Committee told of 'ramping up' of repossessions in mortgage arrears cases

Wednesday 02 April 2014 18.26
Joint Oireachtas Committee on Finance was told that repossessing a home was currently cheaper for banks than finding a resolution
Joint Oireachtas Committee on Finance was told that repossessing a home was currently cheaper for banks than finding a resolution

The Joint Oireachtas Committee on Finance, Public Expenditure and Reform has heard of a “ramping up” of repossession activity by mortgage providers.

The committee heard claims that some lenders, particularly those exiting the market, had become “extremely aggressive” in cases where customers had fallen behind on their repayments.

The committee was looking at the mortgage arrears problem and the effectiveness of the current measures available to achieve resolutions.

Fine Gael TD Kieron O'Donnell told the committee that he had been approached by constituents facing extreme difficulties in dealing with mortgage arrears with Dankse Bank.  

He told of one case where a person had been two months in arrears and, even though they had brought their account up to date, the bank still appointed a receiver. 

He said he had heard from a lot of people with Dankse Bank in the last couple of weeks where they had become “extremely aggressive” in some cases involving the family home and they are moving with receivers 

Paul Joyce of the Free Legal Advice Centre told the committee that of the six main lenders’ 80,000 accounts that have been in arrears for more than 90 days, only around 20,000 have been restructured.  

Of that number, two thirds are permanent and the remainder temporary solutions, he said, while there was no information on how sustainable those restructures are. 

He said in the last six months of 2013, over 3,300 new proceedings were brought to enforce rulings on a principle dwelling which indicates a “ramping up of repossession activity”. 

Mr Joyce said the Central Bank's Code of Conduct of Conduct on Arrears was revised to “detrimental effect” to consumers. 

He said the Central Bank's code was not scrutinised, with the relaxed restrictions on unsolicited approaches to borrowers having a particularly adverse affect.

Mr Joyce said the Central Bank’s code had initially obliged lenders to look at all listed alternative repayment options, but a subtle change now only obliged them to look at the options they themselves offer. 

“So they get to chose which options from the list that they wish to offer,” he said.  

“That is why we have the maddening inconsistency. There are people waking up this morning lamenting the fact that their mortgage is with one particular lender rather than another because there is no consistency in decision making.”

David Hall of the Irish Mortgage Holders Organisation told the committee it was currently cheaper for a bank to repossess a property than for them to participate in a scheme which would see families remain in their homes, which he said was a disgrace.

Mr Hall asked the committee to recommend the introduction of legislation that would compel lenders to offer those in arrears a choice of four solutions.

He said banks could offer struggling customers a mortgage to rent scheme, a debt for equity swap, a split mortgage or the resolution of residual debt when a property is sold.

Mr Hall said that a State sponsored mortgage to rent scheme – where a home is given to the bank and the family rents it from them instead - should be streamlined. 

He told of a case due before the courts which is perfectly suitable for the scheme, but the lender is insisting on repossession.  

Mr Hall also said the Central Bank's targets on mortgage arrears resolutions were a massive disincentive to the borrower. 

“After six years of inaction, we have banks... trying to tick boxes,” he said. “In the event of ticking boxes the only people that can lose are debtors, where someone is trying  to tick a box to keep the regulator happy.”

Mr Hall also said tracker mortgages were the "elephant in the room" and that, as night follows day, interest rates would begin to rise again.

He said it was important not to give the impression to people who are in mortgage arrears that there was some kind of magic solution coming down the road and it was vital that customers engaged with lenders.

"They are sitting at home thinking something's coming, something's coming. It's not. They need to engage with the banks," he said.

Brendan Burgess - the founder of the forum Askaboutmoney.com - told the committee that there was no reason why someone had to have their mortgage repaid when they retired.  

He gave an example of a women in her mid-50s who was being told by the bank that her mortgage was unsustainable because she was paying interest only.  

He said the standard convention that we must pay our mortgage off in advance, but this was a completely wrong definition.

Meanwhile Julie Sadlier from the Phoenix Project said there was a huge chunk of repossessions that did not appear anywhere in the statistics where people were asked by the bank to surrender or sell their home and they did so voluntarily.  

She said you have to remember the terror that this brings to people and they had no way of measuring this. 

In response to a question from Fianna Fáil's finance spokesman Michael McGrath, Ms Sadlier also said the banks had an extremely draconian way of classifying people as non-cooperative.

Ross Maguire of New Beginnings said people had to get over the stigma of bankruptcy.  He said it was a card that people had to play.

He said they were currently travelling the country trying to educate people that it can be a viable option.  

He said that Walt Disney and Donald Trump were bankrupts and that once we get over the stigma, deals will be done.

He added that bankruptcy did not always mean losing the family home.