We spoke to Jonathan Healy about the mortgage arrears crisis and noted that despite 19,000 buy to let properties having made no payment in over a year that banks haven’t taken them back.
I smiled when I heard that Central Bank director Fiona Muldoon had described dealing with the banks as ‘like dealing with troublesome teenagers‘. This was referring to their resistance to resolving their loan book issues for the last five years.
The thing that wasn’t mentioned was ‘why’, and as always, it’s the ‘why’ that plagues many of us the most. The ‘delay and pray’ response is a standard tactic deployed by lenders when they have a crisis, this has occurred in Japan in the past, is currently an issue in Vietnam and also in the USA. Banking is one of the industries where honesty is not the point, survival is. At any time a bank could unwind if everybody made their claims against them and the same broadly holds true for dealing with bad debts.
If a bank started to deal with one bad debt (at a time when there is a pent up mass of them in the …
This month the property-watch focused on Central Bank reports that property prices had overshot from 12-26% depending on the model used. This counter to conventional wisdom, so we chatted about this and other topics with Claire Brock, Martin King and Angela Keegan.
There are often calls for stricter regulation, in particular the idea that in the US they arrest people in banks with greater ease/faster (which is in itself not ‘regulation’ it is policing). Anyway, I thought it was worth mentioning that in the US it isn’t a ‘one Regulator fits all’, and that the problems we had in the past through division of regulatory responsibility [splitting Central Bank and Regulator] still exist there.
Below is a graph of how responsibility is divided out in America.
As you can see, the OCC takes care of national banks, then the very popular state & community bank sector is elsewhere. Taking State banks in particular, they either have access to the Federal Reserve or not, if they do they are SMB and the State Authority and Fed are the regulators, if not then they are SNMB and the State Authority and the FDIC are the regulators.
That is why you hear about the FDIC ‘going into banks’ – these are state banks that …
We touched on this topic over on MyHome.ie last Friday in our weekly blog contribution to their site.
It is important to look at this from a few perspectives
1. Regulation and the role of the Regulator 2. Past decisions by the Regulator 3. Politics and policy
1. Regulation and the role of the Regulator: The idea of regulation is not for price control, rather it is about prudential control. As galling as it seems to everybody, the Financial Regulator is not (nor should they be) empowered to tell banks what prices they can charge. This is sickening given that we have spent €10,000,000,000 this year alone via the NPRF in supporting our banks (€8.8bn to AIB and €1.2bn to Bank of Ireland).
Readers, if you know of other jurisdictions where regulators set prices please let us know! The idea of a Regulator is that you pay for them …
We were delighted to take part in the making of Richard Currans documentary ‘Property Crash, Where to Now?’. It is the follow up to 2006’s ‘Future Crash’ in which he predicted the demise of the Irish property market.
The full version is available on the RTE player, we just posted the clip that we took part in (showing off for our loved ones basically!)
In operations I have two main roles, firstly is the obvious operational aspect of any company which has to do with logistics of loan suppliers and our distribution to clients as well as looking at the general business planning to ensure we are always at the best of our abilities. The other role is regulatory, I act as a compliance officer, while that is not a legal position, it is one in which the practical aspects of law surrounding financial services are to be found, how it works in real life.
On that basis I was surprised to see that there were several articles talking about the use of tort law to prove negligence in lending, and with that, a particular reference to the Consumer Protection Code (CPC) which has since been updated. While I admire the initiative being taken by New Beginning I have some doubts which I will express here.
One issue we have had with regulation is that it actually …
There is a strange situation occurring in the Irish property market, arrears are rising rapidly, stock of repossessed homes is on the increase, and yet the number of repossessions is dropping; there is a contradiction in here somewhere.
Per quarter the number of properties being repossessed is dropping, banks are taking back fewer and fewer houses, this would normally be a sign of prosperity, people with jobs and a stable property market would mean that there would be some equity in the property as people pay down debt and are able to afford their payments, but that isn’t the case, quite the opposite, Irish households are heavily indebted and arrears are rapidly rising.
The largest number of properties being taken back is actually that of voluntary surrender (and abandonment), so there is no ‘repossession’ monster lurking in the Irish market because we have decided that we don’t want it to exist, this will come at a cost as we incrementally strip banks of their ability to enforce mortgage contracts.
The stock of property …
The Financial Regulator has voiced ‘concerns’ over the manner in which disclosure and transparency are enacted when people move from a tracker rate onto any other rate in a press release yesterday.
There were no firm figures given, and no direct accusations (although the Financial Services Ombudsman has received c. 60 complaints). The release comes on the back of a story in the Sunday Business Post by Emma Kennedy which outlined that PTsb ‘misclassified’ up to 300 mortgages and put them on standard variable rates rather than trackers. The issue was spotted by PTsb and rectified by them, customers have been refunded (on average €5,000) the difference they paid plus interest.
The way in which people ‘come off’ trackers tends to be by their own volition, if they opted for a fixed rate while on a tracker contract they do not need to be re-offered their tracker rate at the end. If they were on a fixed rate and are coming …
Below is a press release from the Financial Services Authority in the UK. This is how they deal with executives who cross the line, while we can praise reform in Ireland it is clear to see that we do not come anywhere near the standards set in the UK when it comes to discipline in the market, while over 90% of complaints are against banks, they have the fewest sanctions and yet this is the same banking system which nearly pushed the nation over the edge. The people in charge now are the same people that lead us here and it is shocking that we laud ‘new regulation’ when in fact we are still behind the times.
It is becoming evident that our own banks may have not been totally forthcoming in how they presented their own statements of affairs in the past, will similar sanctions therefore follow?
27 July 2010
FSA bans and fines former Northern Rock finance director £320,000 for misreporting mortgage arrears figures
The Financial Services Authority has fined David Jones, former finance director (FD) of …