Are the banks finally facing up to the mortgage mess?
Home help: More than 100,000 Irish homeowners currently can't afford to meet their mortgage repayments
The big banks claim that they are getting serious about engaging with customers in mortgage arrears - but the signs so far aren't good, CONOR POPE,Consumer Affairs Correspondent
When it comes to restructuring debt, the Government can move pretty fast if it wants to. A couple of weeks ago, on Prom Night, the Dáil stayed up well past it’s bedtime to rubberstamp a bill aimed at liquidating the bank formerly known as Anglo.
The late night paid off and within 24 hours a deal (kind of) had seen it restructure a €30 billion promissory note into a long-term bond which, we were told, would save us a billion euro a year over the next 20 years.
While the sums owed by more than 100,000 Irish homeowners who can’t afford to meet their mortgage repayments is much smaller, the pain that debt is causing to individuals and families is, arguably, greater, but the pace at which the Government, the regulators and the banks have been moving at since the crisis began has been glacial.
According to the Central Bank, there were 135,628 residential mortgages in arrears at the end of last September, with 86,146 of them behind for more than 90 days. Today, that figure is almost certainly higher. There is much talk of the personal debt crisis – and at the highest levels – but for many people, respite seems a long way off.
It is more than a year since Minister for Justice Alan Shatter published details of new personal insolvency legislation which he described as the “most radical reform of insolvency law since the foundation of the State”. Almost 14 months ago, he promised to expedite its passage into law. It is not yet up and running.
When it does finally get going, it will help people deal with debts they will never be able to repay. The bankruptcy term will fall from 12 years to three, and an out-of-court debt-settlement system – where mortgage debt of up to €3 million can be written down to affordable levels – will be set up.
The regulators are also on the case. Kind of. Earlier this month, Central Bank governor Patrick Honohan said it was “ramping up” its engagement with banks, as they were “behind the curve” in dealing with mortgage arrears. “Banks will have to act more proactively and liberally in respect of those who cannot realistically pay, if they are to avoid the costs and inefficiencies of having to respond to PIA [personal insolvency arrangement] proposals or bankruptcy cases,” Honohan told a conference of bankers.
Stern words, but ones he has uttered to little effect in the past. Speaking to a handful of students who gathered in Limerick on cold, dreary night last March, Honohan said it was “surely now past time for the banks to be dealing more proactively with the situation of over-indebted buy-to-let borrowers no longer able to service the debts they assumed in order to take investment positions – now loss-making – in property”.
‘ Authentic leadership’
Last October Honohan’s colleague Fiona Muldoon had a go at rousing the banks. Speaking at a dinner attended by the great and good of the Irish banking industry, she told her audience that they had paid “lip service” to the notion they were dealing with troubled mortgages. She said banks needed “authentic leadership not humility; some courage to act”. She went on to say that she was not looking for “an overnight avalanche of available resolution options offered to thousands and thousands of borrowers”, just a “proper beginning”.