The Central Bank has sent inspectors into the banks to see how they’re dealing with long-term arrears.
There are 37,400 people in arrears for two or more years, who owe approximately €1.8bn of the entire arrears figures outstanding in Ireland of €2.3bn.
People who are in arrears for 720 days or more are the most vulnerable group, according to David Hall, CEO of the Irish Mortgage Holders Organisation (IMHO), and are what he describes as a financial time-bomb.
“They’ve been abandoned by the system and the banks haven’t dealt with them,” Mr Hall told Newstalk Breakfast this morning.
The entire social housing list currently has 100,000 people on it and is said to be in crisis. The IMHO predicts that 20,000 of the 37,400 will lose their homes.
The other group of long-term arrears are those in the one-to-two year group, of which there are 15,000 people.
“What’s happened is that the banks have been celebrating the false reduction of arrears - having dealt with the small arrears problems, which is normal run-of-the mill stuff that has corrected itself,” Mr Hall points out.
In the category of more than two years, there is an average arrears figure per household of €45,000.
The entire arrears figure outstanding in Ireland is €2.3bn. However, of that figure , €1.8bn refers to those in arrears of more than two years which then equates to a loan value of €8bn.
The three main issues are:
- Impact on social housing
- The issue of personal debt
- The potential balance sheet problem for the banks - no one truly knows how much they’ve provisioned for
The IMHO has lodged a complaint with the banks about tackling the issue of long-term mortgage arrears, accusing them of cherry-picking which cases to resolve.
The Central Bank inspectors are probably going to confirm inaction, lack of solution, lack of willingness to take a hit and write-off loans, and also point out the lack of functionality of the insolvency regimes, according to Mr Hall.
He is also critical of the Government, in particular Minister of Expenditure Brendan Howlin for “parading the insolvency regimes when they were announced, and the ability to write the loan down to the current market value, but they didn’t compel the banks to do it.”
The IMHO puts forward three compulsory solutions for every lending institute:
- Split-mortgage
- Mortgage to rent - state sponsored initiative, but has been a total failure
- An agreement to sell with an agreement re the residual debt
As it stands, the Central Bank of Ireland does not require any lending institution in Ireland to provide a mortgage product or solution for anyone who is in mortgage arrears.
