For the reasons set out in the subsequent paragraphs of my previous post?
Key Post "Why borrowers should not fear repossession courts"
- Thread starter Brendan Burgess
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For the reasons set out in the subsequent paragraphs of my previous post?
Sophrosyne
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I cannot see anything in those paragraphs to rationalize expediency over justice or why you regard the proposals as unconstitutional.
epicaricacy
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I would advise anyone who has a lump sum to carefully consider any decision to hand it over to the bank in lieu of arrears. My wife and I paid a mortage north of 300K in full for 16 months (20K) after we were made redundant.
As soon as our money was depleted we entered the 12 month MARP period and at the end of the 12 month period - even though we never missed a restructured payment, which amounted to a little less than the full interest amount - we were informed that the bank had deemed our mortage unsustainable and that we needed to sell the house on the bank's behalf. In addition to them finding our mortage unsustainable, they informed us that we would have to pay the full monthly repayment of 1100 throughout the sale process.
After we had completed the sale on behalf of the bank, the bank wrote to us with a repayment schedule over 27.4 years that amounted to an additional 90K in interest on top of the full shortfall!!!!
Is it any wonder that people are building up survival funds as opposed to handing it over to the banks? If I had my time back I would have played it differently.
Re. David Duffy's appearance - did anyone really expect anything else besides a 'divide and conquer approach'? It's the oldest trick in the book. Turn customer A (SVR rate holder) against customer B (struggling to pay mortage) to deflect from their own exploitative practices.
Come on - are we really swallowing this convenient narrative hook, line and sinker? I thought we should have learned at this stage to take what bankers have to say with a pinch of salt? It certainly seems as if Brendan Burgess is taking some of the 'information' given by Duffy with a pinch of salt e.g. AIB's SVRs in the North, whilst taking other statements (which conveniently back up his 'empirical evidence) as being factually accurate. One can't have it both ways! I certainly don't accept that Duffy's 'story' provides further 'proof' re. prevalence of strategic defaulters.
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breakonthru
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Yes, to a point..
Banks sole purpose to increase profits and distribute same to shareholders after costs and staff total compensation is paid (AKA ridiculous salaries for 'top brass' and associated egregious 'bonus' culture).
To think that 'for-profit' banks as an institution - have any moral / social interest in their mortgage holders - is a sad but blind mistake.
As such, one must deal with them in as a cold manner as they treat their mortgage holders.
I do hope other forum readers learn from your experience and adjust their strategy when dealing with their arrears dept etc..
___
In my own situation the bank has been informed by letter, email and 'phone that until I am in receipt of 'sufficient income' - i will not pay one cent towards capital repayment - and only 'interest' payments will continue until that time.
I have also stated that all correspondence be directed to my nominated Personal Insolvency Practitioner - who will keep a record of said correspondence and keep me informed of any developments.
If the bank is not happy with all the above - they can go ahead and begin legal proceedings which i will drag out as long as possible to increase their costs..
Once one is in a position to face bankruptcy - and happily go through with it - then a lot of fear falls away..
(It also helps to put aside some income for if / when they place 'Payment Orders' post adjudication!)
Well, I gave my opinion that the proposal was completely impractical because the Circuit Court was already overwhelmed and would not have the capacity to make determinations on the basis suggested. I did not, and would not, attempt to "rationalize expediency over justice" in any circumstances.
On the constitutional point, it seems to me that in order for the proposal to have any practical application, the Court would ultimately have to be in a position to void or set-aside a mortgage contract. Otherwise why would a lender not simply enforce its security where it disagrees with the Court's determination as to what is "fair"? I think it is almost certainly the case that any such voiding of a mortgage would constitute an unjustifiable attack on constitutionally guaranteed property rights. In particular, I don't see how any such voiding of a mortgage could be justified on social justice principles or the exigencies of the common good.
Aside from the above, I personally have a difficulty in principle with any proposal whereby a tribunal of any type can substitute its own subjective view as what is "fair" for the terms of a contract concluded between two consenting parties.
It's certainly not surprising to me. It seems obvious to me that deciding to withholding funds that could otherwise be applied to discharge pre-existing contractual obligations will often be a rational and understandable decision at an individual level. However, there is no getting away from the fact that it is still a strategic default (i.e. a case of "won't pay" rather than "can't pay"), albeit one that is motivated by fear rather than greed. Describing a default as strategic is not a value judgement - it is simply a statement of fact.
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Gerry Canning
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Sarenco,
I wonder how many of the Strategic Defaulters are in this type of situation, ie making a pragmatic contract breaking decision.
More importantly how many of these Strategic Defaulters would come back on board if they saw hope?
I wonder how many of the Strategic Defaulters are in this type of situation, ie making a pragmatic contract breaking decision.
More importantly how many of these Strategic Defaulters would come back on board if they saw hope?
I've no idea Gerry. David Duffy suggested that around 20% of all defaults on AIB's non-performing mortgage book were strategic in nature and presented some details (quoted in my earlier post) to back up this assertion.
Similarly, I've no idea how many strategic defaulters would adopt a different approach in different circumstances. However, I would have no doubt whatsoever that the level of non-performing loans would be considerably lower if the consequences of defaulting were more immediate.
epicaricacy
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I'm not talking about massive amounts here Sarenco. I remember listening to Boucher a few years ago on some RTE current affairs programme and he alluded to someone with an amount of 10K in his / her bank account as being a strategic defaulter. I'd like to see how Boucher would act - in some parallel universe - if he was down to his last 10K (which equates to his current weekly salary)
People holding small lump sums - when in receipt of social welfare / low wage - are not 'strategic defaulters'. I'm not sure that any mortgage contract explicity states that someone needs to hand over every cent that they have to the bank to 'discharge pre-existing contractual obligations'. What about if something serious (e.g. timing belt) happens to a (necessary) family car? What about paying large utility bills? Emergency dental work - not covered by the medical card i.e. basic fillings, root canal etc? How are they supposed to pay for a PIP - e.g. Steve T quoted £5K (6973 euros plus court fees of £1500 (2091 euros)) for my wife and I to bring us through UK bankruptcy in April 2013?
Is it really practicable to expect people to risk everything to pay their mortgage? Furthermore, is it reasonable to then label them as being 'strategic defaulters'?
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A strategic defaulter is simply a borrower who is in a position to make a scheduled loan payment but decides not to do so (whatever the motivation). Again, it's not a value judgment (or a label to use your phrase) - it's simply a description of the circumstances of the default.
As I understand it, in your own circumstances you decided to continue making mortgage payments out of a redundancy lump sum. You have said yourself that if you had your time back you would have played things differently. Presumably you would have held onto the cash and stopped making payments on your mortgage and, with hindsight, that would have been the better strategy from your perspective. However, there's no getting away from the fact that in doing so you would have been a "strategic defaulter".
Again, I have no ethical or moral issue with anybody deciding to stop repaying their mortgages where they decide that that would be in their best interests. My difficulty is with any policy or practice that facilitates or encourages such behaviour. I fully appreciate that you disagree with this position.
epicaricacy
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Hi Sarenco
My strategy would not have been to 'stop paying' - rather it would have been to approach the banks sooner (when I still had a lump sum) to come to an arrangment to pay (full) interest only for a longer period of time - thereby giving us a longer period in which to 'recover'. I doubt if someone paying interest only could be considered a strategic defaulter. Unfortunately, during the MARP period we were not able to make the full interest repayments (even though we paid the agreed restructured amount every month) as we'd blundered in paying the full amount (capital plus interest) for 16 months.
My strategy would not have been to 'stop paying' - rather it would have been to approach the banks sooner (when I still had a lump sum) to come to an arrangment to pay (full) interest only for a longer period of time - thereby giving us a longer period in which to 'recover'. I doubt if someone paying interest only could be considered a strategic defaulter. Unfortunately, during the MARP period we were not able to make the full interest repayments (even though we paid the agreed restructured amount every month) as we'd blundered in paying the full amount (capital plus interest) for 16 months.
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Sophrosyne
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If I am in mortgage arrears, whether I am a strategic defaulter or not is irrelevant. Whether my case was adjourned on my first court appearance is also irrelevant.
The fact that certain people who the banks claim have never engaged and who paid nothing for 6 years, is also a distraction. This was probably down to the banks’ uncertainty after the Dunne judgment, until the uncertainty was removed by The Land and Conveyancing Law Reform Act 2013.
Post the 2013 Act, if I do not engage and pay nothing or make token payments, I will lose my home.
The real issue is the perception of sustainability. Brendan has already touched base on this. One bank might conclude that my mortgage is sustainable while another might not. One might work with proposals either my advisors or I put forward, another might force me to sell or face repossession.
My bank has the final say on “sustainability” or what is “reasonable” before legal proceedings are initiated.
There have been cases where the High Court refused to grant orders of possession. In the case of Irish Life and Permanent v Duff, the lender refused an offer of interest only payments by the borrower. Hogan J concluded that this was a failure to comply with the Code of Conduct on Mortgage Arrears (CCMA). He considered the lender’s duty to make every reasonable effort to come to an alternative arrangement.
I am open to correction, but as far as I know, although this was a breach of the CCMA, the Central Bank did nothing about it.
The borrowers had to go all the way to the High Court to prove the bank acted unreasonably.
Surely this process should be accelerated by creating a different route.
The fact that certain people who the banks claim have never engaged and who paid nothing for 6 years, is also a distraction. This was probably down to the banks’ uncertainty after the Dunne judgment, until the uncertainty was removed by The Land and Conveyancing Law Reform Act 2013.
Post the 2013 Act, if I do not engage and pay nothing or make token payments, I will lose my home.
The real issue is the perception of sustainability. Brendan has already touched base on this. One bank might conclude that my mortgage is sustainable while another might not. One might work with proposals either my advisors or I put forward, another might force me to sell or face repossession.
My bank has the final say on “sustainability” or what is “reasonable” before legal proceedings are initiated.
