Archive for April, 2015

Number of ‘at risk’ homeowners looks set to quadruple

The number of the most financially vulnerable homeowners in Northern Ireland could “quadruple” in the next three years, it has been claimed.

Those in the so-called “double trigger” category could be “tipped over the edge” by a rise in interest rates or welfare cuts, according to Ursula Toner of the Housing Rights Service.

And the number of repossessions in Northern Ireland has increased 10-fold since just before the housing crash, according to official government figures.

“These are people that are doubly at risk and fragile to any sort of cut and interest rate change – any benefit change will tip them over the edge,” Ms Toner told a Council of Mortgage Lenders conference in Belfast.

“That number will quadruple by 2018… we have concerns the problems may be worsening.

“There are quite a number of people who are on suspended possession orders, who are just about hanging on to making those payments and keeping their home,” she said.

Trevor Long, who heads up the Enforcement of Judgements Office in Northern Ireland, outlined the stark rise in the number home repossessions carried out here. “In 2007, I completed 139 repossessions. In 2013, it was 1,522. So you can see the scale of how things have changed,” he said.

“That meant I had to redesign how we did things – I had to put more enforcement officers on the road. The concentration at that time moved away from money judgments to repossession work.”

The amount of money taken back from debtors increased to more than £9m in the last year.

And Ms Toner said the problem of interest-only mortgages – where a homeowner only pays back the interest on the loan – was a “time-bomb”.

She said any increase in interest rates in the coming months and years would have “much more impact” on Northern Ireland than in Britain.

Meanwhile, the level of negative equity in Northern Ireland remains the highest in the UK after a boom and bust which saw prices fall as much as 60% in some parts of the province.

Ulster Bank chief economist Richard Ramsey said despite a turnaround across most business sector, the extent of public sector cuts had yet to be felt here. “It’s a game of two halves – public spending cuts are going to be much deeper,” he said.

But Jay Colville, area director for Nationwide, said for new buyers there remained a “massive amount” of mortgage deals on the market.

Source: Belfast Telegraph

Ulster won’t write off debt for those who stay in home

Ulster Bank is on a collision course with the Government after it insisted it will not write off debt for those unable to meet their repayments if they stay in the home.
Image Source: Irish Independent

Ulster Bank is on a collision course with the Government after it insisted it will not write off any mortgage debt for those unable to meet their repayments if they stay in the home.

The admission came after the bank said it would write off mortgage debt for low-income families that sell up and hand back the keys.

But chief risk officer of the bank Stephen Bell said it would be unfair to customers of the lender who were managing to meet their repayments to write off mortgage debt for those unable to meet their commitments.

The Government is concerned that banks are vetoing State-backed insolvency deals, known as personal insolvency arrangements (PIAs).

These are designed to reduce mortgage and other debts.

The Government is planning to bring in mechanisms such as an appeals process to force banks to review cases where lenders reject settlement terms proposed by the Insolvency Service of Ireland, as reported by the Irish Independent in early March.

But Mr Bell was unrepentant: “We are opposed to writing down mortgage debt where people remain in the home.”

He said there was no need to change anything about the banks’ veto in insolvency deals.


Most people were able to meet restructured mortgage payments if their unsecured debts were written off, which was the approach favoured by Ulster Bank, he added.

The bank is appealing to 2,000 mortgage customers who were not engaging with it to contact it and promised to offer fair solutions.

For those unable to meet their repayments, and if they are eligible for social housing, Mr Bell said the home could be sold and the bank will not pursue the customers for the outstanding debt.

But debt advisers warned those considering this to take legal and financial advice as the bank is only making this offer as it has no hope of recouping the money.

Director of the Free Legal Advice Centres Noeline Blackwell said people need to be careful that they do not end up homeless.

“Ulster Bank and the Government will have to be conscious that this sort of proposal doesn’t lead to increased homelessness,” she said.

Ms Blackwell questioned if debt-ridden people would get objective assessment of their situation from a bank and said there was a need for an independent third party to assess those in chronic debt.

