Deliberately in Mortgage Arrears

donalg1

Saw this article on the Irish Times today just wondering if anyone has thought of going into arrears to try and win concessions and if anyone would openly admit to doing it. Personally I think people would be crazy to mess up their credit rating when they dont need to but then some might see it as worthwhile.

UP TO a quarter of mortgage holders whose payments are in arrears are deliberately delaying payments to try to win concessions from lenders, it was claimed last night.
But the claim, by Karl Deeter of Irish Mortgage Brokers, was immediately challenged by the Free Legal Advice Centres. Its director, Noeline Blackwell, said that while some people were “undoubtedly abusing the system”, it was impossible to establish the true number.
Mr Deeter said there was increasing anecdotal evidence of mortgage holders “strategically” falling behind on their repayments in an attempt to gain a greater measure of forbearance from lenders.
He said the indications he had received from clients, bank debt collection teams and senior executives in the State’s largest financial institutions suggested that the problem of “strategic arrears” is far greater than the banks will publicly admit.
Speaking to The Irish Times, Mr Deeter said the level of mortgage arrears was increasing more quickly than was necessary because significant numbers of borrowers were operating under the belief “that they might get some kind of debt deal that is being caused by changes the Financial Regulator made”.
There have been changes to how often lenders can contact those in arrears, while under new personal insolvency legislation making its way through the Oireachtas banks are likely to be pressed to show more forbearance to people who can show they are in no position to pay mortgages.
Responding last night, Ms Blackwell said banks “ may well have suspicion about their own customers but ultimately that is just speculation”.
“We do not get anyone in to us telling us they are planning to strategically default on their mortgage debt and I very much doubt they are telling the banks that either,” she said.
Mr Deeter said the lowest estimate Irish Mortgage Brokers had suggested was that around 12 per cent of the total arrears were held by people who could afford to make repayments but had chosen not to in the hope of being the beneficiaries of some class of debt forgiveness.
“The figures are not being officially collated but the anecdotal evidence is very strong and is coming from several channels,” he said.
“The lowest number suggests that 12 per cent of mortgages which are in arrears don’t need to be. But the highest percentage that we’ve heard is that some collectors believe as many as one in four dont need to be in arrears.”
He said it was “a disgrace” that people were choosing not to pay their mortgages when they were in a position to do so and this increased the pressure on those who were in “genuine trouble, who aren’t in this situation by choice”.
Permanent TSB said yesterday the number of accounts more than 90 days in arrears stood at 20,816 in 2011, up from 12,200 cases in 2010.
AIB said 7.9 per cent, or more than €32 billion of its owner-occupier mortgages, were in arrears of more than 90 days at the end of last year, compared with 2.2 per cent a year earlier.

D1stant

I think its understandable in severe NE situations... if you think there is a deal to be done

Unfortunately there is no consistent policy from Government or tha banks on the issue. 'Dealing with debt on a case by case basis' to some ears sounds positive and only encourages it.

daltonmd

donalg1 wrote: »

Saw this article on the Irish Times today just wondering if anyone has thought of going into arrears to try and win concessions and if anyone would openly admit to doing it. Personally I think people would be crazy to mess up their credit rating when they dont need to but then some might see it as worthwhile.

"He said the indications he had received from clients, bank debt collection teams and senior executives in the State’s largest financial institutions suggested that the problem of “strategic arrears” is far greater than the banks will publicly admit."


How do they know? What information are they working off? In fairness look at where the information is coming from. Meh...

donalg1

daltonmd wrote: »

"He said the indications he had received from clients, bank debt collection teams and senior executives in the State’s largest financial institutions suggested that the problem of “strategic arrears” is far greater than the banks will publicly admit."


How do they know? What information are they working off? In fairness look at where the information is coming from. Meh...

