Up to 30,000 homeowners face losing their properties in the next year, according to industry estimates, after the Expert Group on Mortgages and Personal Debt set an official level at which a home loan is considered unsustainable.
Borrowers in arrears who cannot pay at least 66% of the monthly interest bill on their mortgage will now be vulnerable to foreclosure once their 12-month statutory grace period runs out, even if they have engaged with their lender as recommended by the Financial Regulator and the Irish Banking Federation, the Central Bank has confirmed.
Those who meet the minimum standard can avail of a "deferred interest scheme" for up to five years before the banks can move on them.
Between 15,000 and 30,000 homeowners would fail to meet the new threshold for mortgage forbearance, according to mortgage broker estimates consistent with Central Bank survey data.
The new rule makes clear to the banking industry for the first time the circumstances under which a troubled mortgage is a lost cause.
"It's presented as a positive for struggling homeowners but it provides lenders, particularly those who haven't taken much action so far, with the clarification
and definitions they've been looking for to enable them segment their arrears customers and decide who they should take legal action against," said Ciaran Phelan, chief executive of the Irish Brokers Association. The expert group's recommendations were endorsed by the Department of Finance and Financial Regulator Matthew Elderfield.
More than 28,000 borrowers were at least 180 days in arrears at the end of September, the latest Central Bank arrears and repossession statistics show. A separate survey found about 15,000 mortgages had been restructured, but were not paying full interest – putting them at risk under the new rule. "It is incredibly difficult to come back from 180 days in arrears," said Karl Deeter, operations manager with Irish Mortgage Brokers.
Deeter said he expected the deferred interest scheme to be "a total failure. It's a repeat of Hamp [the US's mortgage modification scheme] or the UK's Homeowners Mortgage Support, which was meant to help 42,000 people but only 34 have used it."
The Central Bank is preparing to break out the number of unsustainable mortgages in its quarterly arrears reports starting next year, according to a spokeswoman.
Well said Mark, they will be taking my home literally over my dead body.
Mmmm,I seem to remember the good Prof. Kelly saying something like this a while ago and he hasn't been wrong yet. Now where are all these people going to live after their houses are reposessed, in tents on the golf courses?
I can just imagine Lenihan saying that the country is too small for us all to live in, just like his father did in the eighties. Back to the future...
The government has socialized private bank loans into public debt resulting in the need for external assistance from the EU-IMF et al. The same principle should apply to homeowners struggling to repay their mortgages. It is not one rule for the 'elite' Bankers/Developers & another for the ordinary citizen.
With regard to alarmist claims on home repossessions, just examine the past experience in our nearest neighbour the UK, where 47,700 homes were repossessed in 2008 despite 93,533 Court Claims made by Lenders' that year & 72,235 Court Orders for immediate repossession. Their worst ever year was 1991, following the Thatcher-Lawson Property Bubble collapse, of 186,649 court cases for repossession, 142,905 were successfully won by the Bank in question, yet only 75,500 homes were actually taken off the occupiers!
The bottom line: less than half of the successful court cases by mortgage lenders actually results in a property repossession. Deals are always done. This has been the case every year since 1969 in the UK - a country with a history of repossession - unlike Ireland. UK lenders e.g. Nationwide & Halifax ended up with their own estate-agency subsidiaries. This will not happen in this country.
Realistically speaking, to take from the UK market where repossession is the norm, to extrapolate to Ireland, adjusting for population & market size where they have 15x both the number of homes & people, we can expect no more than 5,000 actual repossessions in this jurisdiction, where there is a culture of forbearance & restructuring, not to mention the possibility of some 'contingent' debt-forgiveness. Many people in negative equity have agreed 'short-sales' on their properties with their lender, funding the shortfall with an unsecured term loan.
People with negative equity will grow out of their difficulty in time. Those who have experienced job loss or loss of income and are struggling, should keep paying some amount of money each month & no Irish Judge will rule against them.
Finally, to contextualize the Irish situation properly: only 98 homes were repossessed over the last 3 months (78 forcefully, 3 voluntarily surrendered their homes, whilst another 17 homes were abandoned), this equates to <400/year. A total of 522 repossessed homes remain on the balance sheet's of Irish mortgage lenders, that's a far cry from 30,000!
