Politicians are prone to playing politics, that’s a given. What is strange is that so few demonstrate a knowledge of the regulatory environment that banking exists in. While decrying a ‘lack of regulation’ they fail to see that loan sales are actually a result of regulation, the very thing they are saying they want.
If you have a long term agreement with a borrower that is a contract, it can and does stand the test of the courts. A fund buyer won’t seek to overturn that contract even though the loan is technically ‘not performing’.
This is an important point, if you got a split mortgage and it was agreed on a long term basis (as they are) then your loan is non-performing because part of the loan isn’t accruing interest. You are making payments in full on the other part, but it is less than the original contracted agreement. Any losses of interest are accounted for and already booked, but the loan itself is still going to be classified that way.
If somebody buys your loan they have to honour that agreement that the original bank made with you, indeed, it all forms part of the new buyers due dilligence and the lenders obligation of disclosure on the loans they are selling. So if you are in this situation and afraid chances are it’s mainly because the media and many partially informed sound-bite providers are telling you to be afraid.
If your loan is performing regularly then you also have little to fear, even if you are on a variable rate the loan buyers have not raised interest rates (such as we saw with the old Irish Nationwide loan sale where all and sundry swore high up and low down that it would end in the apocalypse) change because performing loan payers have choices such as goinge elsewhere. Even those who bought in the boom are likely out of negative equity so that isn’t a trap and the Central Bank code on switching mortgages allows for any size of a loan on a straight switch to provide for people in this situation.
Those who are and will definitely be affected are the people who haven’t been paying, haven’t been engaging or who are trying to hold on to a property they simply cannot afford and where they are still trying to negotiate with the lender.
The shortest explainer is this: any mortgage in this nation is regulated, that means that the person who is liable will be dealing with a regulated entity when they do anything with their mortgage. A loan buyer that isn’t regulated can’t deal with their end clients, they have to get another party who is regulated to deal with them. The loan servicer will deal with them in the way that regulated entities have to. What it doesn’t mean is that the loan buyer has to offer similar forbearance that the original loan provider offered. In Ireland that means that the loan will be dealt with in a manner you’d expect in a normal country – because here we have a situation where loans go for years with no payments and still aren’t repossessed. Ireland is the only country in the world where this happens.
For many of the people who are in active arrears or not paying, if they want to keep their home they should be talking to insolvency practitioners rather than listening to politicians. We already brought in some really great legislation to protect borrowers, some of the most powerful insolvency legislation in the world, and Irish borrowers are already some of the best protected in the world. Use that legislation rather than try to bring in yet more obstruction to resolutions, quite literally, our housing crisis persists in many respects because of political intervention, this latest charade is merely the most recent example.
The politicians are saying ‘but people will lose homes’. That sometimes happens after a crash, many of the homes are empty, why protect them or delay their possession? Many homes had no payments in years why do the people in them get special treatment? We know there are families in some, but that doesn’t make them right and the whole thing victimless.
What about the 100,000 people on the social housing witing list? Why not repossess and let the people who didn’t pay go on the housing list and give the property to a person who has been waiting 10 years? If you think that is unfair then you are showing a bias towards insiders and the middle classes. Why not let the property get sold to a young couple starting a family who would pay for the property?
The reason many can’t tolerate the idea of anybody losing a home is because they are inherently on the side of ‘insider privilage’ which is where you favour one group over another for no other reason than that they are on the inside (in this case an insider means a person/s who put a deposit on a house and drew down a mortgage).
Society pays for this in a myriad of ways, banks keep mortgage rates high, other banks won’t lend here because they know that the whole system is rigged against them. Every major international organisation has commented on this but our papers still lead with articles that echo the opinions of parish oriented politicians before mentioning these things. People get to live in areas they can’t afford and in doing so lock out a family that do want to live there (much like taking a parkin spot, not paying for the parking and leaving your car there indefinitely – there is a limited supply so it matters).
People who borrowed money are getting to stay in a property with every borrower bailout imaginable being offered while those on the housing list while away the years waiting – they were simply never middle class enough to afford to borrow and in doing so ensured they’d stay on the bottom rung of the ladder. Less agreeable lending means builders have more concern about being able to sell their product (houses) and one element of the puzzle feeds into the next.
The Debtor grievance industry exists in the minds of politicians, a few gamekeepers turned poachers, vested interest charities (who usually say that part of the solution is to fund them) and those who were affected by not paying their debts. To people who constitute the majority of society, we understand that housing doesn’t come for free.
We should help those who are genuine cases and let everybody else face the courts instead of trying to be helicopter-parent-citizens who rush out to throw our fiscal selves in front of whatever the next economic train is for people who are almost a decade into a problem that still hasn’t resolved.
If we now need to regulate the funds that buy loans it implies that our existing regulation is bunk, why else would you have to bring in a new round of rules? The only reason would be because the existing ones are not fit for purpose, or worse yet it’s truly a ‘politics only’ move. I heard Stephen Donnelly the Fianna Fail TD say that he thought it was odd that people say we have enough regulation and that this move would scare off buyers, that it’s a contradiction that nobody can explain.
I’ll explain it, people don’t like doing business in a political echo-chamber that decries honouring contracts, or where the future looks like an effort to recreate the same mess we are already in. It’s about the power of signalling, the international view that financial firms have of how we do things here (and yes, when it comes to mortgages we are an international laughing stock).
The more ‘Irish solution to an Irish problem’ we get, the less ‘international participation in the Irish market’ we can expect, that’s common sense, not a contradiction- but perhaps that’s a bit much to expect from teh political classes.