Key Post "Why borrowers should not fear repossession courts"

[Sarenco]

Stephen Donnelly put it to Ritchie Boutcher at the Oireachtas Finance Committee hearing earlier this week that a repossession order was granted in the Bray Circuit Court two weeks ago, notwithstanding the fact that the borrower in question had made a repayment the previous month in excess of the relevant interest amount.

Unfortunately I don't have any further details but, if true, it would suggest that making partial mortgage repayments will not always successfully ward off a repossession order.

 

[ClubMan]

the borrower in question had made a repayment the previous month in excess of the relevant interest amount.

if true, it would suggest that making partial mortgage repayments will not always successfully ward off a repossession order.

There's no doubt that making partial repayments will not always be successful regardless of this case.
But in this specific case one would need to know more about the previous history of repayments and the wider context of the borrower's circumstances before drawing any conclusions.
You can't really generalise from such sparse details.

 

[Sarenco]

There's no doubt that making partial repayments will not always be successful regardless of this case.
But in this specific case one would need to know more about the previous history of repayments and the wider context of the borrower's circumstances before drawing any conclusions.
You can't really generalise from such sparse details.

I agree that we can't generalise but Brendan made the point there were no reported cases of a borrower making partial payments that was subject to a repossession order. This would appear to be the first such reported case (at least that I am aware of) and, in my opinion, is at least worth noting.

I agree that we would need more details to draw any wider conclusions but at a minimum it would appear to confirm my initial view that it is probably dangerous to suggest that making partial payments will always be a successful strategy.

 

[Brendan Burgess]

Hi Sarenco

Coincidentally, I was in the same court as Stephen, and here are my notes from the case:

Solicitor: We received an email from the borrower saying that her daughter was doing her leaving cert.


Registrar: If this order is not granted, it will escalate out of control and the situation will become hopeless. The borrower has 8 months to engage with the lender


BB’s comments


If she bought in 2009, she probably is not in big negative equity. She emailed the bank but did not turn up in court.


A mortgage of €182k@4.5% would cost around €700 a month in interest. We know nothing about her case because she did not show up in court. But assuming she is on social welfare, it would make much more sense for the government to pay Mortgage Interest Supplement than rent supplement.


Taking the 6 years of the mortgage as a whole, she has paid most of the interest. Of course, she may have paid down the loan in the early years and fallen behind in the last few years.

My notes say that the repayment was in October. But things move fast, so I could have been mistaken and it might have been in March. I do have sense that the repayment was "recent" but in most of the cases, the last repayment was before 2012, October would qualify as recent.

In any event, it was clearly a single payment and not any indication of a borrower paying anything regularly.

Looking back at my notes now, the repayment of €582 seems very low for an SVR loan.

She would have had the full MARP open to her.
The lender would have had to wait at least three months after she exited MARP to initiate legal proceedings.
At the first court hearing - maybe 9 months after leaving MARP, the case would have been automatically adjourned whether she showed up or not.
This was at least the second hearing. And she did not show.

And this case illustrates what is wrong with Government policy. Bank of Ireland has done all it can for this woman. Shouting at the banks for not addressing the problem isn't helping. This woman should be the target of the initiatives and criticism. If she does nothing for herself, no one else can help her.

For the record, Bank of Ireland has

• 20% of the mortgage market
• 10% of the arrears over 9 months
  
• 6% of the cases before the courts

Brendan

 

[Brendan Burgess]

Here is what Stephen said at the Oireachtas Finance Committee

"Two weeks ago I spent the morning in Bray Circuit Court. One of the repossessions granted
was sought by Bank of Ireland. The lawyer representing the bank admitted in court that repayment
had been made the previous month. My understanding is that the amount was above
the level of interest. The payments of the mortgage were occurring and mortgage arrears had
built up in 2014. I know Mr. Boucher does not have the specifics of that case in front of him
and he cannot comment on it yet it appears blindingly obvious that Bank of Ireland is moving
to repossess houses when all other options have not been exhausted and when borrowers are
making payments. What does Mr. Boucher say to that?"

The payments of the mortgage were occurring and mortgage arrears had built up in 2014.

The solicitor for the bank did say something about the mortgage arrears having been built up in 2014. This made absolutely no sense.

A mortgage of €182k @4.5% with 20 years remaining has a monthly repayment of around €1,000, of which, €700 is interest.

€23k arrears represents 2 years' payments. So she has either paid nothing at all for two years or paid half the mortgage due for 4 years.

If full payments of the mortgage had been made in 2014, then the mortgage arrears did not arise in 2014.

