ICS to be sold and currently ceasing mortgage offerings.

We have just found out that the EC have approved Bank of Ireland in keeping New Ireland assurance but that ICS must be sold and they are to stop accepting [glossary id=’6898′ slug=’mortgage’ /] applications with immediate effect.

We don’t actually know what this means at present, we have not been informed of how they will deal with pipeline applications, applications that are on the system and approved but not offered, or that are awaiting approval.

We have been told that it will be ‘business as usual’ but it may not be,we heard this line before from INBS and others, and if not this is going to cause quite a nightmare for many people and some them will be our clients.

This is out of our control, and not something we had a contingency plan for, but unlike the norm in Irish finance we are not going to wash our hands of it and say ‘not our fault’, this isn’t about blame, this is about Irish Mortgage Brokers doing a great job for every client we represent, and that isn’t …

Read More →

The trend in lending and deposits

We have been banging on for quite some time about the trend in mortgage and deposit rates, namely that mortgage rates will continue to rise and that deposit rates will start to drop (already happening) and this will continue downwards – in particular you’ll have to watch for zero rated fund movements.

Zero rated funds are the money that banks keep for you (a liability for them) in the likes of demand and current accounts. You used to get zero interest but in return you got free banking. Now more lenders are demanding that you keep a certain balance in the account or you get charged a fee, such as Bank of Ireland’s recent decision to require a €3,000 balance to qualify for free banking.

This creates a near ‘negative interest rate’ for people who don’t keep that sum in their current account because fees mean the bank will cover all operational cost associated with your account for regular banking activity while making money elsewhere with those funds or …

Read More →

Mortgage Debt for Equity swaps

A popular idea that has been discussed in the past (and if Niamh Hennessy’s article proves correct may become working reality) is that of banks taking equity in the family home in exchange for reducing the debt on the property.

I’d like to go through this by looking at the differences in cost, the difference to the mortgage holder and to take a look at why it may not be a great idea.

The bank balance sheet currently looks like the picture to the right, the value of the asset (the loan) is based upon the amount of finance advanced, not the value of the underlying security.

Remember: When you put in your deposit, you are the first equity owner, if prices fall the owners equity is wiped out first which is why ‘negative equity’ is a talk about current value versus the mortgage secured and not just current value versus market value.

People who’s property fell 40% but who have no mortgage cannot crystallize …

Read More →

AIB Rate hike: where is it now and where is it going?

AIB have announced an increase in their Standard Variable Rates (SVR’s) as well as in their Loan to Value Standard Variables (LTV-SVR’s: which are tiered variables based upon your loan to value), effective from August 10th. Caroline Madden of the Irish Times and Charlie Weston from the Independent both carried the story today, this comes only days after Allied Irish Bank announced that they lost over €2,000,000,000 in the first half of 2010.

Their SVR now stands at 3.25% but where is it headed? For that it is important to look at several different factors, firstly, their cost to income ratio has gone from 48% in 2009 to 63% for 2010. That means that it is costing them €63 to turn over €100 in income, this is a 32% increase on last year in costs which is a bad indication.

There are a multitude of factors playing into this:

1. Guarantee/ELG costs: …

Read More →

Haven move LTV’s lower

The EBS distribute through brokers via their subsidiary ‘Haven Mortgages’, the EBS have thoroughly debunked the idea that mutuality means anything by charging their existing clients different rates than new clients. They have also failed to be in the driving seat for a ‘third force’, going it alone has not happened, remaining an independent entity has failed, and the likelihood of private equity getting involved will most likely hinge upon state support being part of the package, thus it seems that institutional buyers will be the only serious suitors.

It is in an environment such as this that costs should be most seriously addressed, they have done this with Haven, slashing commissions and workforce, getting the organisation lean, but thus far EBS have failed to pursue efficiency with the same zeal within their own camp, and this zombie-like bank/mutual/whatever, is now reducing LTV’s for the only efficient part of the operation, Haven will now only offer a maximum of 80% LTV to potential clients, leaving 90% loans with the least effective arm of the organisation, the agent network.

It is …

Read More →

Behavioral Economics & Arrears – avoid repossession by reward

I had an interesting conversation with Frank Pallotta of Loan Value Group in New Jersey earlier today. Loan Value Group is an organisation that was set up to help avoid foreclosures, they use the expertise of behavioural economists from Wharton, mortgage finance experts, mortgage advisers, and consumer marketing experts, to work with lenders at risk of strategic default and likely default.

There are really only two classifications of borrowers in difficulty, those who can’t pay and those who won’t pay – Loan Value Group can both identify and work with either cohort.

We share a common view on principle reduction, Loan Value Group’s opinion is that ‘blind principle reduction’ is very negative, it addresses the consumers balance sheet, but from a working point of view for every other stakeholder its a mess. And if people are willing to lie for a 0.5 to 1% – reduction in rate then imagine the incentive if there was 10k or more in principle reduction? Therefore, we need solutions that don’t disadvantage the …

Read More →

Just who is getting the mortgages?

Caroline Madden wrote an article in today’s Irish Times ‘Just who is getting the mortgages?‘. It is a question that begs answers, at first it seemed to me like asking ‘Who is John Galt?’ (Rand readers will understand). The stories we hear constantly is that banks are hoarding credit, they will not extend credit to particular groups and when they do the underwriting is so strict that even credit-worthy applications are being turned down.

This article features our feelings on the matter, we believe that some of the banking statistics being thrown around make fore ‘good copy’ (good PR) and very little else, as we are not seeing applications turn from approvals in principle into closed loans, and in many cases, approvals are coming in far below what the applicant is actually looking for.

One element of this is natural, after a credit fuelled boom you …

Read More →
  1. Pages:
  2. 1
  3. 2
  4. 3
← Older Entries