% of accounts are over 90 days in arrears – in other words, 96% are not in arrears.
Reintroduction of Mortgage Interest Relief which I am calling RMAP – Repayable Mortgage Assistance Payment
If a renter can’t pay their rent, we means test them and give them HAP.
Why not do the same for mortgage holders? It’s arguable more important.
The old MIS Mortgage Interest Supplement was not fit for purpose.
- It was paid to the borrower and in many cases, they didn’t pass it on to the lender
- It was an employment disincentive
Instead of reforming it, it was scrapped.
I suggest using the same means test to pay Repayable Mortgage Interest Supplement.
Very easy to set up.
Very scalable.
Can be paid to people in positive equity
Would cost very little as the Exchequer would get most of it back.
In the UK, in 2018, Support for Mortgage Interest. When they changed MIS from a SW payment to a loan in the UK, only 20% of former recipients applied for it.
Make it easier for lenders to repossess properties where borrowers are paying nothing.
There are about 14,000 borrowers over 2 years in arrears – last year, there were 57 repossessions on foot of a court order in the last 12 months or less than 1 person in 200!
If borrowers are making genuine efforts to pay their mortgage, they should get full state protection – not that they need it because the lenders will willingly reschedule and restructure these mortgages anyway.
But some people are just financially irresponsible. Others pay nothing because they know that there is no sanction or that any sanction is ten years away. So if it’s a choice between paying their mortgage and going out on the town, they will go out on the town.
We have too many barriers in the way of lenders dealing with these.
- The lender must go through the MARP
- They must give a month’s notice that they will be classified as non-cooperating or unsustainable
- The borrower can then appeal this decision
- They must then give them notice that the CCMA no longer applies
- The bank must give notice that they are going to take legal action
- They take legal action
- They have to serve the notice on the borrower and anyone else potentially affected
- The first hearing is adjourned automatically to the next sitting
- The borrower can fight this for ages and then apply for Protective Order.
All the requirements and pitfalls and traps are imposed on the lender.
There should be a minimum payment requirement imposed on the borrower at all stages.
Make it easy to comply. But don’t tolerate 10 years of no payments.
Arrears is a terrible measure – it must be payments based.
At the court stage, to get an adjournment, the borrower should be required to show up in court and to agree to make minimum monthly repayments as determined by the Registrar.
At the MARP stage, it could be The MARP no longer applies after 6 months of missed payments or one year of payments of less than 1% of the balance outstanding. I am making it a very low barrier to comply.
This would benefit everyone
If an irresponsible borrower saw that the sanction was within months and not ten years away, they would act more responsibly.
If we reduce arrears, the interest rates will be lower for the 95% of responsible borrowers.
The Central Bank must change its definition of non-performing loan
The key measure should be profitability and not whether the loan is being paid in accordance with the original contract.
Two examples of this.
Just yesterday – interest only loan.
Take the split mortgage madness
Johnny has a €300k mortgage with ptsb and they warehouse €100k. So the Central Bank said it was an NPL and must be sold to a vulture fund.
Mary had a €300k mortgage with ptsb and was making all her payments in accordance with the contract, so the CB were deliriously happy with it.
But Johnny was paying the SVR of 4.5% and Mary was paying a tracker of ECB + 1%
The monthly repayments were the same. But of course, the split mortgage was much more profitable.
Ptsb was getting €3,000 interest a year from Mary, but 4.5% of €200,000 or €9,000 a year from Johnny.
But the CB forced ptsb to sell these to a vulture fund with disastrous results for ptsb who lost a very profitable book of business and for the borrower who has seen their rates rise to 9% with Pepper.
And Pepper is laughing all the way to the bank. In many cases, they have moved money from the warehouse to the active mortgage and pushed the rate up to 9%.
This is all due to the CB’s nonsensical definition of what a non-performing loan is.
That must not happen again.
Whoever has to fix these definitions should do so – it that is the CB, the ECB or the Basel Committee.
