This time last year, we had the Morgan Kelly article at the start of August warning about the mortgage crisis, we had what seemed like a knee-jerk reaction with the Government rustling up from nowhere the Keane research which led to the Keane report published in October after President Bill Clinton identified the mortgage crisis as the number one economic problem facing the country. And remember MP Mac Domhnaill, the man from Kerry whose heartbreaking letter to the Irish Times aroused widespread sympathy and alarm?
A year later and the mortgage crisis has intensified; figures released last week show the number of mortgage accounts in arrears has increased by 50% in the past year, that more than 83,000 owner-occupier mortgage accounts are now in arrears of more than 90 days, and when taking into account all arrears including those less than 90 days and the number of restructured mortgages, some of which might be repaying zero at present, then 22% of mortgages are in trouble.
There has been a slight relenting in the pace of increase in the last two quarters, but the numbers are getting worse. And responding that 78% of mortgage accounts are being repaid on time isn’t much more helpful than saying that with only 11 homicides in Q3,2011 in Ireland, the vast majority of the 4.6m in the State wasn’t murdered, that there were 28 Tiger Kidnap offences but again 4.6m people weren’t kidnapped or that 630 people were sexually assaulted but most weren’t. Every single household in arrears should be a matter for concern.
Figures gratefully received today from the UK’s Council of Mortgage Lenders for the second quarter of 2012 show just how dysfunctional our mortgage crisis has become. In the UK less than 2% of mortgage accounts are in arrears for more than 90 days, in Ireland the latest figures show 10.9%. Despite having a healthier economy, lower unemployment with property prices down just 10% from peak, you are 23 times more likely to have your home repossessed in the UK if you run into difficulty.
Whilst accepting that the UK is a different jurisdiction with a different economy, history and culture, it is our closest neighbour both geographically and arguably, socially; so when there are big differences – be that in unemployment benefit rates or the cost of health or broadband – then questions suggest themselves. Ultimately there may be justifiable reasons for disparity, but when there are such stark differences, it seems sensible to at least ask why.
It may seem heartless to call for more repossessions in Ireland, but by sticking our heads in the sand, we are consenting to perpetual social harm and economic blight. Of course keeping the family home should be a social and economic priority, but we need to debate if it is better to put a merciful end to hopeless cases and provide social housing or rent assistance. And if we had a proper personal insolvency regime, then we might find banks willing to do deals in cases which might otherwise be hopeless. Otherwise we continue to have large numbers of households frozen in fear for the future with all the distress that causes, plus the economic harm of households not spending in anticipation of imminent distress – bad for the economy and even worse for society.
NAMA Wine Lake 
I think you answered your own question there: the main reason home reposessions are uncommon is because there Is no social housing to place people into, and if there were it would mean displacing people who never had the opportunity to own their own home on the social housing lists. Also government owns Both banks and pays for social housing, so its probably ‘cheaper’ in the short term to stick their collective heads in the sands and hope the problem goes away,
Finally, the vast majority of people who have problems with mortgages very much prefer to stay in their own home, very few want to take pot luck on the only option, a private rented sector that is effectively unregulated and where living conditions are often several decades behind standards expected by owner occupiers.
@NWL
It does indeed sound heartless to argue for more repossessions, without defining what one means by repossession.
Personally I am in favour of one kind of repossession. Repossession where the owner occupier remains in the house as tenant.
In fact I think there is a good case to force this course of action where mortgage arrears extend beyond 12 months.
Repossession involving eviction by State owned banks, purely for reasons of genuine inability to pay, only to have the evicted owners rehoused by the same State, is not only heartless, it makes no economic sense.
But what I really cannot understand is why we are talking about repossession of the +16% of residential mortgagees in arrears, when probably a full 50% of Buy to Let landlords could be in arrears and seem to occupy a favoured place amongst bank borrowers, akin to developers. An undeclared NAMA beag appears to be in operation for them.
Lets have some balance here.
When the BTL investors have been ‘repossessed’, an outcome that need cause no distress to exiting tenants, then perhaps one could start discussing repossessions of owner occupier dwellings.
