Too many mortgage arrears deals fail, say experts

Leading mortgage experts have raised new questions over whether banks are offering the right of sort of deals for homeowners in distress almost a decade on from the onset of the financial crisis.

Central Bank figures published yesterday showed that long-term arrears had fallen at the end of 2016, but, unexpectedly, the number of borrowers falling into early arrears had risen.

Senior Counsel Ross Maguire, founder of the advocacy group New Beginning, said though small the rise in the number of accounts falling into arrears in the first 90 days showed supposedly robust restructured mortgages were failing at the first hurdle.

The Central Bank figures showed that the overall number of homes still in arrears for any length of time fell to 77,493 at the end of December from 79,562 in September.

Just over 10.5% of all home mortgage accounts face some sort of arrears.

The number of accounts in arrears for over 90 days fell to 54,269 in December from 56,350 in September.

And the number of accounts in long-term arrears of over 720 days also fell, to 33,447 from 34,551.

However, the number of new cases unexpectedly rose for accounts in arrears for up to 90 days rose slightly, to 23,224, the first increase in this arrears group for over four years.

“These are not in my view people who are going into arrears for the first time. They are people whose mortgages were restructured and were sliding back into arrears,” Mr Ross said.

“It does show that the problem is circular and is not being addressed in the first place. Banks appear to be looking at capitalising the arrears as a solution. People are desperate to do a deal and then something happens, because of a car breakdown or a child gets sick.”

He said it was “worrying” because the figures showed that a large number of restructured mortgages were not meeting the new terms struck with their lenders.

He said that capitalisation of arrears in which arrears are added onto the outstanding mortgage was the largest type of mortgage restructures and many of those were not working.

He said that such restructures should be reaching a success rate of close to 100%.

The Central Bank said that 87% of restructured home mortgages were meeting the terms of their agreements with their lenders, meaning that “the borrower is at a minimum meeting the agreed monthly repayments according to the current restructure arrangement”.

Paul Joyce, senior policy analyst at the Free Legal Advice Centre said there was “still a huge problem” with arrears.

“There has been an assumption that new arrears were only a legacy issue but even the small increase suggests that new arrears have not gone away,” said Mr Joyce.

“That suggest there are questions about the sustainability of current capitalisation restructures.

“You should not be offered capitalisation arrears if you cannot afford it. It begs the question whether capitalisation arrears solutions are being offered just to get them out of arrears.”

Rachel McGovern, chief operations officer at brokers’ group PIBA, said there was “a great deal of the devastation felt by individuals and families still unresolved”.

She said PIBA was again calling for the Central Bank to review arrears capitalisation.


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