Labour’s Senator Lorraine Higgins accused the bank of spinning.

She said the bank had little chance of getting money out of those overburdened with debts.

Source: Irish Independent

State must grasp the loan arrears nettle

Noeline Blackwell

Throughout the crisis, the resolution of mortgage arrears has been blighted by the absence of independent oversight of lenders
Image Source: Sunday Indo Business

Throughout the crisis, the resolution of mortgage arrears has been blighted by the absence of independent oversight of lenders

Taoiseach Enda Kenny recently promised a suite of new measures for those in trouble with mortgage arrears. Speculation is mounting that these are imminent.

Existing policies have failed tens of thousands of households. State policies are not coherent and have not succeeded in allowing people to restructure their mortgages fairly. They have not led to practical outcomes for those who are stone broke and insolvent. Above all, they leave many thousands of households at risk of losing their homes.

New measures are long overdue. The Government needs to grasp the nettle and do it right this time.

So let’s look at what is rumoured to be under review.

1 An appeal or oversight mechanism

Throughout the crisis, the resolution of mortgage arrears has been blighted by the absence of independent oversight of lenders.

They have been allowed to propose any solution they wish or none at all. There can be no fair resolutions where already powerful, well-resourced lenders get wide discretion on how they deal with customers negotiating over the roof over their heads, when the lenders are accountable to no one. An independent appeal or oversight system is therefore crucial.

2 A reduction in voting rights for the main creditors

In most personal insolvency applications where people hope to retain their family home, the main creditor is the lender, which can approve or reject any application without question.

Any reduction in voting rights will be a welcome remedy to the present power imbalance.

3 An information campaign for borrowers

The Taoiseach indicated that Government hopes to raise borrower awareness. This must go beyond a mere information campaign.

People often know the information; what they need is help in applying it to their own situation. The Free Legal Advice Centres (FLAC) has long called for appropriate legal and financial advice and support for stressed, intimidated borrowers dealing with professional lenders.

4 A revised mortgage-to-rent scheme

On its launch in 2012, the mortgage-to-rent scheme looked like an innovative way to provide secure rented housing to people with unsustainable mortgages. However, what was a good idea to increase social housing stock and preserve family homes has been swallowed by bureaucracy and ambiguity. It badly needs improvement.

5 A mortgage interest support scheme

One policy decision that badly misfired was the abolition of the mortgage interest supplement in 2012-2013. That supplement helped people in debt to keep their mortgage going by supporting the interest element.

However the Government argued that scheme made it harder for people to get long-term restructures of their debt.

As with other aspects of the policy, Government expected that banks would take a softer line with borrowers if the supplement was gone. They didn’t.

Now Government seems to recognise that some support could help people overcome difficulty and keep them in their homes

Source: Sunday Indo Business

Property: 60,000 Northern Ireland homeowners trapped in negative equity

Around 60,000 homeowners in Northern Ireland are trapped in the straitjacket of negative equity, new figures show.

The average shortfall if the homeowner was to sell up would be around £68,000, according to Negative Equity NI.

After the property bubble burst, many people who bought at the peak of the market between 2006 and 2008 saw the value of their home tumble. Prices here fell around 55% from the market’s high point. They have since begun to rise, but slowly.

Negative equity affects around 40% of homeowners here, with areas including Omagh and Dungannon hit hardest.

Negative Equity NI estimated it would take homeowners around 15 years to recoup the losses on their properties. According to Royal Institution of Chartered Surveyors data, house prices are set to increase by just 4% this year.

In the latest figures from the Office for National Statistics, Northern Ireland saw an increase of 7.2% – the biggest annual rise in more than seven years. But the average house price was £152,000 – 43% below their peak in 2007.

Phil Davison, from Negative Equity NI, said: “From our research, we estimate the average level of negative equity per residential property in Northern Ireland stands at just under £70,000, and across the country, around 60,000 people are in negative equity.