If she had been paying the interest, then her shortfall would have been only €300 per month, so it would have taken 6 years to accumulate this level of arrears.

Brendan

 

[Sarenco]

Thanks for the follow up detail Brendan.

Just to be clear, I am not suggesting that the repossession order was inappropriate in the circumstances of this case - I am simply saying that making partial loan repayments outside of a restructured loan agreement may well prove to be a bad decision for a defaulting borrower.

 

[Brendan Burgess]

I am simply saying that making partial loan repayments outside of a restructured loan agreement may well prove to be a bad decision for a defaulting borrower.

Interesting point.

If they are in positive equity, then making payments will never be to their disadvantage.

If they are in negative equity, paying a token amount will probably not work.

But if they are in negative equity and want to keep their house, a payment of something meaningful will probably keep them in the house for a very long time.

Brendan

 

[Sarenco]

Hi Brendan

The lesson I would draw from this case is that a borrower in arrears should be very cautious about making any payments to their lender outside of a restructured loan arrangement.

I would have thought that this lesson would apply equally to defaulters in positive and negative equity (although certainly more restructuring options may be available to those in positive equity).

It seems to me that it is probably unwise for a distressed borrower to make a unilateral decision as to what constitutes a material payment. For a distressed borrower, a payment equal to or greater than one month's interest may well be meaningful in terms of that borrower's resources but it may not be meaningful from the lender's perspective.

It really all comes back to the same point that borrowers in arrears should engage with their lenders. If the loan can be restructured in the interests of both parties, well that's obviously ideal. If the loan is unsustainable from the lender's perspective then it cannot be restructured and, in those circumstances, making partial payments will, at best, simply delay the inevitable. I would have thought that it would be in everybody's interests to recognise this reality and arrive at a resolution that allows the lender to realise their security interest and enables the defaulting borrower to start afresh.

 

[demoivre]

It really all comes back to the same point that borrowers in arrears should engage with their lenders. If the loan can be restructured in the interests of both parties, well that's obviously ideal. If the loan is unsustainable from the lender's perspective then it cannot be restructured and, in those circumstances, making partial payments will, at best, simply delay the inevitable. I would have thought that it would be in everybody's interests to recognise this reality and arrive at a resolution that allows the lender to realise their security interest and enables the defaulting borrower to start afresh.

Borrowers would be well advised imo to wait and see what the imminent announcement by government relating to arrears/ insolvency /bankruptcy throws up. A PIA that can't be pushed through at the moment, for example, may well be workable in a few months time, depending on what the legislators decide.

 

[Sarenco]

Borrowers would be well advised imo to wait and see what the imminent announcement by government relating to arrears/ insolvency /bankruptcy throws up. A PIA that can't be pushed through at the moment, for example, may well be workable in a few months time, depending on what the legislators decide.

Fair enough but the decision may well be taken out of a defaulting borrower's hands if the lender is seeking a repossession order in the meantime.

As an aside, I thought it was interesting that the Finance Committee heard evidence last week that Ulster Bank have only voted against 5 PIAs (out of a total of 100) and Bank of Ireland have voted against 18 PIAs (out of a total of 243). It seems to me that the oft-cited "bank veto" is not as big an issue in arriving at sustainable solutions to mortgage arrears as certain commentators would have us believe.

 

[breakonthru]

very cautious about making any payments to their lender outside of a restructured loan arrangement.

My take - being a "strategic / delinquent defaulter"; is that payments at least equal to 'interest only' should be paid regardless of one's situation re: equity in property (negative or positive).

I would hold out 'anecdotally speaking' - that IO payments to lender are FAR less onerous then 'rent payments' on similar properties next door (but with all the added benefits / protections that 'home ownership' provides.)

Making IO payments 'on time - each month' regardless of what the lender insists, results in -

a) more disposable income and thus a better standard of living.

b) less hassle from the banks (i.e. 'SFS requests' and whatnot). But they won't move on reposession when their focus is on 'the others' who are paying 'nothing' and thus, are targeted fIrst..

C) propable extra benefits when the new 'mortgage arrears proposals' are enacted.

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Proviso
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The above is really directed to those PDH owners who've paid little capital since they took out their 98% / 100% loan during Celtic Tiger years.

It's for those who've made minimal capital repayments..

 

[Sarenco]

That's certainly an interesting perspective.

I hadn't realised that banks had given up looking for scheduled principal repayments. However, I would query how a borrower that never pays off their mortgage ever becomes a home owner.

As I've said before, I have absolutely no problem with strategic defaulters - it's a perfectly rational response to our dysfunctional system.

