Mortgage arrears ‘a threat to economy’

Mortgage arrears are not just problems for homeowners struggling to make repayments but pose a threat to the wider economy, a senior figure in the Central Bank has warned.

Sharon Donnery, deputy governor, Central Banking made the comments as the Central Bank published an article she co-authored on the issue of resolving non-performing loans (NPL), which warned that some 14,000 households are at risk of losing their property.

It revealed that 28,946 primary dwelling house loans were in arrears of over two years as of last December — and these account for 60% of all mortgage cases in arrears for more than 90 days.

“Over half of the cases progressing to long-term arrears are classified as involving the potential for loss of ownership outcomes,” the article warned.

It said those losses would happen one of two ways; either through voluntary actions whereby the borrower gives the property back to the bank or sells it as part of settling their debts, or through enforcement, where a repossession order is granted to the lender by the courts.

There has been a total of 8,195 cases involving primary dwellings that resulted in loss of ownership since July 2009, with 2,722 resulting in repossession from a court order and 5,473 properties surrendered voluntarily.

The authors warn that, while progress has been made in reducing the ratio of non-performing loans on the banks’ books, the makeup of the borrowers that remain in default “is such that the speed of resolution progress is likely to slow down from here”.

It also cautions that “there is a sizeable group of borrowers vulnerable in the medium to longterm to economic shocks and interest rate rises… While much progress has been made, this is still a source of risk within the banking sector.”

Ms Donnery urged those in arrears to engage with their banks to restructure their loans. The article revealed that 119,070 loans have been restructured.

The research shows that of the total PDH accounts that have been restructured, 87% are meeting the terms of the restructuring arrangement.

However despite this, 44% of the loans in arrears of over two years were more than five years past their due date as of June 2017. This, the article notes, is an increase from the 34% recorded 12 months previously.

“Durable restructures have been the prominent method for NPL mortgage resolution in Ireland,” said Ms Donnery.

“However, whilst the amount of late-stage arrears cases is decreasing, a significant number of cases remain, and appear to be getting worse. The financial crisis brought great hardship to many people, but the engagement of borrowers is essential for this issue to be effectively tackled.

“Experience has taught us that there is no single measure that will resolve NPLs. NPLs remain one of the primary sources of vulnerability in our economy today and resolving them is in all our interests.

“They inhibit a bank’s ability to fulfil its primary function of lending to the economy. Ultimately, they push up costs for the banks and result in higher rates of borrowing for prospective home-buyers or businesses seeking to expand,” she said.

Help for people struggling financially

The State’s money advice service Mabs (Money Advice and Budgeting Service) has been in operation for more than 20 years and operates from more than 60 locations across the country.

It is also the first port of call for those interested in availing of Abhaile, a service established in 2016 to help homeowners find a resolution to their home mortgage arrears.

Here, Mabs answers some common questions posed by people in mortgage arrears and offers advice on how to manage what is a difficult situation for many.

Q. I’m behind on my mortgage payments and don’t know what to do — where can I get advice?

A. You can get advice on your mortgage arrears by contacting Abhaile via the Money Advice and Budgeting Service on 0761 07 2000. A dedicated mortgage arrears adviser will work with you and your lender to find the best solution for your situation.

Q. I’m struggling to make repayments, so I can’t afford expensive professional guidance — how much does this advice cost?

A. Professional guidance under the Abhaile scheme is free. You can get a free face to face meeting with an expert financial and/or legal adviser.

This advice could come from a dedicated mortgage arrears adviser (MABS), a personal insolvency practitioner (PIP) or a solicitor. To get more information and eligibility criteria visit mabs.ie/abhaile.

Q. I’m in long-term arrears and have been avoiding the bank’s letters and calls — is it too late to engage with them now?

A. It’s never too late to engage with your lender, but if you feel you can’t deal directly with them then contact MABS or call into your local MABS office.

Q. The court has granted a repossession order to my bank — what are my options now?

A. It’s still not too late. Abhaile provides a court mentor service at all repossession hearings which can guide you to the options available. Look out for the court adviser from MABS. Details of the adviser on duty that day will be displayed.

If the repossession order has been granted in your absence, engagement is still key. Contact MABS immediately.

Q. I restructured my loan with my bank, but I’m finding even these new terms a struggle — what can I do?

A. The financial adviser referred to above will be able to instruct you on the best course of action as there are so many variables. Once you engage with the Abhaile scheme the relevant professional services will continue to support you.

The aim of the scheme is to help mortgage holders in arrears to find the best solutions and keep people, wherever possible, in their homes.