Opinion: from "restructured mortgage" to "non-performing loans", the increasing use of technical terms makes the real lives of people invisible

One of the casualties of the financial crisis has been the way familiar words have taken on a new meaning. Words relating to human values are now taken by banks to describe themselves, and not just for advertising. It is important to reclaim these words. We must also ensure that human rights are used to benefit people and not corporations. One such word is proportionality, which was quietly introduced into Irish legislation on mortgage cases last year.

The legacy

Echoes of the financial crisis and reckless lending are still heard across Ireland, whispered in court corridors and quiet conversation. Over 20,000 home loans are more than two years in arrears, accounting for 90% of arrears. Most are in a legal process which may lead to "repossession", often described as the "tsunami" of potential evictions.

Another slowly moving wave involves 100,000 "restructured" mortgages. While 85% of these are "performing", even the Central Bank admits that "meeting the terms of the arrangement is not a measure of sustainability." Many require payments over 45% of net income, and most involve deferring repayments on the capital sum. Partisan media commentators suggest that borrowers are not "engaging" and that they would be treated fairly if they did so, but the evidence for this is not convincing. Nobody wants to risk losing their home.

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Indeed, many households have lost their homes, including households with tracker mortgages, and an untold number of tenants where buy-to-let properties were seized. The Central Bank of Ireland celebrates that two-thirds of homes were repossessed by lenders after a "voluntary surrender" or abandonment (outside the court supervised eviction process). But it undertakes no research on what happened to these people, how much they still owe, or indeed, how many children lost their homes. "Resilience" was certainly forced on them. Of course, the word "eviction" never appears in Central Bank reports.

The words

A decade ago, Irish politicians and commentators worried about the stability of Irish society, its communities and families. There were fears over the emerging risks to employment, business confidence, cuts in income and public services. The vulnerability of households to these risks was widely discussed, with promises to protect basic incomes and essential services.

But ensuring the stability of the financial system and "pillar" banks quickly became the priority and households became the "shock absorbers" of the crisis. We also discovered that banks were "vulnerable" to "risks," and needed to be helped (with public money) and powerful protective regulators to become "resilient". Today, we have rules which officially, make all Irish households "resilient" by giving mortgages only to people with very high incomes.

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Other new words such as "non-performing loans" can silence even the most determined human rights minded judge or politician. They're more powerful words than "access to justice". They condemn distressed home loan and small business borrowers to a shameful and socially ostracised status, even though the definition itself is contested across Europe. To the disbelief of many, our regulators hold Ireland up as a model for "resolving" non-performing loans.

The way these technical terms make the real lives of people invisible can be frightening, especially when used alongside terms such "cleaning" mortgage loan books and finding "solutions" for distressed borrowers. These words are used to create an ideological firewall against meaningful public debate on how the financial system could be organised to promote socially and environmentally sustainable development of people, households and society.

Today, we must defiantly insist that human ‘vulnerability" is a human rights issue. Resilience of banks cannot be equated with resilience of people, children or households. Public institutions exist to protect citizens from the risks which are detrimental to their lives.

"Proportionality" is now part of Irish legislation

In August 2019, legislation was quietly introduced which obliges Irish courts to carry out a "proportionality" assessment in all mortgage possession cases. Courts must examine six factors in granting possession orders, as part of this legislation:

(i) Whether the making of the order would be proportionate in all the circumstances;

(ii) The circumstances of the borrower and their dependents (children etc);

(iii) Whether the mortgagee has made a statement to the borrower on the terms in which the borrower and their dependents could remain in the home and settle the matter;

From RTÉ Radio 1's Drivetime, John Cooke talks to tenants protesting against an investment fund which has threatened them with eviction.

(iv) Any proposal made by the borrowers to enable them and their dependents to remain in the home and settle the matter, including a proposal for mortgage to rent or alternative accommodation;

(v) The conduct of both parties in their attempts to find a solution to dealing with arrears;

(vi) Such "additional matters as the court considers appropriate".

Building on existing measures such as European consumer law and personal insolvency, this legislation provides distressed borrowers with better protection from being made homeless by Irish courts. Mortgage related evictions must be proportionate; that is, the least form of interference necessary with the right to respect for home. Irish courts can now insist on the use of other means of resolving the situation, such as mortgage-to-rent, or insolvency arrangements nd consider whether there is a pressing social need for the eviction. Significantly, the position of children and other dependants of the debtor must now be properly considered.

Human rights matter. The "proportionality" test offers a practical application of human rights into the impersonal world of corporate finance. It is about people’s stability, risk, vulnerability and resilience. After a decade of financial troubles, maybe its time to use our laws to give distressed borrowers a "fresh start."


The views expressed here are those of the author and do not represent or reflect the views of RTÉ