They are not "your" homes, they are the banks' homes, unless you can afford to pay for the mortgage on them. Otherwise, you don't own a home, you simply have a very large debt you can't repay.
So, please could you people stop expecting (indeed, demanding) me to pay for your mortgage? I already have enough trouble paying my rent - I have to rent because too many idiots bid up the property market during the bubble so I couldn't afford to buy - and I can't afford to pay for your abode too. It's over folks. Time to grow the hell up and take responsibilities for your actions.
If some of you people want to take to the streets and fight, cool, I'll see you there - fighting for my right not to have to subsidise your excesses.
Pelle, you haven't a clue what is going on do you? Where have you been since 2008? This shower of donkeys has been hacking away at my ability to pay my mortgage since then, and in case you have been in dream land the past couple of weeks they are about to push through cuts of 6bn, again attacking my ability to pay MY mortgage, think yourself lucky you are renting, but I have bad news they are going to start cutting your ability to pay your rent now, watch the budget.
Everything Pelle stated is true. 2000 to 2008 was a bubble, it burst, Get over it. Direct your anger at FF and in particular Cowen, McCrevy, Ahern and Lenihan.
The cuts (which are not enough) are a result of their actions
Seanie Fitz [passed his leaveing cert hoorah] and was good enough to lend ye wolly headed goms all the money for Mc Mansions that ye didnt need. So now shut up and pay up. Seanie was one of yere golden Gods not too long ago. Remember the trips to N.Y.C, with yere highlighted hair and the fake tans, gold master cards by the thousand stuffed every where to buy rubbish to take home so as yere wan next door would be mad jealous as she see's yere latest model 4x4 pull up with Bloomigdales shopping bags . After all that hard work shopping in beautiful New York ye had to take a mini four or five day break in some sunny backwater town in mainland Europe to recover from the crowds in N.Y. Jazus sure put it on the card Paddy we have the rest of our lives to pay it back and isnt the house worth over 2 mil now, sure we'll be dead long enough O LADS he he he LOL LOL ha ha . Ignorant broke self pitying soon to be homeless half starved culchies is what awaits most of ye. THE partys over, Seanie and the boys want their money so pay up. Poor Seanie and poor old Drum here in the east coast is doing his very best to do a deal so as he can file suit against Anglo for cheating him. So seen as ye claim to be so educated why dont ye file a law suit THE SHEEPLE VERSES THE GOV THE BANKS AND ANYONE ELSE YE DONT WANT TO PAY BACK. Oh I forgot ye think the gov and the banks own the lawyers too. Home dopey James,its time to make your ma proud by turning out the light. THE frost makes those skyscrapers really gleam in my beautiful city of Chicago, must breathe in all that freedom as I watch my freedom loveing puppy enjoying himself. Real freedom ,only in AMERICA. Thank God there is no Mer/Noskill clowns wandering the streets of America,mabye I could teach him to turn out the light. Um wee Jimmy wouldNT like that. Last one out of that begging bowl of an island turn out the lights,,,,,,PARTY'S OVER........YUIYTG6TY
In answer to Pelle, and I write as someone who owns their own house and is debt free, you are an ignorant ****. The vast majority of these people were railroaded by the Fianna Fail traitors who, acting on behalf of developers, tried to make out that if you didn't get into the market now, you would never own your own home.
Pelle has a point. If he and others like him have to cough up to pay your mortgage Mark then in the long run he losses and you Mark have a house paid for. Right now the banks aren't lending so Pelle probably can't take advantage of the property market. Lose lose situation for Pelle.
Well said Pelle, why should i pay someone else's morgtage, when they decided to pay huge sums for a house they couldent afford? In the process of doing that, they priced me out of the market, now i have to pay their morgtage, get real people. I ain't gonna do it.
Pelle and the gang, you consider 140,000 excessive? that is my mortgage and it rapidly becoming impossible to afford, and just how do and your lot think you will be paying my mortgage? Do you gobs..... think you are the only ones in the country paying tax?
In my neighbourhood, in 2004, somebody with a gun went around to people, put it to their head, and told them that if they did not get on the property ladder, that they would be the laughing stock of the whole world.