I wouldnt say the numbers are as high as he would claim, but I would imagine there are some people doing it in the hope of coming to some arrangement with the banks. But surely the banks would look for evidence of income etc before coming to some agreements anyway

daltonmd

donalg1 wrote: »

I wouldnt say the numbers are as high as he would claim, but I would imagine there are some people doing it in the hope of coming to some arrangement with the banks. But surely the banks would look for evidence of income etc before coming to some agreements anyway

Exactly - this notion that a section of mortgage holders who can afford to repay would simply not, and that the banks would take no action against them.

dearg lady

It seems quite likely this is happening, but as regards the percentage, well that's anyone's guess!

I'd say there's another group too, those who haven't made a conscious decision to go into arrears but believing themselves to be on the breadline, are making minimum payments. Let me give an example, a colleague of mine told me she had to go on interest only, they did't know what they were going to do, panic over mortgage repayments. This same girl booked a 300euro a night hotel, and had to buy all new clothes for this same one night away trip. Seems crazy to me.

smallerthanyou

I would say this is happening. Anecdotially it is but impossible to judge the numbers and unlikely to be the largest numbers. It's part of the moral hazard effect that goes with the uncertainty around the potential for debt-forgiveness schemes. Why would someone who has cut back everything to the bare minimum standard of living keep paying when there is the potential for debt forgiveness for those that don't? I wouldn't pay if that was the case.

jmayo

D1stant wrote: »

I think its understandable in severe NE situations... if you think there is a deal to be done

Do people think that negative equity is something that should allow carte blanche to occurr ?
Negative equity does not and should not absolve one of their outstanding debts. :mad:

D1stant wrote: »

Unfortunately there is no consistent policy from Government or tha banks on the issue. 'Dealing with debt on a case by case basis' to some ears sounds positive and only encourages it.

This is exactly why you can't have a blanket system.
You can't treat all people in debt the same since the circumstances are always going to be different.

daltonmd wrote: »

Exactly - this notion that a section of mortgage holders who can afford to repay would simply not, and that the banks would take no action against them.

Does little things like this not throw a spanner in your desire to have debt forgiveness/debt writeoffs for those in negative equity and in default ?
Thus I can see why you refuse to believe that this may be happening.

This type of sh*** is going on and it is exactly why there can be no debt forgiveness schemes brought in.

It is easier to do than people may think.
A lot of those with massive mortgages and large negative equity are the very ones who were involved in the building industry.
These are then the type of people who may have emigrated for work or maybe doing the odd nixer for cash (it is still happening) and there is no way the bank can see exactly what they are earning.

The Irish owned banks are not operating as normal banks since they are ultimately constrained by public opinion (government).
I think if you want to see how a somewhat normal banks work then look at ACC, NIB, etc.

daltonmd

jmayo wrote: »

This is exactly why you can't have a blanket system.
You can't treat all people in debt the same since the circumstances are always going to be different.

jmayo wrote: »

Does little things like this not throw a spanner in your desire to have debt forgiveness/debt writeoffs for those in negative equity and in default ?
Thus I can see why you refuse to believe that this may be happening.

This type of sh*** is going on and it is exactly why there can be no debt forgiveness schemes brought in.

Where did I mention a blanket system? Of course jmayo you buy into what the banks are saying - and of course we all know them to be completely honest.

Re-read my posts - look at the reality of the situation and know this - mortgage debt write down will happen - there is no other way.

indiewindy

daltonmd wrote: »

Where did I mention a blanket system? Of course jmayo you buy into what the banks are saying - and of course we all know them to be completely honest.

Re-read my posts - look at the reality of the situation and know this - mortgage debt write down will happen - there is no other way.

Do you believe that the taxpayer should reward failure and let people who took out massive mortgages absolve themselves of responsibility for their mistakes even those who continue to live beyond their means are are deliberately not paying their mortgages?

OfflerCrocGod

indiewindy wrote: »

Do you believe that the taxpayer should reward failure and let people who took out massive mortgages absolve themselves of responsibility for their mistakes even those who continue to live beyond their means are are deliberately not paying their mortgages?

I don't see what the 'taxpayer' has to do with a private transaction. The houses should be repossessed of course and their credit rating obliterated but apart from that wipe the loan. Dragging the matter out like we do is utterly mad, the US is recovering at a far quicker pace due to being able to reach a market clearing price and being able to clean the banks balance sheets faster.

The faster the debts are dealt with the faster the market heals and the economy recovers, it's not some moral quest it's common sense. People need to start loosing their houses in the thousands. The faster the better for the economy.

indiewindy

OfflerCrocGod wrote: »

I don't see what the 'taxpayer' has to do with a private transaction. The houses should be repossessed of course and their credit rating obliterated but apart from that wipe the loan. Dragging the matter out like we do is utterly mad, the US is recovering at a far quicker pace due to being able to reach a market clearing price and being able to clean the banks balance sheets faster.

The faster the debts are dealt with the faster the market heals and the economy recovers, it's not some moral quest it's common sense. People need to start loosing their houses in the thousands. The faster the better for the economy.

if the banks write off the bad debts their owners (us taxpayers) would have to pony up to cover the hole in their balance sheets again

riclad

Say someone has a loan for 300k,house is worth 160k, they can now afford to pay a mortgage of 190k,does it do the bank any good to evict em and sell the house for 160 ?
IT seems to me people on lower income are getting round this by going to interest only payments.Maybe some people are switching to interest only,even though they could afford to pay 90 per cent of the mortgage , because they think there maybe a capital write down in a few years.
BANKS are writing down loans regulary ,in the case of developers,
companys going out of business, but in the case of home loans ,it doesnt
seem to happen unless someone leaves the house and emigrates.
If your house has lost 50 per value ,and you are in ne ,you may not care much about your credit rating anyway.
it would be nice if there was an independent body that could
negotiate for a deal or x amount capital reduction in the case of
people whose incomes have dropped and cannot afford to pay the full
mortgage.this would not apply to investors , just people who live in the house .

OfflerCrocGod

indiewindy wrote: »

if the banks write off the bad debts their owners (us taxpayers) would have to pony up to cover the hole in their balance sheets again

We have paid to fix up their balance sheets it's just they won't use the capital - like dragons they sit on their hoards of gold that cost Ireland dear and refuse to deal with problem loans. We pay one way or another either through an economy that refuses to start again or by pumping money into the banks. The route of dragging things out and kicking the can just prolongs the problem and makes the economy more sclerotic. If someone can't pay the mortgage this month and they are 9 months in arrears with no job, they won't pay next month, or the month after, or after that.

Better to reposes it rent it to someone who can pay or sell it to someone who can pay and move on. Once people who can pay take over it they will be a healthy household and so will the people who were evicted. Confidence will slowly return and spending will increase, the banks will have healthier loans instead of ones that are toxic.

The bone is broken, either you let the doctor straighten it so it heals correctly or you let it heal crooked and it will have to be re-broken later.

Either way it's going to hurt, best get it over and done quick because the longer people are out of work the more likely they stay that way. We need an improving economy not a zombie one.

daltonmd

indiewindy wrote: »

Do you believe that the taxpayer should reward failure and let people who took out massive mortgages absolve themselves of responsibility for their mistakes even those who continue to live beyond their means are are deliberately not paying their mortgages?

Absolutely not. I have never said that nor advocated it. If you read my posts in relation to this - it has always been about the banks (taxpayer) getting as much of a return as possible.

For example - if people are living in homes that were once woth 350k and have now reduced to 175k and if these people have suffered paycuts/job losses and can only repay a mortgage of 175k (approx todays value on the property) then why not work with that?

I have also said that in these cases the properties may not be sold for profit, that there should be a lien on the homes and that every effort should be made from the bank to re-coup as much of the loan as possible.

Some people here fail to see that if the banks moved in on every problem mortgage that they would go bust - and that is the reality. This is a move that would cost the taxpayer much more than working with genuine people in genuine difficulty - debt write down is an essential part of recovery - it is a standard business protocol.

daltonmd

OfflerCrocGod wrote: »

We have paid to fix up their balance sheets it's just they won't use the capital - like dragons they sit on their hoards of gold that cost Ireland dear and refuse to deal with problem loans. We pay one way or another either through an economy that refuses to start again or by pumping money into the banks. The route of dragging things out and kicking the can just prolongs the problem and makes the economy more sclerotic. If someone can't pay the mortgage this month and they are 9 months in arrears with no job, they won't pay next month, or the month after, or after that.

Absolutely correct.

OfflerCrocGod wrote: »

Better to reposes it rent it to someone who can pay or sell it to someone who can pay and move on. Once people who can pay take over it they will be a healthy household and so will the people who were evicted. Confidence will slowly return and spending will increase, the banks will have healthier loans instead of ones that are toxic.

No no no. This may work if we were talking about a small portion of people in difficulty - we're not. I understand your reasoning - but if all the properties in difficulties were put on the market then this would drive prices to the floor - to the gutter actually, which means the banks get less back from these loans.

OfflerCrocGod wrote: »

The bone is broken, either you let the doctor straighten it so it heals correctly or you let it heal crooked and it will have to be re-broken later.

Again we are talking about the sheer numbers in trouble. If it pertained to a small minority then yes - but we could be talking about 10's of thousands - and then some.

OfflerCrocGod wrote: »

Either way it's going to hurt, best get it over and done quick because the longer people are out of work the more likely they stay that way. We need an improving economy not a zombie one.

We need people to be able to pay mortgages for homes at todays aluations, we need to give them room to breath.

it just ires me that we forgive banking mistakes, goverment mistakes, financial regulator incompetence and yet lay the blame on the ordinary joe and jane who simply bought a home. Some people here scream for the rights of the taxpayer - yet forget that the taxpayer in a hell of a lot of cases is the struggling holder of a boom mortgage.

OfflerCrocGod

daltonmd wrote: »

No no no. This may work if we were talking about a small portion of people in difficulty - we're not. I understand your reasoning - but if all the properties in difficulties were put on the market then this would drive prices to the floor - to the gutter actually, which means the banks get less back from these loans.

About 30,000 mortgages should be enough to clear the majority of problems, I'm not talking about people in NE I'm talking about ones that are basically never going to be repaid. As for driving prices to the floor, we need prices to hit a floor, the faster the better. I don't mean giving away the houses, you can put them on the market for a reasonable amount or put them in auctions with reasonable reserve prices. They could also be packaged up into REITs and rented out if selling them is not feasible. If neither selling nor renting are going to work then I'm afraid the house is a lost cause. I cannot imagine that will the case very often. Of course we need laws to allow that to happen, watch as our efficient political system fails to do anything useful...

daltonmd wrote: »

Again we are talking about the sheer numbers in trouble. If it pertained to a small minority then yes - but we could be talking about 10's of thousands - and then some.



We need people to be able to pay mortgages for homes at todays aluations, we need to give them room to breath.

it just ires me that we forgive banking mistakes, goverment mistakes, financial regulator incompetence and yet lay the blame on the ordinary joe and jane who simply bought a home. Some people here scream for the rights of the taxpayer - yet forget that the taxpayer in a hell of a lot of cases is the struggling holder of a boom mortgage.

I don't think blaming anyone is any help. Best to move on quickly with the problems and improving our market clearing process which at the moment is utterly woeful. At least we are getting some transparency thanks to the IMF forcing us to create indexes and open price databases. I just wish the IMF had written the specifics of our new insolvency laws as opposed to simply tell us to fix something that is clearly broken. They would have done a far better job then our own lot.

Don't forget we have over €90 Billion in deposit accounts in the country - trust me if banks started offering houses for rental yields of 10% or so that money would be attracted out. The Allsop auctions show that. As would foreign money and expat money.

Discodog

If I own a house that is in negative equity the longer that I can collect rent & delay paying the mortgage, the better for me. Of course people are doing it.

pawnacide

Surely any arrangement with a bank is a contract based on a legally binding declaration of financial means and income.I would doubt those in arrears are the ones with foreign bank accounts, offshore accounts or numbered swiss accounts. A bit of due dilligence on behalf of the banks would sort this out. I realise due dilligence isn't their strong point but maybe they could change .. just a little.

