Banks should repossess more homes, says financial adviser

Banks should repossess more homes where mortgages have not been paid, a financial adviser has said.

Brendan Burgess, of the consumer forum Askaboutmoney.com, has said more sanctions should be introduced to dissuade people from not paying their mortgages.

“We have to turn around and say in this country that if people don’t pay their mortgages their house is going to be repossessed. That would benefit almost everybody because if people realised there was a sanction for not paying their mortgage they’d organise themselves and they would pay their mortgage,” said Mr Burgess.

Permanent TSB, which is 75 per cent State owned, said on Monday that it had agreed to sell loans secured on 10,700 properties (of which about 7,400 are private homes), where borrowers have fallen behind on repayments, to Start, which is backed by US private equity group Lone Star.

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Speaking to Newstalk Breakfast, Mr Burgess said politicians should be “jumping up and down” that it was necessary for Permanent TSB to sell their non performing mortgages.

Politicians should solve the problem by allowing Permanent TSB and other banks to repossess houses, he said.

“What we’re talking about here is 7,400 family homes where the average arrears was €28,800. That’s the equivalent of three and a half years of non payment, these loans are hugely in arrears. Something like 1,100 have paid nothing at all in the last year,” he said.

“PTSB does not have a choice. If we were in any other adult, mature country, we would say that where people don’t pay their mortgage, they get a bit of slack, they get a bit of time to come back on track, but if they don’t the house should be repossessed and the house should be sold on to someone who will pay their mortgage.

“What people don’t seem to realise is, if you don’t pay your mortgage, I have to pay it.”

Higher rates

Mr Burgess said Ireland had the highest mortgage rates in the euro zone.

He said: “Whenever I raise this issue with the Central Bank, the Minister for Finance or the banks, they all come back and say ‘yeah, but we can’t repossess houses in Ireland so therefore it’s a much higher risk so therefore we have to charge much higher rates.’

“I don’t buy that excuse. It only accounts for a small part. I do think mortgages should be a bit more expensive when they’re high loan to value like 90 per cent loan to value.

“There’s almost full employment in this country, people should address their arrears earlier. A lot of these cases are beyond repair because they’ve been spending their money on other things and they haven’t been paying their mortgage because they realised there was no sanction.”

If borrowers realised there was a sanction, they would pay their mortgages quicker, he said.

“Anybody who goes into a bank and makes a genuine attempt to engage and pay their mortgage will get a deal of some sort. PTSB has rescheduled 40,000 mortgages so far. I’d say they’ve repossessed fewer than 2,000 and I’d say most of those were empty homes. In total between the banks, fewer than 10,000 have been repossessed over the last ten years and 100,000 have been rescheduled,” he said, adding that Permanent TSB has been “extremely generous” in its rescheduling.

Mr Burgess said he hopes Start will take a firmer line.

“Start Mortgages began as a sub prime lender, they were lending to people where they felt there would be a difficulty in getting repaid, they’d have to manage. They have the systems in place to properly sit on loans.”

He said he didn’t consider Start Mortgages to be a vulture fund. “A vulture fund will actually be good for people who engage with them because they are much more likely to do a deal than a mainstream bank.”