Rules, they apply to at least some of us…

Something that is sadly missing from the Patrick Neary involvement with Anglo is how the rules set up by a Regulator often apply to everybody bar them.

For instance, authorised firms are required to keep records for six years after the date of the transaction, the Central Bank not only didn’t keep records of the Anglo deal, they never made them to begin with it seems.

Here is a page of the various ‘codes’, you’ll note that none pertain the Central Bank, they don’t have any prescribed time frames to make responses, no service level agreement, no charter upon which to be externally judged. They have many pages on what everybody else must do, just none about themselves.

Chapter 11 of the Consumer Protection Code is solely dedicated to ‘keeping records’. It is safe to say that to an extent the financial services industry is the client of the Central Bank so why do they not keep records in the same manner as they firms they regulate must?

Failure results in sanctions (that means …

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Today with Sean O’Rourke: Some of the problems with the Property Market

We were asked to discuss some of the problems in the property market with Sean O’Rourke and Philip Farrell of Real Estate Alliance.

There are issues such as gazumping with other bidders, gazumping where there are no other bidders, under-pricing to increase interest and timed viewings which create an ‘auction type environment’.

It is incredibly difficult for estate agents to manoeuvre their way through this without upsetting somebody (and it can’t be the vendor who is their ultimate client). This is why we should consider some small rules where people get punished for anti-market behaviour such as the vendor having to pay a buyer a certain sum if they pull out after the contract is signed.

This isn’t going to stymie anybody, remember, it is only after the booking deposit is paid, accepted, and the contract sent out, signed and returned that this could happen.

An unintended consequence may mean that contracts don’t get sent out very easily in the future, but can we believe that people would avoid getting contracts sent out? That’s unlikely, some kind of structural change …

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Devil in the detail in debt write downs

(this article appeared in the Sunday Business Post on the 23rd of March)

The banks are starting to write down debt. Should we be surprised? Recent news of large write downs on home loans by AIB has left out some of the necessary detail to add context to the story. The lender has equally shied away from confirmation of what happened, making it all a bit opaque.

Why would a bank choose to offer a capital reduction by writing off part of a mortgage? An alternative is to split the loan into a part which the customer can afford to pay and another part which is ”warehoused. If zero interest is charged on the warehoused part, then the affordability for the customer can be the same as if this part is written down, even if the psychological impact is different.

It is likely that there are peculiarities in the cases where debt has been written down, which means this will only happen in the minority of cases. For example, if a loan was on a one off house with a …

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We don’t have recourse to the FSO, wholesale repossessions & other IBRC myths

The hype-machine is in full throttle on the sale of the former INBS loans. The fear being that some large evil hedge-fund is out there waiting to repossess homes in the thousands.

There may be such a fund headed by some unknown Dr. Evil, but chances are a hedge-fund is the best outcome for the IBRC mortgage holders.

While some of the points about who does and doesn’t fall under various regulations has been made here already, it is worth pointing out that several other factors must apply.

Firstly is that IBRC loans have no recourse to the FSO already, and loans in the IBRC cannot be changed outside of the original loan terms so people simply can’t get a solution while they are IBRC owned.

This is a problem common in other lenders such as Bank of Scotland who don’t exist here any more, only original loan terms can apply so apart from interest only there is no creativity for a mortgage resolution allowed.

Due to that …

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Protection of Residential Mortgage Account Holders Bill 2014

Normally I expect a better outing from Fianna Fail – in particular where Michael McGrath is concerned. Their new bill for protecting mortgage account holders (aimed mainly at IBRC former Nationwide loan holders) is a banger.

It gets down to details in section 3 onwards. In section 4 it calls any buyer to ‘be bound by such Codes of Practice that govern residential mortgages that are in force at the time of the sale and/or transfer or are subsequently introduced by the Central Bank’. This is misinformation.

You can’t ‘opt in’ to regulation, something we already covered here, you are either regulated or not and mimicking best practice doesn’t mean anything as there is no binding force behind it.

In section 4.2 it states that ‘It shall be a precondition to the sale or transfer of residential mortgage loans by persons or entities who acquire, either by purchase or transfer, residential mortgage loans from financial institutions regulated by the Central Bank to other persons or entities …

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NAMA can’t ‘opt in’ to regulation

Something that has been circulating of late is that if NAMA buy the Irish Nationwide (subsumed into IBRC) loan book that they will follow best practise and no borrower will be ‘less well off’ due to it in terms of regulatory protection.