“Not all of them will have an issue – they may be able to afford to sit tight and weather the storm. Others need to move because their family has grown or they’ve got a new job, and they face being followed around with a hefty shortfall on their mortgage.

“To put that in context, if you owe £200,000 on a property that’s now only worth £100,000, a straight sale would still leave you owing £100,000. Plus, time is money. In this case, the average mortgage term is 25 years. That’s a long time to keep paying for something you no longer own.”

Mr Davison added there was a particular problem with interest-only mortgages.

He said: “If you’re on an interest-only mortgage, have no repayment plan in place and do nothing you are paying the interest on £200,000 over 25 years and still owe £200,000, putting the ultimate cost of the property at £400,000, regardless of its worth.

“Interest-only mortgages are something we are seeing more of, and they will be the bigger story over the next few years.”

Source: Belfast Telegraph

70% of mortgage holders in arrears are long-term

Seven in 10 residential mortgage holders behind on their repayments are in long-term arrears — a third of which are grappling with a payment backlog of two years or more.

Despite the latest Department of Finance mortgage arrears figures showing a slight improvement in the number of borrowers in arrears, the scale of the crisis is strikingly evident.

At the end of February, the number of primary dwelling mortgage accounts in arrears stood at 84,717 — an improvement of 3,100 compared to the previous month.

More than 30,200 residential mortgage accounts are mired in arrears of 90 to 720 days with a further 28,930 more than 720 days behind their repayment schedule, however.

The combined total of borrowers accounted for in these two categories translates to just shy of 70% of all residential mortgages in arrears. The situation is reflective of the impending tsunami of repossessions that may materialise with 8,000 such cases before the courts. While many of these cases may not result in repossessions, the number of borrowers before the courts is cause for concern.

The mortgage issue has come into sharper focus as of late with variable rates charged by the country’s main lenders coming in for severe criticism from opposition TDs and advocacy groups while government-supported arrears solutions have also been described as ineffectual.

Finance minister Michael Noonan said earlier this month that he would ask the Central Bank governor Patrick Honohan to bring his influence to bear on trying to convince the banks to lower the rates charged on standard variable rate mortgages. The Central Bank is compiling research on the issue which is expected to highlight the disparity between rates in the Irish market and those in other European countries which are up to €3,300 a year cheaper — but appear reluctant to intervene directly.

The Government which cannot set rates also appears limited in the influence it can exert over the banks.

Stakeholders are still searching for solutions to the arrears crisis too with the Irish Mortgage Holders Organisation suggesting last week that local authorities could pay part of the a borrower’s mortgage in some circumstances.

Existing solutions such as the Government’s mortgage-to-rent scheme, have seen disappointing results to date. However, the number of restructured mortgage accounts stood at 106,400 at the end of February, The number of mortgages in arrears of more than 90 days not restructured has fallen to 41,550 from 42,510.

Of the permanent restructuring arrangements, arrears capitalisation is the most oft-used with more than 28,000 while more than 21,700 split mortgages have been initiated.

Just 2,000 interest-only mortgages have been agreed while more than 16,000 term extensions have been finalised. Interest-only mortgage products are the most popular temporary arrangements, however.

The number of buy-to-let mortgages in arrears at the end of February reduced by 530 against the previous month’s figures and stood at 28,603. There was a fall of 303 in the number of accounts in arrears of greater than 90 days, which stood at 23,520 at end February 2015.

Some 5,915 restructures were in arrears of greater than 90 days compared to 6,045 the previous month.

Source: Irish Examiner

Europe tells PTSB to sell its high-risk mortgages

At a fractious annual general meeting earlier this week, PTSB chairman Alan Cook said the bank is not yet profitable, and therefore cannot bring down prices for customers.
An Irish bank has been told to reduce the number of its tracker mortgages in arrears, including by selling off the high-risk home loans.

