Opinion: Repossessions needed if borrowers don’t pay mortgage
Courts being used as crude stick by lenders to get borrowers to resume their payments
“During the second quarter of this year, Cork had more possession orders for residential property than anywhere else in the country.” Photograph: Getty Images
Figures released by the Courts Service show there were 900 possession orders granted in the Circuit Court in the first half of 2015 (as reported in The Irish Times, yesterday). One-third of these were for non-residential property such as land, sites, farms and commercial premises and residential buy-to-let properties.
There were 616 possession orders granted for what are, or at least at some stage were, principal primary residences. Over the 26 weeks of the first half of the year, that is an average of 24 orders per week with the likelihood that about half of those are for vacant properties.
The Courts Service does not know if possession orders are executed. Not all orders granted are followed by a repossession as there is still time for the lender and borrower to come to an alternative repayment arrangement. Very few of the orders granted in 2015 will have been executed as most orders are granted with a stay, sometimes of up to 18 months, before the order can be enforced.
During the second quarter of this year, Cork had more possession orders for residential property than anywhere else in the country. There were 30 orders granted by the Cork County Registrar with another five granted by judges at full sittings of the Circuit Court. As an observer, I have attended 14 civil possession sittings in Cork, including all six sittings by the county registrar at which these 30 orders were granted.
The six sittings involved 400 separate cases. About one-fifth couldn’t proceed because of difficulties in serving formal notice on borrowers who cannot be found. Some were struck out while most were adjourned for various reasons.
There were 70 instances where the lenders wished to proceed with their application for the order for possession. The lenders were refused the order in 40 of these, with the case adjourned to a later date. That leaves the final 30 where an order for possession was granted.
The details given in the court indicate that 10 of these were principal primary residences, seven were buy-to-let properties, and 10 were entirely vacant properties. The status of three was not given. For most of the vacant properties, no mortgage payment had been received for five years or more.
This borrower had made no mortgage payment since 2012 and had accumulated substantial arrears. Although the borrower did have some medical issues, the county registrar noted that “the loan was in difficulty long before the illness”. The borrower acknowledged that they did not have the repayment capacity to service the loan and the order was granted with a stay of 12 months.
That was the only one of the 30 orders granted where the borrower was present – but with nothing paid on the mortgage for nearly three years and no repayment capacity the order was justified, in my opinion.
Turning up in court and exhibiting some repayment capacity will almost always result in the case being adjourned. In April, a case came before the Cork County Registrar where no payments on a residential mortgage had been made since April 2009 – fully six years previously. The borrower had not engaged with the lender and had accumulated over €75,000 of missed payments.
In court, the borrower said they hoped to be in a position to resume making payments on the mortgage. The case was adjourned for three months. This case has since come before the court again and it was revealed that in May, June and July payments of €600 per month were made. The required monthly payment is just over €1,000 per month. Although the borrower had made the partial payments, they had not engaged with the lender who wished to proceed with its application for a possession order. Once again the case was adjourned, this time to the end of November.
The courts are not open season on hard-pressed borrowers. The banks may be heavy-handed in their approach, but it is the courts that enforce the law. If a genuine borrower makes regular payments – or even promises to make regular payments – and shows up in court, they are extremely unlikely to have a possession order granted against them.
Back in play
There is also a significant number of buy-to-let properties where landlords are collecting rent but not passing it on to the lenders. These should be repossessed. In some cases this will discommode existing tenants but some of these are paying below-market rents to landlords who just want to collect the money for as long as they can.
Repossessions are a necessary part of a functioning market. There are people out there willing to pay for properties that are currently vacant and pay market rents for properties left under the control of delinquent landlords.
The courts are being used as a crude stick by lenders to get borrowers to re-engage and resume paying their mortgage. If borrowers continue to make no repayments against their mortgage then repossessions are warranted, justified and in the public interest.
Seamus Coffey is a lecturer in economics at University College Cork