LAST WEEK, the realisation that mortgage debt was a massive problem seemed to dawn on the Government for the first time with the Minister for Finance Michael Noonan saying he now intended to make the issue “a priority”.
Such a statement is long overdue. According to figures released by the Central Bank last Monday, the number of people in arrears of 90 days grew by 5,000 in just three months and it is only likely to get worse in the months ahead.
A report by a group of civil servants and bank representatives on mortgage debt is to be published later this month and it may recommend some class of debt relief scheme for struggling mortgage holders.
The problem of huge and unsustainable debt is causing untold stress for tens of thousands of people, not just those in arrears.
These are some stories sent in by readers, as well as some from listeners to the Ray D'Arcy Showon Today FM where Pricewatch has a weekly slot.
While the banks claim to be engaging constructively with hard-pressed borrowers, many of the experiences outlined here would suggest they could be doing a lot more to resolve the difficulties people find themselves in.
SIOBHÁN
“Sometimes we just think these are supposed to be our best years and the stress is killing us”
“We have a mortgage with the EBS and when the rates started to go up on an almost monthly basis I was eight months pregnant, so we had additional costs related to the birth.
Things were starting to get tight so we contacted the EBS and asked about the mortgage break/ holiday. We were told that is not a service that it offers.
Then we asked about interest-only so they sent us out the forms but the guy on the phone warned that they don’t usually do it. Sure enough, they refused us, even though we only have about €70 left after paying bills each month.
The interest rates have continued to go up. Our mortgage has gone up by €450 a month since January 1st. We are a family of five who had two incomes and now only one. We spend €90 a week on grocery shopping while 50 per cent of my husband’s salary goes on the mortgage.
I know there are people out there worse off but sometimes we just think these are supposed to be our best years and the stress is killing us.”
CLAIRE
“I’ve almost been made to feel guilty by the bank for getting pregnant”
“We bought a house in the southeast in 2004 for €175,000 and took out a mortgage with Permanent TSB. Then we got married and took out a second mortgage to build a house. We tried to sell our first house but couldn’t. We work full-time and our little girl is in a creche four days a week.
We are expecting our second baby in January and I will not be working during my maternity leave so we will have no money.
I’ve almost been made to feel guilty by the bank for getting pregnant. All we are looking for is a break while we get ourselves sorted. We have never missed a payment or never not paid a bill in our lives. We have the house rented now but it still doesn’t cover the mortgage.
Why are we being shot down at every turn?”
ANNETTE
“They gave us €500,000 even though we only had a combined income of €55,000”
“We’ve tried selling my husband’s first home on three occasions over the past five years with no luck.
We’ve had various people rent the house and have been left holding large bills when some tenants left unannounced. It’s been difficult to rent and has felt like a noose around our necks.
Any time we get our heads above water something will come up with that house and we end up back in the red.
About six months ago, the bank took us off interest-only and we have now gone into arrears as we can’t afford the full payment. We had diligently kept up the mortgage repayments before this change. The bank, Permanent TSB, were completely inflexible and the pressure of all the mounting bills has made my husband leave the country to work abroad.
He is now away for two out of every three months and is out of contact most of the time over those two months. It is very hard, especially as we have a new baby and don’t live close to any of our family.
My husband is missing out on so much of our son growing up and when he comes home our son doesn’t know who his daddy is. This is not the vision we had for our married life.
We feel that the bank is completely ignoring its responsibility in all this. At the time of issuing the mortgages they gave us approx €500,000 even though we only had a combined income of €55,000 and also they only stress-tested our ability to repay the loan on my husband’s home on an interest-only basis. Now they’ve moved the goalposts on that.”
MARY
“I said surely there is something you can do to allow me sell the house and we can come to an arrangement where I will repay the difference? The guy said no”
“I have a property which was my home until I got married. We then bought a family home and so I have tried to rent out my original house. I managed, but as time has gone on, the rent I have been able to get has fallen and for the past year we have been putting €500 a month from our reduced salaries to supplement the mortgage.
When the tenant moved out I was left with an empty house so I decided to try and sell. The asking price was €175,000 and the mortgage outstanding was €182,000. We received an offer of €165,000. I rang EBS to say I was finding paying the mortgage difficult. I told them I was managing but would not be able to continue forever.
I explained that I had an offer on the house of €165,000 and asked could I take the offer and then seek a personal loan from EBS for the difference which I could then pay off?
It seemed to me to be a reasonable proposition as it would instantly pay off a significant amount of the mortgage, leaving a more manageable amount for me to pay.
The EBS’s answer was that they do not give personal loans. They said I should borrow the difference from family or friends. When I said I was having trouble getting someone to rent the house they said ‘the house is rented? Then you are on the wrong interest rate. You should be on a higher rate’.
When I said ‘surely there is something you can do to allow me sell the house and we can come to an arrangement where I will repay the difference?’ the guy said ‘no, there is nothing I can do, I’m not trying to be cold or harsh, we just don’t do it’.”
