Wednesday, October 6, 2010

Economics 6/10/10: Mortgages arrears and paying FR staff

The latest, highly irritating, half-talk about the real issues comes courtesy of our FR. Per Matthew Elderfiled, Ireland's mortgage arrears figures stand at 36,000 borrowers or 4.3% of the borrowers. Now, the number clearly does not include:

  • Those who have renegotiated their mortgage terms (acknowledged by Mr Elderfield), forced to do so by... err... inability to pay; and
  • Those who are in the receipt of state aid to pay their mortgage interest, due to their... err... inability to cover their mortgage; and
  • Those who are missing some of the payments, without triggering actual arrears (say paying 5 months out of every six, thus sliding in and out of arrears)
Here's a question Mr Elderfield should be answering: Why wouldn't his office demand from the banks full disclosure of the above information? "

It's a hugely difficult subject," Mr Elderfield told the Dail Committee today. Really? What's all the highly paid FR staff for, then? To write speeches for the Regulator and arrange events calendar?

Another question for Mr Elderfield. Q1 2010 estimate by NIRSA showed that 32,321 mortgages were in arrears 90 days or over. Figures from the Central Bank show that 36,438 mortgages were in arrears for more than 90 days at the end of June 2010. What's the value of Mr Elederfiled's latest statement if it offers no new information?

And just when you get the idea that Mr Elderfield should have been answering more questions than he did, here's the last one: What is his office doing to prevent banks from savaging more vulnerable (to increases in the cost of mortgage finance) ARM mortgage holders?


Georg R. Baumann said...

How dare you? No one is supposed to question Matthew Elderfield, after all he is the one that is used by Lenihan and Cowen to hide behind and his shoulders are wider than those of the central bank governor. Are you not aware that Ireland introduced new blasphemy laws?

Just kiddin... ;o)

Jagdip Singh said...

Hi Constantin, the IBF said in April (link below) that 30,000 mortgages had been restructured up to the start of 2010 and upto April, it was running at an extra 3,000 per month. If that has continued then some 57,000 mortgages will have been restructured to the 9 months to end Sept 2010.
I understand there are 17k-odd mortgages receiving assistance but some of these *may* be included in arrears.
However if you accept that restructured mortgages are in some sort of difficulty, the it looks like 15% of the 790,000 mortgages in the State are in some difficulty and that ignores < 90 days arrears.
What has not been adequately addressed by the FR or indeed the very well paid Financial Ombudsman is the scandal of tracker mortgage holders being strong-armed off their trackers in return for a restructure and without the benefit of independent financial advice. Some may have lost out €100k+ on a €300k loan over 30 years.

Unknown said...

Hi Constantine,

I cannot find your 'little black book' of things you'd like to see changed, I think you called it your manifesto. Perhaps you could put a permalink somewhere?

If not already there perhaps add to it changes to the bankrupcy laws. Suggest 5 years end to end would suffice. Is there any evidence that easier banrupcy tempers banks wilingness to lend? If so, all the better.


Sean said...


The goverment is bringing in 6 years. 5 years is only a year further.

It's as little as 12 months in the UK. I'd bring it down to 2 - 3 years.

Plus I'd try and institute a similar type of jingle mail that they have in the US. Therefore if people were in negative equity they could simply return the keys to the guys who gave them the loan. That puts the onus on the banks to get appropriate deposits and give appropriate loans thus preventing bubbles.

Unknown said...

While JC and Sean are talking about non-recourse mortgages as a solution, it needs to be said that US style non-recourse loans present many more problems in relation to prices....more repossessed properties entering the market, dampening prices and placing more homeowners in negative equity....which leads to more defaults and a fresh wave of price adjustment (that is what the US is facing now according to the most recent HMDA figures.)

In an Irish context, this problem is taken care of through immigration....homeowners simply find opportunities elsewhere and then leave the keys with the bank....

Back to Dr.G....these figures would need to be specifically compiled due to the way that Irish mortgage providers operate.....all differently.....most have programs that allow mortgage payment moratoria due to "family circumstances" Now who knows what those are, as the banks are not allowed to disclose the "family circumstances" because of various Acts surrounding privacy....which is rather convenient for the FR. They would only get data surrounding financial circumstances specifically, because that is their remit....but "family circumstances" do not come under this.....the banks can define good luck to the FR getting accurate data, assuming that they want it.....

I would estimate the actual arrears rate of over 60,000, with many being defined as "family circumstances" payment deferrals.

EWI said...

The bankers not only fleecing us through bailout but then also screwing us for mortgages fattened up by their game of the past decade or so (playing both sides of the bubble) is sickening. I have no faith either that we won't end up in a situation like that in the US: