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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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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Morning Ireland: Business news with Brian Finn, speaking to Karl Deeter about bankruptcy

Brian Finn of RTE’s Business News spoke to Karl Deeter on Morning Ireland’s business news. He asked how the new changes to bankruptcy legislation would affect both borrowers and the property market.

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Don’t pay the investment mortgage, just pay us

Something that is often overlooked when people hear mortgage statistics is the various shenanigans that are going on underneath the headline figures. For instance, people are often asked to stop paying investment mortgages and to divert the rent to the family home. This is one creditor playing hard-ball with the borrower at the expense of another creditor.

While it does make sense to prioritise your family home, there is also the issue of wondering why the rent shouldn’t go to the investment loan provider given that it is generated from the asset they backed? Clearly this is a judgement call, but when the family home lender is effectively asking for that income then it strays into the area of being an ethical one as well.

The letter to the left is one such example, while it doesn’t state ‘shaft the investment loan provider’ as clear as you might expect, it was the basics of what the borrower was told to do.

They use a bankers vernacular which says ‘we won’t …

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RTE 2fm Colm Hayes Show discussing new AIB and IMHO partnership

We were asked to comment on the new AIB and IMHO partnership. There are several aspects to this that we find unsatisfactory, however we don’t disagree with trying to help debtors.

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Central Bank: solving the mortgage crisis by making it worse

Yesterday was the proposed deadline for debt mediation firms to make their submissions to the Central Bank. The guidelines had only come out about three weeks previous to this and given how much was involved they realised that they had made a deadline in trying to rush it through and gave industry an extension, we didn’t need the extension, what we need is the type of common sense which is vitally lacking in the new requirements the Central Bank are pushing through.

There are a lot of things that people don’t hear about in the compliance area that will result in future news stories, this current round of regulation is going to be in that category. The Central Bank has ensured that there will be less choice, that it will be more expensive – which locks borrowers in trouble out of the process and with a general outcome that banks will hold more sway in the future on deals that do or don’t get done than they did in the past. This is a big banking win as far as …

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RTE Drivetime: What it’s like to be inside a debtors meeting

We were asked to talk to Drive Time on RTE radio about a borrower meeting we were at with a bank. This meeting was typical of the ones we regularly attend and also typical in both tone and outcome.

While we accept the bank have a collection agenda underpinned by the mortgage contract, their methods for obtaining a result are unnecessarily painful and that doesn’t make economic sense for any party involved.

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Why don’t more buy to let investors sell their properties?

We did some research with Marie Hunt of CBRE and Brian Lucey of Trinity College on ‘buy to let’ investors looking at their behaviour (in the main it’s a behavioural economics piece).

The findings are really interesting and show a few aspects of our market that may not have been widely known such as:

1. The ‘average’ property investor is no tycoon, rather they own 3 properties or less, taken in practice this could be a person who bought a house then moved into a second one when they got married or such.

2. The ‘fallout’ has been extreme, a huge majority have faced losses of greater than 50%.

3. The younger and older are feeling the pain, most of the investors were between age 35 & 65 when they bought, this is slightly older than the commonly perceived ‘negative equity generation’. And the ones who lost jobs (often younger) have shot …

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Insolvency: creditors pay for it and carry cost & why some people can’t do it

Something that we hear a lot is that Personal Insolvency Practitioners are expensive, while they may be costly, it is worth looking at where the cost base rests. While one party may have the appearance of ‘paying’ for something, in fact it’s forgone income to the creditors, we demonstrate this using simple T-accounts to show how it works.

Another critique is that ‘not everybody will be able to afford it or obtain an insolvency arrangement’, again, this is in part structural and not necessarily some kind of financial bigotry. To strike an insolvency deal, the same as a company being granted examinership, you have to have some ‘post plan’ survival plan, if you are below poverty levels already taking one out would be to your detriment.

Rather it is the case that for people who are too financially underwater to create a plan will have two choices, non-ISI agreements with the bank, or bankruptcy. The same applies for a company, examinership is not always granted where there is no workable plan for after the protective period.

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Some Irish mortgage statistics worth considering

We all know the headline [glossary id=’6898′ slug=’mortgage’ /] arrears figures and that they are a disaster. Take a look at some of the other figures which don’t make it into general reporting (other than when they come out during Oireachtas committees and the like). Something that still isn’t widely known is that huge numbers of arrears cases are not engaged and haven’t filled in the most basic Standard Financial Statement required to get an arrears resolution.

AIB

6,000 mortgages 2.5 to 3 years behind and not engaging 16,000 Standard Financial Statements (SFS) analysed to collate ‘strategic figures’ 50 per cent of arrears cases haven’t yet filled in an SFS, the founding document of resolutions 2,000 re-engagements after legal threats 2,000 arrears cases have money on deposit greater than arrears 1,000 buy-to-let mortgages with nothing paid in last six months or more 4,000 accounts where customer could pay full mortgage from net disposable income allowing for living expenses (insolvency guidelines plus 20 per cent on top) but do not

Ulster Bank

35 per cent of arrears cases either not engaging …

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