That they would have no social status. That they would never look sophisticated. He forced them to queue up the night before for small apartments.
Why is this bully with a gun, not brought before the justice system. It was all his fault.
Mark - all I'm saying is that there has to be a fair way of fixing the problem. Somewhere along the way someone got paid a lot of money for either selling land/houses or building them. Where did that money go?
Fred. Succumbing to peer pressure is no excuse. Unfortunately, the worthless piles that all these people will be defaulting on will not be the banks problem but society's since we will own those institutions. People need to stop whinging about being duped by buying property in a boom. A market is a market like any other there is always risk attached.
Pelle, while angry, is right.
Nobody put a gun to anyones head - it was a mix of fear, greed, naivety and peer pressure that drove people to buy when they did. Suggesting otherwise is embarrassing - after all we're supposed to have one of the best educated workforces in Europe, right? We need to act like it.
Mark, I'm not sure what your point is. Pelle and the rest of us are very aware of what has happened over the last 2 years and the situation you are others like you are in. It's bad and we all know it. But you can't expect us to pay to bail you out, can you? You signed a legal contract. You.
The root cause of all of this mess is that no-one is taking responsibility for the decisions they have made. Lets start with ourselves, and learn the lessons, before we point the fingers at others. We are the People of Ireland, after all.
I moved to Dublin in 2004 and left two years ago. The decision to rent and not buy was such a complete no-brainer that it was almost funny - banks were offering NINE TIMES combined salary and I can't remember the number of times I heard the mantra "you'll never lose on the property market/it's all supply and demand/ it's different here". I can understand that anyone who bought into the mass delusion now feels hard done by, but Pelle is right. The warning signals came with big flashing signs and you took the risk.
I am in the process of losing my house too.I did nothing wrong.all i ever did was work hard,from eight to six every day.My company went bust because of the Bankers.I will say something for sure,the Bank will not get my house in the condition I and my partner have lovingly put it.I will pull it to the ground before they get it.I have already organised digger to do it,as I used to drive them for a living.I dont fear Jail.as It is far better than what is happening in my life at present.
Unfortunately, Pelle makes a fair point. Nobody with a Mortgage owns their property. Until the mortgage is paid the bank owns the property. That's why they can reposess your homes. However, there is a difference between property ownership and having a home to go to. Having a home is a basic human need. Whether it's a bank or a landlord, i suggest we do everything we can to keep our homes. Some of us rent, someone of us pay off a mortgage. Most of us are at risk either way. Solidarity works better than division, every time.
Pelle, I agree with you 100%, as sad as it is, I do not want to pick up the tab for someone else's Mortgage, (I will just simply not do it) I am getting it hard enough to keep food on the table as it is. Everyone went mad in the boom, led on of course by auctioneers but they took the decision themselves so now they think they can make it my problem, "no way"
Why does everyone see keeping their home as the ultimate objective. There is a 1 year moratorium. Dragging it out longer is only pulling you deeper into debt. Why not campaign for better bankruptcy laws so that one can walk away and rebuild there futures with a clean slate within 3 to 5 years.
Some very interesting comments from Pelle and Mark especially. I am involved in the pre-foreclosure market in the US and have experienced this space over the past couple years.
(a) the lack of regulation in the banking sector was the platform that lead to the irrational speculation in real estate. [Government and Bankers Fault]
(b) the herd mentality (not unique to Ireland) drove many to buy homes they could not afford and loose the run of themselves ...YES on trips to NY and condos in Portugal [Individuals have to take ownership and accountability here]
I know many people who did not get caught in the frenzy and clearly identified that what was happening was madness and was not sustainable. Banks were showering money on them to buy houses they could not afford and they said NO.
(a) The US is fast becoming a renter nation (Good article: http://online.barrons.com/article/SB5...) Many people do not want the stress of owning homes they cannot afford and are not fighting the foreclosure process. This demographic change will probably occur in Ireland also. Another term for this is deed in lieu of foreclosure and it is commonly known as "giving back the keys". There is no shame in renting. Many people do not want to live in a house they will probably never pay off or pay off way too much for it.
(b) Ireland will also learn quickly what a short-sale is and renters will probably be able to pick up some excellent bargains as banks take back properties and then try and flog them on to buyers that are lucky enough to have jobs.