NUALA
“We had an auctioneer take a look at our house and he reckons we would be lucky to get €250,000. We got a mortgage for €415,000”
“My husband is self-employed and has been stung for tens of thousands of euro for jobs he completed and never got paid for. We used our savings to bail out the business. We have three children, the eldest is four.
I had to give up work after I had my first child as we simply could not afford childcare. My husband is now still self-employed and struggling to make between €100 and €200 a week. I am trying to get back to work and at the moment am receiving Job Seeker’s Allowance of €170 a week. On average we have €270 coming into our house and that’s a good week.
As it stands we are €35,000 in arrears with our mortgage. Our ESB bill is €1,400 and we have just received a letter to say they are going to disconnect us if it is not paid in full.
We have no oil in our tank and we are in debt with credit cards and personal loans. We are dealing with MABS and I have to say they have been excellent. They have given us a lifeline.
After months and months of talking about what the hell we are going to do, we have decided to move to Australia. My husband has gotten a job out there and he will go in the next six weeks or so and I will stay behind until next year.
My main problem now is what to do with the house. I need to be able to stay in it up until we are ready to go as we have nowhere else to stay. But we are not making any repayments at the moment and don’t know how long more this will continue for.
We had an auctioneer take a look at our house and he reckons we would be lucky to get €250,000 for it. We got a mortgage for €415,000.”
SUZANNE
“We no longer have any disposable income”
“I can’t say that we are struggling to pay the mortgage currently but I reckon by the end of January we definitely will be, as we no longer have any disposable income following the recent increases by EBS to the standard variable rates of interest.
We are in a lucky position as we got an affordable house for €235,000 in 2007. Unfortunately for us though, we could only get a mortgage for €205,000 from the EBS and had to get the balance from our credit union to be repaid over 10 years. This works out at around €450 per month.
Luckily, the credit union has allowed us to reduce our payments to €200 per month as we had paid more off initially and we are still on target to clear the loan within 10 years, so that’s not the problem.
The problem for us is that we did not get off the variable rate and fix earlier this year because when we looked into it, we could not meet the fixed repayments. We cannot fix now as EBS have removed that option. Mortgage payments, tax payable, water charges and the rest are all going to eat into our money.”
GEMMA
“I would gladly hand back the keys of both houses”
“I bought a house in 2000 and when I went to sell it and move, I was advised to release equity and keep it as an investment property. I would never have done such a thing if the financial advisor had not suggested what a good idea it was.
So we bought our second house and now have a combined mortgage of €420,000 for two properties. I have a job and my husband works as well and we have no children. I am going to have to move from the midlands to Galway for work. So I own two houses in Mullingar with monthly repayments of €1,800 plus all the added costs and have to find somewhere to rent in Galway.
My husband might struggle to find work so we will have to live on my wages of €2,500 per month. I would gladly hand back the keys of both houses.
I have never missed a payment on a mortgage or important bill in my life and recently cashed in a savings bond 3 years early to pay off my credit card which has supplemented our income for the last year.”
NIAMH
“The mortgage is €330,000. The asking price for an apartment in the complex is €185,000 so we are €145,000 in negative equity”
“I purchased a nice two-bed apartment in south Dublin with great views in a small, well-kept, complex in 2005 and took out a mortgage with KBC Homeloans. I lived in it for three years.
At the time I was working in Dublin, had a good salary and was able to service the loan. It was a joint mortgage with my now husband but I always serviced the loan myself.
In September 2008, I moved city and we got married. I can’t afford the entire mortgage repayment (which is €1,900 per month) so for approximately two years now, KBC has agreed to let me make interest-only repayments which are €1,300 per month.
They have just agreed to extend this interest-free period for 12 months. The apartment is rented at €1,000 per month.
We don’t have any personal loans. We have made all the household savings that we think possible, such as discontinuing a phone line, recycling, not using the tumble dryer etc. We don’t go out to restaurants, we go to the library instead of buying books, we borrowed all the baby gear from friends and our cars are ancient.
I have to find €500 per month for the apartment at the moment between the mortgage, service charge on the apartment, the annual NPPR charge etc. and it seems that I am paying an awful lot per month just for the privilege of servicing a loan that I can’t afford to reduce at the moment.
Even if I knew I was able to scratch away at the principal it wouldn’t be so bad.
The mortgage is stuck at €330,000. The average asking price for an apartment in the complex at the moment is €185,000, so we are €145,000 in negative equity.
We have our heads above water, but only just. I know that at least we don’t have to eat cardboard but I feel like I’m running to stand still whereas at least if I felt I was moving forward, however minutely, it wouldn’t be so depressing.”
SEÁN
“We thought Bank of Ireland might do a deal with us. Under no circumstances would they do any kind of deal”
“We have our house for sale in Cork for the past four years with a couple of sales falling through for different reasons.