Bailed out lender Permanent TSB (PTSB) was ordered to reduce its book of tracker mortgages in arrears as a condition for European approval of a long-term rescue plan.
The bank is losing money on the trackers, loans where interest charges have automatically followed the ECB rate to an all time low.
Competition authorities at the European Commission said yesterday that they have approved a restructuring plan for the bank. Brussels said it paves the way for PTSB to return to viability after the €2.7bn bailout.
But conditions laid down by Europe for granting the approval are set to prove highly controversial.

That includes a commitment from the bank to reduce the value of its defaulted Irish tracker mortgages – either by restructuring the distress home loans for customers or by selling them.
It is the first time a bank here has been specifically told to sell the home loans of customers in arrears, who are by definition most at risk of repossession.
Bank sources said last night that PTSB’s preference is to “cure” rather than sell the loans, but the lender is up against a time table which has been set by European authorities and which ends no later than 2018.
PTSB has previously sold its springboard Irish sub-prime mortgages business to UK fund Mars Capital, but that includes a mix of good and bad loans. Like most lenders planning to remain active in the Irish market, the bank has shied away from selling home loans made in its own name, even as it disposed of other assets.
The sale of customer mortgages by bailed-out banks, including, notably, by the liquidators of the former Irish Nationwide Building Society, has proved highly controversial.
That is in large part because borrowers automatically lose the protection of the Central Bank’s code of conduct on mortgage arrears if their home loan is sold to an unregulated buyer.
Up to 20,000 mortgages have been sold by banks since the financial crisis, mostly to unregulated foreign investment funds.
After a public outcry the Cabinet approved draft legislation earlier this year that will see all homeowners get full consumer protections, but it has yet to be signed into law.
Until then, funds that buy mortgages are not bound by the consumer protection code, which limits what a lender can do when someone is in arrears.
The deal approved by Europe also includes a commitment by the bank to maintain its income ratio at targeted levels. That will be a worry for PTSB customers campaigning for a cut to the cost of their standard variable rate mortgages, which carry interest rates of around 4.5pc which are a multiple of the cost of servicing tracker loans.
At a fractious annual general meeting earlier this week, PTSB chairman Alan Cook said the bank is not yet profitable, and therefore cannot bring down prices for customers.

Source- Irish Independent

1,000 repossession cases listed in courts this week

Repossessions are expected to surge after the latest Central Bank figures revealed that the main banks were now threatening 31,000 homeowners with the loss of their properties.
New figures show the threats to take homes off people make up 40pc of the “solutions” the banks are proposing as part of targets set for them by the Central Bank for dealing with the arrears crisis.
More than 17,000 of these mortgage holders are already at a more advanced stage of the repossession process.
Some of these people have already given up their homes voluntarily, the Central Bank said.
The figures, which set out how the banks have dealt with targets set for them by regulators, show just 46,000 of those in arrears on a residential home loan have had their mortgages restructured.
New Beginning believes that most of cases coming before the courts can be resolved without the loss of the family home, provided there are systems in place to deal with borrowers “whose finances are so impaired as to make them unable to repay even a restructured mortgage”.
“This involves industrial-style solutions which will involve ownership in properties passing to large group-housing owners who can then lease them to the individual borrowers or to local authorities who can lease them on to those same people,” Mr Maguire said.

He suggested that this will require new thinking, but inevitably these solutions will need to be forced onto the system.
“At the moment, it is in a state of paralysis. We can force this through by developing strength in numbers. We believe that where we put forward sustainable solutions, the courts should not order evictions. We will ask them – ‘Are you going to put a family out on the road when there is a better way?'”
Last week it was reported that the Government is considering new measures to deal with the mortgage-arrears crisis, including proposals for a new scheme that would allow people in significant arrears to stay in their homes.
The package of measures may also involve legislation to weaken the veto banks enjoy in personal insolvency deals, though court actions will continue against borrowers who refuse to discuss arrears with their lenders.
The Irish Times reported that the Government is also considering a separate scheme that would allow borrowers to retain ownership of their properties, but offer them ongoing State support to help them pay their mortgages.

Source- Sunday Independent

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