The fact that the rest of us are paying for the cost of capital for strategic defaulters through higher cost of credit (SVRs, business loans, etc), higher bank charges and lower deposit rates should be of no concern to a strategic defaulter.

If we are not prepared to change current policies re mortgage arrears then we have no real cause to complain.

 

[Bronte]

My take - being a "strategic / delinquent defaulter"; is that payments at least equal to 'interest only' should be paid regardless of one's situation re: equity in property (negative or positive).

I would hold out 'anecdotally speaking' - that IO payments to lender are FAR less onerous then 'rent payments' on similar properties next door (but with all the added benefits / protections that 'home ownership' provides.)

Making IO payments 'on time - each month' regardless of what the lender insists, results in -

a) more disposable income and thus a better standard of living.

b) less hassle from the banks (i.e. 'SFS requests' and whatnot). But they won't move on reposession when their focus is on 'the others' who are paying 'nothing' and thus, are targeted fIrst..

C) propable extra benefits when the new 'mortgage arrears proposals' are enacted.

---------
Proviso
______

The above is really directed to those PDH owners who've paid little capital since they took out their 98% / 100% loan during Celtic Tiger years.

It's for those who've made minimal capital repayments..

How to get around the system. Helpful no doubt to many people. When they do get to you, you have an exit strategy presumably, care to share it?

 

[demoivre]

Fair enough but the decision may well be taken out of a defaulting borrower's hands if the lender is seeking a repossession order in the meantime.

If the premise of this thread is correct that shouldn't be an issue but be in court when your case is called or be represented !

 

[Brendan Burgess]

Great article by Nicola Anderson in today's Irish Independent

Few in court to argue on repossessions

With 120 repossession orders up before the court, the number of anxious faces in the benches were surprisingly few and far between.

...In fact, just 12 people facing the devastating loss of their home had lodged a defence.

Meanwhile a woman from Co Wicklow was representing her son yesterday.

She was jubilant after getting a six-month adjournment on his repossession order.

So turning up in court is good. Having your mother to represent you is even better.

 

[Sarenco]

I assume she meant the repossession hearing was adjourned for six months. A stay can be granted on the execution of a repossession order but it can't be adjourned.

I'm not sure that piece really adds anything to the sum of human knowledge TBH.

 

[Brendan Burgess]

Hi Sarenco

Most articles claim that there are 11,000 people facing repossession by the big bad banks.

Nicola points out that the majority are not even concerned enough to show up.

Good point about the adjournment. I would be fairly sure that the case, and not the order, was adjourned

Brendan

 

[petey]

Sample case study:
I was representing myself in the four courts relatively recently, facing an application by the bank for final orders of possession, after missing the first hearing earlier this year.

By the time my case came around (50something in the list) the vast majority had been adjourned with three or four granted repossession, usually by consent.
From what I could hear, EBS's solicitor didn't apply for repossession in any of their cases in front of mine (about 9 or 10 cases) and quite often seemed to actually apply for an adjournment on behalf of their own customers in various states of default (I couldn't quite hear properly but I think this was happening.)
One other defendant had a solicitor to represent them and no defendant before me in the list attended.

Some brief facts about my case:
Our joint mortgage was taken out in 2006/2007 for between €350,000 and €400,000.
Our payments had been reducing since 2010/2011 when we both lost our construction jobs.
Deemed unsustainable in 2013 and nothing paid since then.
Current arrears of between €50,000 and €60,000 and very little ever got to be paid off the capital too.

Basically, I briefly explained to the Registrar that a decent proposal (>70% of what monthly repayments should be) was made to our bank by one of the mortgage assistance agencies but not in time enough for the bank to assess it and thereby cancel or adjourn or continue with the final order for repossession in front of the court.
This naturally appeared to the Registrar as if we had been kicking the can down the road and her displeasure was palpable.
I began to sweat and stammer and as she was looking at our case, I wasn't sure about whether I should launch into the history of our situation and why our proposal to the bank was so late. I believed I had reasonable and rational explanations as to why we had found ourselves there at the 11th hour but began to feel like the star in the worst best man speech ever, so just kept schtum.

There were a couple of ominous silences when I didn't offer an explanation for our situation but thankfully, she didn't ask us for our personal circumstances or why we had left it so late (and I would appreciate the same from this forum) but warned that when the adjourned date comes around, we had better not have just previously issued a proposal, like we had done on this occasion.

This was a few weeks ago. I haven't heard anything back from the bank yet about our proposal but I've been walking on air ever since, and paying off >70% of our monthly repayments, which will continue at least till the adjourned date.