31,000 mortgage holders in arrears facing legal action

Legal proceedings have been initiated or threatened against more than 31,000 people who are in mortgage arrears by the four banks who are appearing this week before an Oireachtas committee.

Fianna Fáil deputy Michael McGrath, a member of the Oireachtas Committee on Finance, Public Expenditure and Reform, said not all of the people concerned would lose their homes, but many of them will.

He was speaking during the appearance today of executives from AIB before the committee and in the wake of appearances from representatives of Permanent TSB and Ulster Bank. Bank of Ireland will appear tomorrow.

The committee heard that at the end of last year 24,990 of AIB’s private home mortgages were in arrears of more than 90 days, while 11,650 buy to let mortgages were in a similar situation.

Legal action had been threatened or initiated in 6,702 private home cases and 2,569 buy to let cases at the end of December 2013.

AIB chief executive David Duffy said the bank was taking a lot of cases that were on interest-only arrangements, off those arrangements. It had found that in two-thirds of cases, the customers could service their loans, while one-third could not pay and had to enter a process.

He said that 50 per cent of customers who were told they were potentially going to be taken down the legal path, engaged with the bank as a result.

The bank had also found that 10 per cent of the customers who were brought into legal proceedings, were able to pay their interest and capital.

The average length of time in which people brought into legal proceedings were in arrears, was three years, the committee heard, while most who received letters telling them of potential legal action, were in arrears for at least two years.

The bank had agreed split mortgage arrangements and assisted voluntary sales that had involved the write-down of debt. The total number of cases was approximately 2,000.

The committee was told that of those mortgages in arrears, 70 per cent were in negative equity. Of those mortgages that are performing, 44 per cent are in negative equity.

There were currently 2,500 cases where civil bills had been issued, or the customers had been brought into the legal system. These were for residential home mortgages. It was expected that virtually all of the 2,569 buy to let loans that were the subject of proposed or actual legal proceedings, would end up having receivers appointed.

Brendan O’Connor, group head of financial solutions, said receivers were often appointed because the customer was not forwarding the rent being collected from the properties, to the bank.

On residential home mortgages, he said the negotiations the bank was involved in were often “heartbreaking”. He said loans issued to couples who had since become separated or divorced were “quite a significant percentage” if the difficult cases the bank was dealing with, and could be very complicated.

Mr Duffy said that SME arrears receive a disproportionately small level of coverage in the national debate despite the resolution of this problem being critical for the country’s long-term sustainable growth.

He said the bank was making “very strong progress” in resolving its SME arrears and was seeing much higher rates of customer engagement relative to the mortgage book.

“We are confident that we will have completed the substantial majority of the SME restructures over the next 12 months.”