The latest figures for the last quarter of 2016 from the Central Bank shows that the issue of mortgage and personal debt facing thousands of Irish families has no end in sight yet. A revised legislation seems the only hope of relieving this unprecedented strain on the citizens and the housing sector at large. In the meantime, here is how and why the picture of the situation, as depicted below, is a rather dismal one.
The figures on repossession are alarming
A total of 455 family homes were repossessed in the last quarter of 2016 according to figures released by the Central Bank for the fourth quarter of 2016. This is the highest quarterly total since this data began to be collated. NGO FLAC (Free Legal Advice Centres) has issued numerous analyses and policy statements calling for a fairer mortgage arrears resolution process. These figures gave FLAC the opportunity to compare four full years of data on repossession in Ireland. Senior Policy Analyst Paul Joyce hence observed that since 2013, a total of 28,917 new repossession cases had been brought, out of which 5,306 family homes were repossessed through court orders or by voluntary surrender.
The actual figures might be even more worrying
The fact that the trend for the number of repossession cases presently before Circuit Courts has been omitted is a matter of concern for FLAC. Circuit courts are intermediate level courts of local and limited jurisdiction. Nearly 29,000 cases have been brought before them in the past four years. Paul Joyce thinks the households that are currently before these courts are threatened of repossession too. He regrets no figures have been made available there as these could help understand the extent of the menace facing such households.
The average arrears amount has increased
While it is true that the number of accounts in arrears for over two years has decreased from 34,551 to 33,447, the average arrears amount on these accounts increased from €63,611 to €65,895 over the last quarter of 2016. It is therefore a concern that there is limited progress in tackling longer term arrears cases.
The rate of failure in restructures is another perturbing trend
Close to 1,400 split mortgage arrangements are failing to meet the terms of the deal. The rate of failure for capitalisation of arrears is nearly a quarter, that is 22.5%. Capitalisation of arrears is an arrangement where some or all of the outstanding arrears are added to the remaining principal balance, to be repaid over the life of the mortgage. The fact that the success rate of such arrangements is so low means that the restructuring deals that are being made are impracticable. Indeed, most lenders are reluctant to consider all available restructuring options, especially writing down the mortgage to a supportable amount. FLAC believes this should be the case so that as many people as possible are able to keep their homes.
Vulture funds are intensifying the homelessness crisis
The name could hardly be more appropriate: working indeed like the predatory bird, a vulture fund is an asset manager that specialises in buying distressed debts. This hedge fund has considerably increased its share of mortgage accounts which are in default, particularly those that are in deep, longer-term arrears. Vulture funds now own over 15% of the accounts that have been in arrears for over two years, that is, 4.2 % higher than during the previous quarter.
The only hope lies in the revised legislation
The Keeping People in Their Homes Bill was published on 23rd February 2017. It seeks to introduce major new additional safeguards to mortgage holders in arrears in relation to their main private residence. This bill is most urgent as currently, there is no detailed consideration of the individual circumstances of the debtor as required by EU law. This has led to a situation where there is no means in the courts to examine the repossession order on its merits so as to determine how fair or unfair this course of action is. This Bill, if voted, will address this huge gap in the law.
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Source : https://www.flac.ie/news/2017/03/16/worrying-trends-continue-in-latest-mortgage-arrear/
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