Do banks have one rule for the 'little' borrower and another for the high-profile?

There are many borrowers in the past week who lost their homes wondering if they could have retained them or come to a better arrangement, writes Catriona Redmond

DJ Carey's debt was reduced from €9.5m to a €60,000 settlement in 2017. Picture: Seb Daly/Sportsfile

For every missed mortgage payment the bank sends a letter which says ‘your home may be at risk’. 

Is this really the case? Is there one rule for high net worth, or purported high net worth individuals and another for the rest of us?

In July last year, musician Frank McNamara and his barrister wife Theresa Lowe had their mortgage debt renegotiated from €2.2m to €500,000; that was very close in value to their family home which they were allowed to retain.

In the Mortgage Arrears Resolution Process (MARP), customers in financial difficulty provide every detail of their expenses and the bank calculates how much a customer can afford to repay every month. 

What’s interesting about this process is that the bank can challenge your finances to see how much more they can claw back for the loan repayments. The repayment arrangement is normally a temporary fix so that customers can get back on their feet.

Last week, the courts signed off on a  personal insolvency arrangement (PIA) for a developer couple with secured debts of almost €10.8m (plus unpaid loans of €2.9m). Overall the debts were reduced to €900,000, once again roughly the value of their home which they can retain.

What's your view on this issue?

You can tell us here

Once a customer opts for a PIA or bankruptcy they are given certain protections including reasonable living expenses. Did you know that mortgage holders in negotiation with their bank are not entitled to those same reasonable living expenses?

Ten years ago I was doing everything within my power to keep as much money as I could to pay the mortgage. At one point I had the grocery bill down to €70 a week for a family of four, with another €300 per year to pay for an allotment and seeds to grow our own food. 

I had cancelled the health insurance, stopped making eye contact with the parents at the school gate for fear I’d have to turn down an invite to coffee, and sent regrets to every party invitation.

The bank asked if I could cut back more and reminded me of my responsibilities under the mortgage arrangement. At that point, I was put on notice that if the reduced repayment arrangement didn’t work and I had to contact the bank in financial difficulty again I was going to be asked to sell my family home.

DJ Carey’s debt was reduced from €9.5m to a €60,000 settlement in 2017.

These bank settlements involve huge sums of money; the equivalent of a lottery win. The write-downs are also astronomical figures. The process has, in many instances, resulted in the individuals keeping their homes. 

Should I say they were lucky? I doubt that luck had any part in them retaining their homes, instead I’d say it’s down to the hard work of a Personal Insolvency Practitioner along with several legal professionals plus the assistance of the relevant lenders and debtors.

Historically, lenders have not been so benevolent to the ‘little’ borrower; chasing down and pursuing delayed repayments and pushing for properties to be sold. Nor should we forget applying the incorrect interest rate when it suited them, putting families in distress resulting in homes and lives needlessly lost.

Like thousands of others, I ran into financial difficulty and had to contact the bank to renegotiate on my mortgage. I know that there are many borrowers in the past week who lost their homes wondering if they could have retained them or come to a better arrangement. 

What’s the difference between the likes of us and the aforementioned customers who benefitted from write-downs? The banks can and do pick off the little borrower with ease. Maybe we’re just not wealthy enough to make a difference.