Just six weeks ago a young couple put in a final offer of €180,000. We needed €187,000 to clear off our mortgage, and pay the auctioneer’s fees and solicitor’s fees but we felt it was the best price we were going to get for our house.
Since we’re on a tracker rate and have never missed a payment, we thought Bank of Ireland might do a deal with us. I’m only working two and a half days per week and my wife works week on/week off. Under no circumstances would they do any kind of deal. We tried other ways to raise the difference (family, credit union) but the buyers got fed up waiting and called off the purchase. We were devastated but in no way could I blame the couple.
While my wife’s job is fairly secure, mine is not and it is a real worry with three young kids. I am so p**sed off with the banks right now. I roughly estimate that over our mortgage lifetime, with us on a tracker rate, they will lose between €15,000 and €20,000 but they don’t care because we’ll bail them out regardless”.
BRIAN
“I did go hungry to meet my mortgage several times, but I have come to the conclusion that this is pointless”
“I am a public servant, and in the past four months I have had to make the choice between eating or paying my mortgage. I chose to eat. I am struggling to survive on a wage that is only slightly above social welfare rates.
I joined the public service from the private sector, incurring a large cut in my wages. I own a three bed, semi-detached house and used my savings to pay my mortgage while I was training, on a wage of €150 per week.
I got a job far from where I owned my house. I couldn’t sell, so I rented it out. The rent covers far less than half my mortgage and I pay rent in the town where I now live. As time went on, my debts rose as I borrowed to pay my mortgage each month.
I have now hit a wall. I cannot borrow any more money. I did go hungry to meet my mortgage several times, but I have come to the conclusion that this is pointless. Losing my house is now inevitable. People constantly allude to the fact that I am lucky to be a public servant. I am not lucky. I am at the end of my tether.
At least my shame is my own. I don’t have a wife or child, and there isn’t a day that goes by that I don’t thank God for that.”
HOW LENDERS MUST DEAL WITH YOU IF YOU GET IN MORTGAGE DIFFICULTY
Banks must adhere to a five-step Mortgage Arrears Resolution Process (MARP) when dealing with arrears and pre-arrears customers
- An arrears problem arises if a mortgage holder does not make a full repayment on a due date. If those arrears are outstanding 31 days after that date, the lender must inform the borrower in writing of the status of the mortgage account.
- The letter must include full details of the payment(s) missed and the total amount in arrears. It must also explain that the arrears are now being dealt with under MARP; the importance of co-operating with the lender; the consequences of non co-operation; and the impact of missed repayments/ repossession on a credit rating.
- The lender must send an information booklet and for as long as the mortgage is in arrears must provide a written update of the status of the account every three months.
- Lenders must provide a standard financial statement to obtain financial information from a borrower in arrears or in pre-arrears, so that they can assess the financial position and identify the best course of action.
- The lender must pass the completed standard financial statement to its Arrears Support Unit (ASU) for assessment.
- The lender’s ASU must assess the completed standard financial statement and examine each case on its merit. The ASU must base its assessment on a borrower’s full circumstances, including overall indebtedness; information on current repayment capacity; and previous payment history.
- The lender must explore all options for alternative repayment arrangements. These must include: an interest-only arrangement for a specified period; an arrangement to pay interest and part of the normal capital element for a specified period; deferring payment of all or part of the instalment repayment for a period; extending the term of the mortgage; changing the type of the mortgage, except in the case of tracker mortgage; and capitalising the arrears and interest.
- If and when a lender offers an alternative repayment arrangement, it must give the borrower a clear, written explanation of the arrangement.
- As well as the basic details of the new repayment amount and the term of the arrangement, it must explain its impact on the mortgage term, the balance outstanding and the existing arrears, if any.
- If the lender is not willing to offer an alternative repayment arrangement, it must give the reasons in writing.
It must also inform the borrower of their right to make an appeal about the ASU’s decision to the lender’s appeals board, the lender’s treatment of a borrower’s case under the MARP, or their compliance with the requirements of the code.
- The lender must inform the borrower that the 12-month moratorium on taking legal action will no longer apply if an appeal is not made. The lender’s appeals board will consider any appeal and independently reviews the ASU’s decision, as well as the lender’s treatment of a case under the MARP and the lender’s compliance with the requirements of the code.
- The lender must allow a reasonable period to allow the borrower to consider submitting an appeal. This must be at least four weeks from the date a borrower receives notification of the ASU’s decision.
- The appeals board will be made up of three of the lender’s senior personnel who have not yet been involved in the specific case.
- At least one member of the appeals board must be independent of the management team and must not be involved in lending matters.
- The lender must not apply to the courts to commence legal action for repossession of a property until every reasonable effort has been made to agree an alternative arrangement.
- If a borrower is co-operating with the lender, it must wait at least 12 months from the date that arrears are classified as an MARP case (31 days after the first missed repayment) before applying to the courts.
