Long way to go in dealing with non-performing mortgages

For years now we have been warned that a “tsunami” of repossessions is on the way due to the high level of mortgage arrears. So far, at least, it hasn’t happened.

The latest figures from the Central Bank show that repossessions are happening, but on a small enough scale. Looking at the banks – and focusing on residential mortgages – a total of 245 houses were repossessed during the quarter, a bit lower than 321 the previous quarter. The majority were voluntarily surrendered or abandoned. A total of 101 houses were repossessed on foot of a court order. Looking at what the Central Bank classifies as "non-bank entities" and everyone else calls vulture funds, a total of 47 properties were repossessed during the quarter, up from 43 the previous quarter.

However, while the number of mortgages in arrears falls, the nasty problem of those in long-term arrears remains deep-rooted. More than 6 per cent of all loans are in arrears for more than 90 days and the amount owed by these borrowers represents just under 10 per cent of the total outstanding balance on all residential mortgages.

Looking at the detail of how arrears are being dealt with, questions also remain, as pointed out by Brokers Ireland. While a total of 7,857 restructuring agreements were signed during the second quarter, the highest level since 2016, arrears capitalisation accounted for a third of the total. These type of arrangements, effectively rolling up arrears and adding them to the mortgage to be paid, will only be kicking the can down the road in many cases. More encouragingly, the share of interest-only and reduced payment arrangements – the classic delaying tactic – are falling and more split mortgage deals are being agreed.

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The figures also showed that non-bank lenders have, not surprisingly, a much higher proportion of longer-term arrears on their books. Irish banks simply seem to struggle to cope with these and some commentators believe that vulture funds may be more pragmatic in writing down debt. In some cases this may be true. The Irish banking system has failed to deal with this issue in any kind of expeditious way, albeit that the Irish legal system has also played a role. Ten years on from the crash, there is still a long way to go in dealing with non-performing mortgages.