We have ceased to offer debt management services under the Central Bank regulations

Irish Mortgage Brokers have informed the Central Bank that we will not continue the debt management services industry under their regulation. This blog serves to notify people who may want to enquire with us that we are no longer authorised by the Central Bank (we can still offer insolvency solutions). No clients have been adversely affected and we are liaising with the Central Bank to ensure the termination goes smoothly.

Particular issues relate, in our view, to how the Central Bank has approached the regulation, the delays, repeated requests for identical information and specifically seeking management accounts when audited accounts were provided.

We also faced huge delays from the Central Bank in processing and responding to queries which they resolved by asking for more information rather than accepting blame (point above being one such example).

The efforts thus far seem to amount to seeking unrealistic demands from industry then only pulling back when they are shown to be operationally impossible. In the first ‘consultation’ the Central Bank suggested that a mediator hold indemnity for the entire quantum of debt they …

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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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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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Debt chronicles: There can be no solution for some people

A while ago we decided to document some of the things we encounter as debt managers in order to give a taste of the experience from within the process. This is more than anecdotal but nowhere near outright empirical proof of how things are going for everybody else in the process.

The most recent meeting involved a site in rural Ireland. The borrower was a former developer who now lives abroad. Like many property deals he wasn’t the only one on it but he happens to be engaging and when that happens the idea of ‘severable liability’ is about all the bank can hope for.

The developer made an offer of a 30% recovery, this was rejected at the start of the year. Given that the site is worth about 20% of what it went for (at best) this would have been a decent outcome, frankly I’m surprised the developer even made one so high given that in this instance they have the bank over a proverbial barrel.

The loan is in deep arrears, but what’s worse is that the …

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Time to leave your home, give it up…

One of the downsides of financial advice is when a person comes to you and it is too late to help, recently I had a client who was about to give up their home, they couldn’t even afford to pay me for advice, but in hearing their story I thought I could turn them around and told them if it works they can take care of it some other day.

The first thing they showed me was a letter (click on it for the big version) which basically said ‘you can’t afford your home, time to give it up’. You’ll notice a big white space to the right of it which makes it less legible, that isn’t what happened when we scanned it up, it went to them like that.

So the demand to get out wasn’t even presented in a fully readable format. This couple are in …

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Standard Financial Statement or SFS – for people in mortgage arrears

If you go into arrears on your mortgage or you talk to your lender because you believe you are a ‘pre-arrears’ candidate then you will be asked to fill in a ‘Standard Financial Statement‘ or SFS which is part of the Mortgage Arrears Resolution Process (MARP) which started last year.

Engaging with the lender is a key tenet of this and filling in the SFS and liaising with the lender on aspects of it. The information in this is what will be used to negotiate the repayment that you will pay in cases where lifestyle adjustment does not allow you to make the full payment.

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Debt Deflation

Irving Fisher was a leading economist in the early 20th century. After being caught out during the Great Depression (he famously quipped, “Stock prices have reached what looks like a permanently high plateau.” right before the bottom fell out), he did a lot of soul-searching and research to understand where he and his profession had gone wrong. By 1933, he had come up with a framework which very well describes what happened during the depression and happens in similar episodes of credit crisis.

From an issue of Econometrica in 1933: “Assuming, accordingly, that, at some point of time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both”. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to 2. Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes 3. A fall in the level …

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Negative Equity Financing

I was on the panel on Frontline recently and during it I mentioned a thing called ‘Negative Equity Financing’, we were asked by a few journalists and some clients about it, so hopefully this post will help to clear up what it is, and how it may work.

For a start, I’m anti-bailouts, in general and in particular, so debt forgiveness is not really something you’ll  see supported here, but we are big believers in facilitation, and any means that can help to oil the cogs is likely better than one that tries to create a new machine – albeit in time that is what we need; changes to our property and debt laws. However, in the here and now facilitation is quicker and easier to implement and has a better chance of reaching those it is intended for.

Negative Equity Financing is the idea we have put forward, but it isn’t just a case of doing a short sale because that doesn’t work in Ireland.

A short …

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Debt Management: no tax break for people in trouble

Financial services (such as brokering) are a zero VAT business, we cannot charge VAT for our activities, we do however, pay VAT on all of our supplies and in one respect that makes financial services good for the Revenue Commissioners, it’s a one way street.

Equally, it makes everything more expensive for a financial services company, but we won’t be expecting any sympathy on that!

However, what happens when that financial service is for a person in difficulty? A guideline given by the Revenue Commissioners to a debt management company in Dublin has lead to the interpretation that ‘Debt Management’ is subject to VAT.

What that means is this:- If you get into trouble servicing your debt and you hire a professional service to help you negotiate with lenders and to arrive at settlements on interest and principle amounts due then you will have to pay VAT on the fee applicable by the company that is helping you to get out of trouble. Thus the service becomes 21.5% more …

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