Experts: ‘Mortgage arrears haven’t gone away’

The running sore of mortgage arrears — eight years after the onset of the financial crisis — is back on top of the political agenda as Independent TDs negotiate their participation in a new government, the Irish Examiner has learned.

The Independent Alliance of six TDs is seeking to strike a new agreement over the banks’ balance sheets and secure a “new deal” for the many thousands who are struggling with home-loan debt.

Documents have passed between Independent TDs and Fine Gael negotiators, including Justice Minister Frances Fitzgerald, over the last three weeks.

Negotiations continued yesterday.

But what could any deal look like? And why is it needed?

Central Bank arrears figures published in March show the total number of mortgage accounts in arrears had fallen by the end of 2015, to 88,292 cases, or about 12% of all mortgage accounts for main homes in the State. Long-term arrears have fallen too.

A huge number of all home mortgages, totalling 120,739 accounts, have been “restructured”.

However, the experience of people at the sharp end of the mortgage crisis — the debt and restructuring loan advisers — say the problem is far from settled.

Gerry Dowling of the Money Advice and Budgeting Service (MABS) of Dundrum and Rathfarnham, in Dublin, said new cases are still coming through his door every week.

“Mortgage debt has not gone away,” Mr Dowling said.

He favours a major housing agency to intervene to take on homes in some sort of shared-ownership arrangement with existing owners.

His experience tells him that under the current “restructuring” regime lenders are offering solutions to distressed borrowers in an inconsistent way.

The menu of solutions is “cherry picked” by banks to suit what is best for the banks, he said.

Perhaps surprisingly, Mr Dowling said his experience is that so-called vulture funds or service providers, who bought distressed home loans or administrate mortgage loans of conventional lenders, are often willing to cut deals with homeowners in distress.

But such lenders do not have split mortgages “in their repertoire”, he said.

He said he deals with AIB, Bank of Ireland, KBC, Permanent TSB and Ulster Bank, as well as funds and service providers such as Start, Pepper, Mars Capital and Certus.

Michael Dowling (no relation), chair of the mortgage committee at the Irish Brokers’ Association — IBA — said Ireland experienced a world-record slump in home prices during the crisis, and yet the solutions eight years on are “not world-beating”.

He said that of 14 “off the shelf solutions” available that only four types of deals — interest only; extending the length of the mortgage, capitalising arrears and split mortgages — are commonly used in the Republic.

“It is still a significant problem for those who are two years or more in arrears on their family home,” he said.

“There have to be solutions for that cohort. That number may not be rising but it is not falling significantly.

"Repossession is not going to be a solution to the problem — neither from the borrower’s point of view or for the banks either,” he said.

“And despite what people say, there is not going to be mass repossessions,” Michael Dowling added.