BTW .. this is starting to sound like the repossessions thread.

jmayo

pawnacide wrote: »

Surely any arrangement with a bank is a contract based on a legally binding declaration of financial means and income.I would doubt those in arrears are the ones with foreign bank accounts, offshore accounts or numbered swiss accounts. A bit of due dilligence on behalf of the banks would sort this out. I realise due dilligence isn't their strong point but maybe they could change .. just a little.

BTW .. this is starting to sound like the repossessions thread.

You forget this is Ireland.
The country where half the population, the half with any money, it appears had "foreign" bank accounts during out bad recession in the 80s.
This is the country where our minister of finance did not have a bank account. :rolleyes:

Some people still like to deal in good old fashioned cash.
Cash is harder to trace.
And even if eventually found with loads of cash you just resort to the old line about winning it on the nags. :rolleyes:

kippy

indiewindy wrote: »

Do you believe that the taxpayer should reward failure and let people who took out massive mortgages absolve themselves of responsibility for their mistakes even those who continue to live beyond their means are are deliberately not paying their mortgages?

No,
I don't believe the taxpayer should pick up the tab for that.

However, in this country, the taxpayer picks up the can for the guys higher up the chain, the developers, who somehow managed to retain a large portion of their assets, transfer the rest of to family, use some of the highest paid financal and legal professionals to help with this, and then end up getting 6 figure salaries from NAMA and other groups to manage the portfolios that NAMA have taken over.

I think people want to see some level of fairness and some people think that if the taxpayer can pick up the can for the "rich" and powerful, why cant the taxpayer pick up some of the tab for them as well?

Zamboni

kippy wrote: »

No,
I don't believe the taxpayer should pick up the tab for that.

However, in this country, the taxpayer picks up the can for the guys higher up the chain, the developers, who somehow managed to retain a large portion of their assets, transfer the rest of to family, use some of the highest paid financal and legal professionals to help with this, and then end up getting 6 figure salaries from NAMA and other groups to manage the portfolios that NAMA have taken over.

I think people want to see some level of fairness and some people think that if the taxpayer can pick up the can for the "rich" and powerful, why cant the taxpayer pick up some of the tab for them as well?

What about folks who didn't run up a 'tab' at all?
What do they get exactly? The joy of picking up after everyone else's mistakes?
I think this country needs a second Flight of the Earls, except it will be a Flight of the Solvent.
Leave the losers to it.

kippy

Zamboni wrote: »

What about folks who didn't run up a 'tab' at all?
What do they get exactly? The joy of picking up after everyone else's mistakes?
I think this country needs a second Flight of the Earls, except it will be a Flight of the Solvent.
Leave the losers to it.

I'm not defending these people, just pointing out why some of these people might see things as a tad unfair.

Obviously those that didnt run up tabs, kids, the next generation, the poor who remained poor throughout etc are all exceptionally hard done by and have every right to feel this way.

daltonmd

OfflerCrocGod wrote: »

About 30,000 mortgages should be enough to clear the majority of problems, I'm not talking about people in NE I'm talking about ones that are basically never going to be repaid. As for driving prices to the floor, we need prices to hit a floor, the faster the better.

The problem is more than 30,000 mortgages at a recent count there were over 50,000 mortgages in arrears of 6 months or more , as each austerity budget comes in, more and more people will find themselves unable to repay boom time mortgages based on earnings they will never earn again and on house prices that we will not see for decades.

We need prices to hit the floor? I really believe that people aren't joining the dots - if the banks close in on every mortgage in trouble they will collapse.

OfflerCrocGod wrote: »

Don't forget we have over €90 Billion in deposit accounts in the country - trust me if banks started offering houses for rental yields of 10% or so that money would be attracted out. The Allsop auctions show that. As would foreign money and expat money.

90 billion in deposits? What about what they owe EU banks? The ECB? Over 200 billion - they don't have 90 billion, it's not their money.

Trust me - the banks are broke. You are looking at one side of the equasion and not at the other. Irish banks cannot afford to close in on all mortgages in trouble - have a look at their loan books, take into account that over 50% of their property loans are now in NE.