Unravelling repossession

Statistics can only hint at what is happening with house possessions in the Republic. The real picture won’t become clear until the autumn

FOR MANY years, the crane was the symbol of the building extravaganza that went on all over Ireland. From rural Leitrim to suburban Dublin, apartment blocks, office blocks and new homes riddled the built environment like scattergun fallout.

They’re still there, of course, along with all the other properties people live and work in – and pay mortgages on. Despite challenges to the economy and a drop in personal incomes, the overwhelming majority of people are still managing to make mortgage repayments which appear to be satisfying Irish financial institutions, unlike their counterparts in Britain and the US.

On Wednesday, Pat Farrell, the chief executive of the Irish Banking Federation (IBF), appeared at a meeting of the Joint Oireachtas Committee on Social and Family Affairs to discuss debt levels and the topic of house repossession. Among the figures he presented were those relating to personal borrowings, an area that includes mortgages, and which found that 47 per cent of people had no personal borrowings at all. These figures were based on a nationally representative sample of 1,000 adults, surveyed by Amárach in February of this year.

It would be an interesting exercise to apply these mortgage statistics to the cohort of adult friends, family and acquaintances you have, and to see if the numbers divide as evenly as the IBF’s quoted sample. Are almost half of all the people you know lucky enough not to have a mortgage?

The IBF did agree that there are an estimated 14,000 people in the State with mortgages currently in arrears. As of the end of March, the Central Bank figures of outstanding credit to private households in the State was €171.7 billion. Of that sum, 87 per cent of it referred to mortgages or other housing finance.

Since February, a 12-month moratorium against pursuing mortgage arrears has been in place at both Bank of Ireland and Allied Irish Banks; and there is a six month one on all other lenders.Moratoriums on our lending institutions notwithstanding, perhaps the financial puzzle right now is that repossessions of property in Ireland are not higher. This is even when you leave aside implications such as the PR disaster that would await already highly unpopular financial institutions in a small country where those facing repossession are unlikely to be the faceless statistics they are in a country the size of the US, and the fact that the traumatic period in our history when forced evictions were widespread has left a powerful emotive impact on our collective memory.

Last year, there were 225 orders for possessions made by the circuit courts, for both residential and non-residential properties. The counties with the highest number of orders were Dublin at 53, followed by Cork on 21 and Meath with 20. However, the actual number of repossessionsthat went on to be implemented were far lower.

In Dublin city, there were five. In Cork city, there were 10. There were four in Meath. Thus 94 orders for possessions translated into only 19 actual repossessions. And according to John Fitzpatrick, the Dublin county sheriff, the order of possession figures of the county are “way down” for the first half of this year. “They’re lower than I’ve ever seen them.”

By contrast, financial news service Bloomberg reported this week that 1.8 million foreclosures are forecast to be filed in the US for the first half of this year. The widespread phenomenon of home-owners posting their keys back to lenders there has become known as “jingle mail”. In Britain, also this week, the Council of Mortgage Lenders estimated that the number of people likely to lose their homes this year is 65,000. These are the highest such figures there since 1992, when many British properties went into negative equity after a high-profile property crash.

In this country, an order for possession of property made by the courts on behalf of a lender is referred to either the sheriff, or the county registrar, depending on the location of the property. At that point, every effort is made to arrange an amended financial agreement of repayments between the lender and the borrower.

No Irish financial organisation wants to inherit a bad property debt, since at that point, they have a property worth less than what they lent for it. Almost all borrowers do come to some acceptable arrangement with a lender, even if on a very modest scale of repayment, whether by extending the term of the loan, paying interest-only, or a variety of other methods. As a result it’s exceptionally rare that a sheriff or county registrar ever has to repossess an occupied home.

Anecdotally, there are reports of the “jingle mail” phenomenon occurring here in Ireland also. However, contrary to what these people may believe, dramatically surrendering ownership of a property they can no longer afford to pay the mortgage on does not then free them from the outstanding debt they owe their lender. The debt is not cancelled by vacating the property. In all cases, mortgage holders in difficulty should consult with their financial institution.

START, A SUB-PRIME lending company, established their business in Ireland in 2004. As their website states, they “offer finance to people who have been unsuccessful in getting a mortgage from the main banks and building societies. . . In Ireland, tens of thousands of people are refused mortgage finance every year, very often for the most trivial of reasons. We have an open-minded approach to lending and therefore have been able to offer mortgage finance to almost 10,000 satisfied customers throughout Ireland.”

This week in the High Court, Start were granted 24 of a total of 61 possession orders listed in the weekly chancery summonses. Speaking to The Irish Timeson behalf of Start, Paul Murphy confirmed that in their five years of business, they have repossessed 47 properties, the majority of those in the past two years.

“A responsible mortgage lender will make every attempt to contact the customer in order to establish a satisfactory arrangement to clear their arrears,” says Murphy. “In our experience this process will normally entail an average of 28 phone calls together with 16 letters, a level of contact commensurate with the seriousness of the matter.

“Where Start has made arrangements with customers to restructure their repayments, some do not keep to this agreement. Typically a customer will have broken up to 10 arrangements prior to commencement of legal proceedings. Despite all efforts to reach a satisfactory conclusion, where repossession has been granted, customers will typically be two to three years in arrears.”

Since February, a moratorium has been in place with AIB and Bank of Ireland, which protects mortgage holders in arrears for one year from that date. Other lending institutions are on a six-month moratorium from that period, which is due to expire before the courts sit again in the autumn.

This week, Edmund Honohan, master of the High Courts, warned of the “avalance” of orders for possessions that he anticipated to see once the first wave of moratoriums lift in the autumn. It’s thus likely that mortgages on the properties that will come before the courts in the autumn will have been taken out when prices were at their highest, and before unemployment statistics started to rise to 400,000 and beyond. The current complex juggling act between financial institutions, defaulting mortgage holders and our national debt is clearly due to become even more complex.