Six One News looks at the problem of Rent Receivers

Rent receivers are generally sent in when a landlord is unable to meet the terms of their contract. It doesn’t mean they can’t pay anything (although often insolvency is behind it), sometimes the landlord is on an ‘interest only’ term that reverts to capital and interest and the uplift in cost means there is no way they can meet the increased commitment.

The issue is also more common in properties with equity because the bank don’t stand to suffer a loss in that position (they do in properties with negative equity), it’s also used as a more coercive approach to borrowers who want to hold on to trackers, as ‘interest only’ is often extended for people willing to forgo that aspect of their contract.

Unbalanced taxation on property is also a concern, the ability to tax a cash flow loss on residential property makes it a difficult trade off of ‘who shall we upset’ the choice being the bank or Revenue (most opt for the former).

 

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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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Getting through the heavy lifting of debt mediation, one result at a time

We had another successful outcome with a lender and thought that it might be worth describing in terms of how it came about and how it worked out.

This time it was Bank of Ireland who many say (in the past ourselves included) are notoriously difficult to deal with, while they are not easy (as none of them are) we have noticed a definite thaw in recent months in how they deal with negotiators which is a positive development.

The client in question has a job in the public sector (many in mortgage arrears do), but has faced various reductions in income and tax increases which resulted in payments being missed.

They engaged with the bank to no avail, spoke to another firm who they heard offer debt mediation for free but then got a quote and that kind of annoyed them so they called us. We suggested that if they wanted free service they go back to the provider who they spoke to first, that provider sent out a standard financial statement reminding them it would cost upwards …

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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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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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How does a mortgage holder get a writedown when banks sell their loan?

Tonight on RTE’s Primetime they are going to cover the dilemma some IBRC mortgage holders (residential mortgage holders from both Irish Nationwide and Anglo) face when their loans are sold.

If the loans have a discount limit set on them as the commercial loans do then there will be little or no appetite for them because as it stands estimates are that 50% of the former INBS loan book are impaired in some way.

The  sale will probably proceed but it’s a question of who the buyer may be. The IBRC loan assets are being independently valued and then offered for sale through a competitive auction process.

Loan assets may only be sold for bids that exceed these independent valuations. All but a very small number of loans are being offered for sale as part of larger portfolios of loans.  

Successful bids must exceed the independent valuation, this is in effect a restriction on any discount. We have found no difference in the sale process as between IBRC mortgage loan assets and other IBRC loan assets.

The values that …

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Details of the new AIB debt write-down scheme

The information available at present is limited and the only thing we were able to obtain in terms of hard fact is that people on trackers won’t lose their tracker in this process.

Background info:   This is a variant of our split product and it can provide for upfront partial compromise of principle debt and a right sizing of the loan. It will contain features that incentivise and reward repayment of the loan B in advance of maturity.  It will also provide an opportunity for the customer to earn a ‘reward’ in the form of principle debt reduction if they keep to the terms of their A loan.     There is security of tenure built in as a feature for as soon as the borrower lives in the property.   Key details:     This is not a self-selected product. It will suit a certain, limited cohort of borrowers for which standard forbearance does not work. If standard forbearance works it will not be offered.  This split represents a final attempt to keep people in their homes where there is …

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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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