(c) I hope that Ireland (unlike The US) is able to put in place a fair program for people that genuinely need a little help. There are many people that want to stay in their homes. The average foreclosure here costs a bank $50K and banks and govt need to put in place a "modification program" facilitating some possible debt reduction, interest rate reduction or equity sharing arrangement to help these home owners. Pelle, you make a fair point but if you squeeze out those folks who are marginal in their ability to pay their mortgage and are genuine homeowners who are now caught up in a malaise they did not create, you will end up footing the $50K bill anyway.
The US made a complete hames of trying to provide a modification program that worked and I think this is key to real estate stability and helping normalize the most fractured part of the economy.
The taxpayer anger about having to pay somebody else's mortgage is well founded, but only because we pursue ridiculous policy, when has it ever been the case - assuming common sense capitalism- that everybody who invests in a bank is protected to some degree to the detriment of taxpayers generally? That isn't capitalism, it is crony-ism, it is the embodiment of all policy failure wrapped into one.
There are investors who should have taken the pain first, and the argument that doing this means a re-cap doesn't hold, we have to re-cap anyway. At the same time, a write down on both asset and liability side at the same time doesn't throw the balance sheet out of kilter. Banks do deals with all and sundry except for those from whom they actually get their saving grace from, its the injustice of this which is the real rub, not renters v.s. owners of debt.
karl, you would be one of the people that are in the public eye that I can not stand, to me every time you open your mouth you are on an agenda for "yourself", you are in negative equity and it seems to me that you speak for yourself when you want me and everyone else to pick up the tab for your mistakes. You go on and on about the one thing and it seem to me that you protest to much, who do you think you are kidding?
Karl - well said, but traditionally bank bondholders are pension funds and the like. So you either tell people they have lost their retirement (50+ year old plus group - who will then work longer and hold onto their jobs and not pass them onto the next generation) or you tell people (30 to 50 year old group) they need to bail out the bondholders/banks for the next 20 years or leave the country.
I feel so very bad for people like Dermot above. Words, of course, fail us. Will we act on the truth? Politicians on all sides of the house have knowingly and shockingly failed us, for many many years, by promoting the corruption and secretly participating in the payoffs, while protecting the criminals most at fault, by refusing to enact the basic anti-corruption legislation we can see across the EU and elsewhere in the world. We are the victims of a very simple set of dirty tricks, thanks to all of them, "Garret the Good " included.
Jackasses like "pudsy ryan" anthony and his pathetic fans like Maire are only so much rotting detrius, blown along the open sewers, that now hold our former dreams of prosperity and pride. That the editors here allow them free rein to spout mindless tripe and mis-spelled rot, is perhaps merely an appropriate metaphor for our current state and standards of practice.
See what you gone and done now antony,y'went and made Jack mad!
C'mon Jack,yer politicians;is it dem yer really peeved with,or is it yerself to be naive enough to think they were really worthy of faith?
Ahern rides off into the sunset with a big fat wallet while the rest of youse starve!..ANGRY you may be as well you have the right,but dont take it out on antony and his FREEDOM..freedom is a state of mind.
If you re reading antony right,he's angry too y'know..angry to have the misfortune to be reared in such a horrible hole,and Yes-the world does owe him a living!
Who's really the bitter man now Jack??
The other issue is that a lot of money poured into Ireland. We could have used it to build up Irish industry. Multinationals have been based here long enough for technology transfer to have taken place. But nope, we failed to make any inroads into building a tech savy economy. A complete and utter waste of 10 years and 100 billion.
One more thing. For years we've had politicians insult us. We stood by and did nothing. Anthony and co are harmless. Look at the damage that career politicians have done to Ireland - look at the lives they've ruined - the stress - the uncertainty - the sheer lack of respect for their fellow countrymen. Jack do you vote ?
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LOL LOL LOL is this for real? Do you really think that 30,000 people are just going to allow their homes be taken without a fight, what is being prescribed in this article will mean civil war.
30,000 would be more than enough to totally overwhelm the combined forces of the boys in blue and the army, and that does not take into account the fact that among that 30,000 will be members of both organisations.