This is not true because an important aspect of regulatory protection is that of recourse to the office of the Financial Services Ombudsman (FSO). This recourse is covered in section 51 of the Code of Conduct on Mortgage Arrears and also in the Consumer Protection Code of 2012 10.9(d).

Simply stating that you will follow or mimic the existing codes and regulation isn’t the same as actually being covered by them, it doesn’t grant jurisdiction. The FSO cannot structurally cover a complaint made against an unregulated entity. It really isn’t far different than going to them with a complaint about a restaurant you ate at, if they don’t cover the institution they can’t deal with the complaint.

The oft overlooked point is that the granting of regulation …

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Could the new AIB split mortgage be illegal?

In the Sunday Business Post yesterday an article appeared which explained the new AIB split mortgage deal. We sought details of this from AIB but only scant ones were provided which we posted already.

How it works in money terms was not disclosed by AIB but they equally didn’t retract any statements showing up in the press so we can assume that the information published is correct as they haven’t publicly retracted any aspect of how it has been covered. For that reason there was an aspect to this which we see as being of grave concern.

However, if Mary and Tom get a pension lump sum at retirement, they must use this towards paying down tranche B. This only applies to pension lump sums and doesn’t apply to any other lump sums a person may receive e.g. inheritance, bonus payments, gifts, lotto win etc. On this matter it is always advisable to seek professional pension advice.

Read the highlighted parts again, ‘they must use’ the lump sum …

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The 2,000 Irish evictions you dont’ hear about

There may be close to 2,000 evictions that won’t be in the papers. There will be no pictures of people being forced from the home their families occupied for generations, no in depth story, little empathy and worst of all, it’s something that hurts people who are entirely innocent.

What we are talking about is the ‘move out’ letters people are getting from banks that appoint receivers and in particular the ones that are becoming commonplace when rent receivers are appointed. 

The ‘broke landlord’ is unlikely to receive much in the way of empathy from anybody, this is why receivers are being sent in on investment properties rapidly while repossessions and executions on family homes are so much slower to occur, but that misses the point, we have made one process ‘slow’ to protect families, while allowing the other to be quick to ‘get landlords’ but really all we are doing is ‘getting families’ who are affected and showing them an entirely different duty of care.

It isn’t that an investment property doesn’t house a family the same as a …

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The Expert Group on Repossessions: condensed themes

We tried to put the main themes behind the 60 pages of the report (minus appendices) into a 1,000 word condensed version. 

To begin with the report (here) is just that, a report, it isn’t an automatic initiation of policy change although it may affect policy change in the future.

The Expert Group on Rerpossessions was established in September 2013 at the behest of the Troika  and was mentioned in the 9th review of the Memorandum of Economic and Financial Policies (MEFP).

They didn’t understand (nor did our own decision makers) the reasons behind the length, lack of predictability of outcome, cost of proceedings and how it stacked up compared to other jurisdictions.

We have an abnormally low rate of repossessions in Ireland, that is both in absolute terms and most tellingly in relative terms to other countries, and the system for this is also lengthy, complicated and expensive.

There is nothing in the report which calls for wholesale repossessions, and in light of the facts (rather than the spin) …

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Repossession statistics in Ireland, consider the numbers

With the new report on repossessions out it is probably a good idea to look at some of the actual statistics. Many commentators mistakenly describe property that isn’t taken back through repossessions as a ‘repossession’ when it is more in line with liquidated damages.

A repossession by definition is a seizure of collateral securing a loan in default, in most jurisdictions this comes with a court order allowing the lien holder to reclaim the property. In a ‘voluntary surrender’ that isn’t seizure process, and in an abandonment it is also about limiting the value reduction of idle property, for that reason we break the figures down into court ordered possessions and those that are done by choice or by leaving them without notifying the lender.

Here’s what it looks like.

And what you can see is that the orange bar which is the abandonments and voluntary surrenders far outweigh the blue bars which are the ‘repossessions’ where somebody is being brought through the process in court.

The non-court repossessions …

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