Regulating mortage buyers is a political move not a sensible regulatory one.

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 …

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What the Central Bank said about cases in arrears that are in the court system

Below is an email excerpt from the Central Bank on the area of court proceedings. We get frustrated with misinformation about stadiums of people doomed to homelessness and sums up around 20,000 court proceedings being bandied about. They are bad numbers and should be ignored, however, it doesn’t stop people from repeating things that are wrong.

There is also the information (not yet public as far as I know) from the Court Service which indicates the live number of cases in the system at the end of the same period was 12,252 again, nowhere near some of the figures that were being trumped about at the time.

(email below)

> From: CentralBank <*****@centralbank.ie> > Date: ** April 2016 at 15:18:19 GMT+1 > To: ********** > Subject: RE: Clarification of Quarterly Arrears Stats > > Hi *****, Somebody else has just come back to me with a more useful answer for you: The figure for PDH mortgages – at end-December 2015-there were around 13,500 accounts for which court proceedings have been issued (and have not yet concluded). > > …

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Just repossess stuff, there are REIT’s and Social Housing folks who want them

There is a message coming from two sectors who have a housing demand that isn’t discussed when it comes to the finger pointing game, but who, by rights should get a mention.

The most recent one is mentioned in Construction 2020. Under the heading ‘Social Housing’ on page 14 it talks about how social housing is important then says this ‘It is estimated that in the region of 5,000 new Social Housing units will be provided in 2014 through leasing and existing capital programmes. This includes completion of mortgage-to-rent arrangements’.

Translation: repossessed houses will help create social housing supply. It won’t add supply, it will just re-profile properties from one classification into another meaning the list length stays about the same for these properties. This merely lets people who borrowed leap frog the 90,000+ people in the queue ahead of them into getting a home (which used to be theirs) reclassified into social housing.

The ‘Mortgage to Rent‘ scheme came from the inter-departmental group …

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The Late Debate: Property problems and prices, 1st October 2013

Last night we took part in a conversation on the Late Debate with Audrey Carville to discuss property and some of the issues surrounding it such as mortgages, arrears, price and what some of the challenges are facing both people and the market in general.

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AIB experiment proving there are no answers (at least no easy answers)

Something that was disclosed to me in an interview with Brendan O’Connor, AIB’s Head of Financial Solutions Group (they side of the company that deals with fixing debt problems and arrears) was that they have tried different things to see if it could fix arrears. I’ll outline a recent experiment they did.

This one involved sending letters out to 1,400 borrowers who were both in arrears greater than 6 months and who were not engaging with the bank. This was effectively a ‘best guess’ experiment where the bank would have had some level of insight into the borrowers accounts.

The bank sent out 1,400 letters to the borrowers offering split mortgages or longer term forbearance solutions.

Only 700 replied, so about 50% responded, 50% didn’t write back or acknowledge the letter or answer follow up calls.

Of the 700 respondents it turned out that less than 20 needed long term solutions to make their mortgage manageable. This is less than 1.5% of the original sample group and about 3% of the respondents.

What does this prove? It proves that even …

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Actual repossessions versus perceived repossessions

If you were to read the headlines and not delve into the figures you’d be forgiven for thinking banks are either taking back houses wholesale or are about to. There will be a marked increase that is for certain, but have a look at some of the actual figures below.

This shows actual repossessions versus surrenders and abandonments. It’s clear to see that jingle mail and people giving back properties voluntarily is far greater than those being ‘turfed out’. The ratio is generally more than 2:1 against repossessions.

Some of these properties are being sold at a loss, some have equity, others are owned by people who just leave the country, the main thing to consider though, is that for the 95,000 loans more than 3 months behind (the topline figure of almost 150,000 ‘in stress’ is a little misleading) only 200 were taken back without consent in 2012.

That’s a mere 0.2% of the loans in arrears, and it’s still a nearly insignificant 0.85% of …

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Are repossessions good or evil?

There tends to be two views on repossessing family homes, the first is that it is wrong, that doing this is committing an act which is immoral and putting a family who are often victims of circumstance into an even worse position than that which they currently hold.

The other is that it is reality, not one to be ignored, and that avoiding it doesn’t change outcomes. The recent news that the Secretary General of Finance himself believes that ‘home owners cannot expect to stay in houses where they have no prospect of paying the mortgage’ is telling, we are at a stage we have been saying is going to come for several years; where repossessions start to kick-in in earnest.

The Justice Dunne ruling and CCMA have all had a role to play, as have our zombie banks attitude towards forbearance which is not out of altruism but out of a view that the longer they wait the better they are equipped to deal with the problem.

Thus far the debate …

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New ‘Consumer Protection Code’, the proposed CPC47 going forward.

The original Consumer Protection Code was brought out in 2006 and it was a welcome augmentation to the Regulatory environment, since the financial crisis began we are increasingly hearing calls for ‘more regulation’.

Naturally, good regulation is of benefit to both industry and consumers alike, perhaps industry is actually the greater beneficiary because faith in the financial system allows funds to flow freely and in turn financial firms can make profits with greater ease albeit at lower margins (increased competition tends to go hand in hand with that environment).

However, Regulation that is there to hog-tie or ‘get back’ at either beneficiary of regulation is flawed, so something that hammers banks or consumers is ultimately not an achievement but a regression, and for that reason I can’t help but feel sceptical about the new Consumer Protection Code which will come about from the briefings laid out in consultation paper 47 (recently closed).

Where are the key areas that the failure arose?

Bank …

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‘Plan B’ for arrears

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 …

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