Oireachtas finance committee hearings show how far we have to go on arrears

The Bottom Line: targets set down for banks by regulator are far from bulletproof

Fianna Fáil finance spokesman Michael McGrath: zoned in on the 4,323 arrears customers facing legal proceedings. Photograph: Brenda Fitzsimons

Fianna Fáil finance spokesman Michael McGrath: zoned in on the 4,323 arrears customers facing legal proceedings. Photograph: Brenda Fitzsimons

 

Ding, ding. Seconds out, round two.

The slug-out between the Oireachtas finance committee and the country’s four main home loan providers about mortgage arrears resumed yesterday.

It’s seven months since they last shaped up to each other, with mixed results. Ulster Bank was first into Leinster House yesterday with chief executive Jim Brown trying his best to strike an upbeat tone in his opening remarks.

He highlighted how 2,500 customers of the bank have been taken out of arrears in the past seven months and that the percentage of borrowers not engaging with the bank on this issue had reduced from 35 per cent to 14 per cent.

Brown also threw in the line that Ulster Bank has €500 million to lend into the mortgage market this year having increased its lending by 32 per cent in 2013, and that the bank is here to stay with the support of Royal Bank of Scotland, which has sunk £15 billion of capital into its Irish subsidiary since the global financial crash of 2008. This cut little ice with the committee.

Customer arrears
Fianna Fáil’s Michael McGrath, who is always measured in his questioning, zoned in on the 4,323 arrears customers who are facing legal proceedings. That’s about 30 per cent of all the owner-occupiers in arrears of 90 days or more with Ulster Bank. Another 2,300 are facing the threat of a legal letter if they don’t engage with the bank soon.

Brown and his colleagues were quick to point out that this has followed exhaustive attempts by the bank to engage with the customers involved. In most cases, they have refused to deal with the bank or make payments for up to two years.

“It’s not in our interests to repossess 4,000 houses,” Brown said.

Given resource constraints in our courts system, it would also probably take years to complete.

McGrath said it was “frightening” that such a large number of customers are heading down a “legal route” with Ulster Bank.

Joe Higgins accused the bankers of blackmailing customers about their arrears while Pearse Doherty zoned in on some statistical anomalies between Ulster Bank’s figures yesterday and those submitted back in September.

Judgments
Last year, Ulster Bank reported 180 judgments against customers. This time around it has put the total at 177. Doherty wondered where the other three had gone in the intervening period. The bankers weren’t able to give him an immediate answer but said they’d get back to him.

Doherty made the point, correctly, that there was no point in going before the committee with incorrect information. Round and round they went for more than 2½ hours, with a fair bit of huffing and puffing on both sides of the room.

Permanent TSB and AIB are in today while Richie Boucher and his colleagues at Bank of Ireland are up tomorrow morning. Boucher’s interaction with the committee should at least provide a little entertainment. He’s not one to bend the knee to politicians.

Are the hearings worthwhile or simply a PR exercise for the politicians? The public might now be wary of the public accounts committee’s interrogations of Rehab and other charities but they are a long way off tiring from a bit of banker bashing.

The finance committee can claim the hearings last year resulted in Bank of Ireland changing its policy on how much interest it charges on the warehoused portion of split mortgages. It highlighted how the banks were taking the legal route as a quick way of meeting the initial arrears targets set for them last year by the Central Bank of Ireland. AIB chief David Duffy made the case that a legal letter is indeed a solution for someone who either refuses to engage with the bank or isn’t able to afford the loan.

In other respects, the banks ran rings around the committee, with reams of confusing statistics. It wasn’t supposed to be like this.

All of the banks say they don’t want to repossess homes but with 96,474 owner-occupied mortgages and 30,706 buy-to-lets in arrears of 90 days or more at the end of December, this is unrealistic. The aggregate arrears on these accounts is €3.5 billion.

Clearly, there will have to be a large number of repossessions. Yet they dare not state this at the committee hearings for fear of a hammering. They are also holding to the line that they are not in the business of writing off mortgage debt.

“In terms of debt write-off, Ulster Bank does not write off mortgage debt,” Brown said yesterday.

Yet he admitted, under questioning from chairman Ciarán Lynch, that this is precisely what they do in cases of repossession. Except by then, the debt is, strictly speaking, unsecured.

AIB has also been writing off debt, as evidenced by its recent agreements with those in the pilot scheme operated by the Irish Mortgage Holders Organisation.

Who’s kidding who on this issue?

These committee hearings highlight how far we still have to travel to resolve the mortgage arrears issue and how the targets set down for the banks by the regulator are far from bulletproof.

But they are also long-winded, lacking in sufficient focus, and subject to the odd bout of grandstanding by politicians playing to the gallery.

It’s not just the banks and the regulator who need to up their game on mortgage arrears.