There have been cases where the High Court refused to grant orders of possession. In the case of Irish Life and Permanent v Duff, the lender refused an offer of interest only payments by the borrower. Hogan J concluded that this was a failure to comply with the Code of Conduct on Mortgage Arrears (CCMA). He considered the lender’s duty to make every reasonable effort to come to an alternative arrangement.
I am open to correction, but as far as I know, although this was a breach of the CCMA, the Central Bank did nothing about it.
The borrowers had to go all the way to the High Court to prove the bank acted unreasonably.
Surely this process should be accelerated by creating a different route.
Ah, understood and apologies for my presumption.
Meeting rescheduled or reduced payments on a modified loan agreement is definitely not a default - strategic or otherwise. However, I think your caution to others regarding the use of a lump sum stands.
As an aside, I would echo breakonthru's comment that others could benefit from your experiences. If you had the time, it would be great to see a list of your practical tips for people in financial distress or, if you had to repeat the process (God forbid!), what you would have done differently.
Brendan has been arguing for some time that the Central Bank should issue guidelines as to what it considers to be a sustainable mortgage from a borrower's perspective. This would provide a base-line for the purposes of borrower/lender negotiations and would seem to me to be an entirely appropriate approach.
On another thread 44brendan told us how the bank that he works for determines sustainability. While people can reasonably disagree as to how this might be formulated, I would suggest that there is a compelling case for some guidance from the Central Bank in this regard.
In fact, I would go further and suggest that Central Bank's resolution targets are somewhat meaningless if the Central Bank is not prepared to provide guidance on what it considers to be a sustainable mortgage.
However, this is quite different to setting aside a lender's property interests and nominating a third party to determine what is a "fair" resolution between the parties.
I would also suggest taking a cautious approach in terms of drawing any broader conclusions from the line of cases following the Dunne judgement. These cases were all determined in the context of a particular statutory provision/lacuna which has now been amended/resolved.
Brendan Burgess
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Hi Sarenco
Just one clarification - I want to see a definition from both the borrower's and the lender's point of view. For example, interest only on a cheap tracker would be very sustainable for the borrower, but not for the lender.
I looked at a letter from Bank of Ireland yesterday which said the following:
This is a mortgage of €200k @ 4.5% SVR on a family home worth €150,000. The borrower has paid the interest in full for the past three years and will be able to continue to do so for the foreseeable future. Unfortunately, he won't be able to pay any more for the foreseeable future.
So they are earning €9,000 interest on this at the moment. If he agrees to a voluntary sale, they will lend on the €150,000 at probably 4% and earn €6,000. This makes absolutely no sense.
I was speaking to another lender yesterday about this and they said that they would consider this sustainable, but the Central Bank classifies it as unsustainable, so they would do exactly the same as Bank of Ireland, because they have no choice but to meet the Central Bank targets.
So, in this case, he is going to lose his home and have to rent an inferior house for the same money. He will have a €50,000 shortfall hanging over him forever. Bank of Ireland will have reduced assets.
But the Central Bank will be happy because BoI are reaching their target for offering "sustainable solutions". It's bonkers stuff.
For me, it's frustrating. I can see the right answer, but I can't convince the Central Bank.
But for the borrower, it's devastating.
Gerry Canning
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If you are on Job Seekers Allowance(JSA) I understand you are allowed to have k20 in savings before your JSA is reduced.
However should a PAYE person wish to retain some (rainy day funds) he is a strategic defaulter.
Brendan,
Frustrating is nowhere near strong enough.
The Central Bank who failed us ,continue to make good reasons why even honourable people become (strategic ) defaulters, and give Banks good reasons to whinge about said defaulters.
Worse, Banks can use Central Bank rules ,as your example shows, to frighten people.
You couldn,t make this up , but they did!
However should a PAYE person wish to retain some (rainy day funds) he is a strategic defaulter.
Brendan,
Frustrating is nowhere near strong enough.
The Central Bank who failed us ,continue to make good reasons why even honourable people become (strategic ) defaulters, and give Banks good reasons to whinge about said defaulters.
Worse, Banks can use Central Bank rules ,as your example shows, to frighten people.
You couldn,t make this up , but they did!
So 3,500 not paying anything for years can afford to pay but are choosing not to. But they are racking up arrears and adding costs and making their mortgages worse.
The question should be asked:
Why are they defaulting
Would it be because the NE was so large and they though what the hell nothing to lose
What were they doing with the money in the meantime
Probably paying off other debt
What costs are adding to the mortgages of defaulter, or are banks ignoring that for now, get them back on track and add the costs on towards the end of the mortgage as in here's the 20K bill for arrears, interest on arrears, legal costs etc.
A year is nothing, I've a sibling in default for nearly 3 years and with a defense, having a defense (crazy stuff) makes it take longer. As far as I can tell they are past the registar stage, to the judge stage, in the past week they never saw so many people in the courts before for debt (old hands now at courts in different parts of Ireland) so many judge called for another judge to divide the list, then put cases that were difficult off to Court Difficult (it has a number but I don't want to identify) and so it goes on and on and on. On top of that the judges don't have time to deal with all the cases so everything basically gets adjourned all the time.
Care to share your defence, by PM if necessary.