Half of mortgage borrowers in arrears may lose properties

The rate of house repossession in Ireland is likely to ramp up significantly in the coming months with new figures showing nearly half of the “proposed solutions” for distressed borrowers may involve the loss of properties.

The latest figures from the Central Bank on how the State's main banks are meeting targets for resolving mortgage arrears reveal the scale of the problem that still exists nearly eight years on from the property crash.

They show 47 per cent of the proposed solutions reported by banks for borrowers in arrears of at least 90 days, equating to 49,698 cases, involve the potential “loss of ownership” for the borrowers.

Significantly, the lion’s share of these cases (30,904) relate to owner-occupier mortgages.

The figures for the final quarter of last year show the majority of proposed solutions reported for both owner-occupier and buy-to-let mortgage holders in arrears involved some form of loan restructuring arrangement, while a small number of cases were being resolved through the insolvency legislation.

The figures come as the Government looks at new measures to tackle the mortgage arrears crisis. The Government’s Economic Management Council is understood to have discussed the issue, specifically the high number of repossession cases headed for the courts, at its weekly meeting on Wednesday.

Sources suggest the Government is looking at possible changes to the personal insolvency rules, including some form of review process when banks block proposed insolvencies.

Measures to push the banks to be more active in offering solutions that do not involve repossessions are also being considered, perhaps involving more use of mortgage-to-rent schemes in more difficult cases, with the current rules deemed too restrictive.

However, there still remains the problem of what to do with those borrowers in long-term arrears, who are a long way off being able to pay even a restructured mortgage or who will not engage with the lender.

The Central Bank said the six banks covered by the targets - AIB, Bank of Ireland, Permanent TSB, Ulster Bank, ACC and KBC - had “concluded solutions” for 62 per cent of arrears cases of more than 90 days as of the final quarter of last year.This was comfortably ahead of the 45 per cent target, the Central Bank set for the lenders last year.

The figures also show banks had “proposed solutions” for 97 per cent of 104,938 borrowers on their books with arrears of at least 90 days, again meeting the Central Bank’s target of 85 per cent.

Proposed and concluded solutions increased by 4,625 and 7,194 respectively over the quarter with the majority of the change due to increases in the restructure category, which continued a trend from last year.

Of the reported concluded solutions, some 40,837 (60 per cent) involved repayment and restructure arrangements, including split mortgages, term extensions, arrears capitalisations and borrowers clearing their arrears.

According to information supplied to the Central Bank, 91 per cent of the concluded restructure and insolvency solutions are reported to be meeting the terms of the arrangements.

Where the lenders take legal action that may result in loss of ownership for a borrower, the Central Bank said, they are required to comply with the Central Bank’s Code of Conduct on Mortgage Arrears for owner-occupier mortgages, and must be prepared to re-engage with borrowers to explore alternative solutions.

“Therefore, even where repossession proceedings are in progress, in many cases lenders and borrowers may still agree an alternative solution through meaningful engagement by both parties and avoid repossession as an ultimate outcome,” it added.

The Government is expected to publish revised proposals to deal with the arrears issue before the end of this month.