@Joseph, so you would protest if Sean Quinn’s home in Cavan – the 14,500 sq ft home with cinema and swimming pool and nice landing onto the adjacent lake – were to be repossessed by Anglo as suggested it might be in last weekend’s Sunday World (middle of article)?
http://www.sundayworld.com/columnists/sw-irish-crime.php
I would use this example to illustrate the point. Homes aren’t homogenous 1,000 sq ft boxes. There are differences, and if the accommodation that would be offered as social housing was the same as the home from which a borrower was being evicted, it makes no sense indeed for the State through its banks to incur the cost of an eviction and the inefficiency of sourcing social housing.
In the case of Sean Quinn, my protest would be rather meek. Nevertheless on the general principle involved, I would not exclude any private residence, except perhaps trophy residences, provided the debtor cooperated in every way. That alone excludes Sean Quinn & Co.
The simple way out in the case of ‘trophy homes’, which would be no different from other council owned houses, is that the bank (read State) ends up owning the home and charging a reasonable rent for same, based on the income of the occupant.
Many of these ‘trophy home’ occupiers would have to resort to B&B provision to help with the maintenance.
Vindictiveness or exemplary punishment, (and I am not suggesting that you have advocated either ), should not form part of the process of dealing with owner occupiers who are genuinely unable to pay their mortgages.
I have a some sympathy, for instance, with the case Bernard McNamara, who lived in that house for many years. Provided he had cooperated fully with the creditors, the policy I would propose would have seen him keep his house.
Correction to Typo
Above should read
“When the BTL investors have been ‘repossessed’, an outcome that need cause no distress to existing tenants” not ‘exiting tenants’
Why on earth would there be a reasonable level of repossessions in Ireland?
Our country has been run for the benefit of a new landlord class since the introduction of S.23 relief in Finance Act 1981. A considerable element of the higher earners in our society jumped on this bandwagon at various times and in varying intensity in the last 30 odd years.
The game they played was low equity, high leverage and you could not lose. It was initially stoked by tax relief with later boosts and when the game looked like stalling around 2001 when Bacon’s withdrawn income tax relief on interest for rental property started to reduce prices, the government immediately reversed the measure. It ran on greed when the little people thought they too could become players in the mid noughties and crashed to earth in 2008.
Deliberately poor regulation during the period 1990 – at least 2008 allowed this crazy situation to continue.
No realistic observer ever believed that NAMA’s primary purpose was to provide bank liquidity. It was started to bring about a “recovery” in the property market and “recovery” meaning a return to the crazy prices of 2007 not a return to long term affordability for the ordinary Joe or Jane seeking to house his/her family.
The majority of politicians appear to either belong to or be beholden to this landlord class. Recent successive governments appear willing to risk bankrupting our country in order to “save” the property market through the NAMA scam and Forebearance measures – where is there any realistic debate or policy on growth or jobs or a state investment bank – perhaps called the Industrial Credit Corporatoin – that loans to or invests in business.
How could we possibly have a Smart Economy when we let ourselves be run by such apparently stupid people?
We absolutely need property repossession in order to return to a functioning market. It will show the true value of property, and cause buyers to be confident again in a far better way than the crazy proposal from Mike Soden (why he is on the board of the Central Bank?) and also help lenders to lend as they will again be able to enforce their security.
We will not see repossessions at a meaningful level for as long as the current property class control our nation. What possible economic rather than political reason can there be for no buy to let repossessions? Cui Bono?
Rereading this, I seem like a conspiracy nut with left wing tendencies. I’m actually a free market capitalist. I’m not a fan of the woman, but Margaret Thatcher once said in the context of Britain leaving the ERM “You can’t buck the market” – how far on the road to penury does Ireland need to go before we realise that the hard way?
Has anyone ventured a guess recently at where the bottom will be in terms of residential mortgages? What might the 22% figure quoted above eventually rise to? (One can only assume this will rise since the economy is still in recession and unlikely to take off like a rocket anytime soon.)
Or is it impossible to say, given the unprecedented personal debt situation Ireland finds itself in?
I’ve been asking myself that question for years. My answer? It’s the wrong question.
It’s wrong because it’s framed in terms of housing as an investment.
Otherwise, the credit bubble has burst and it’s not coming back.
Have a look at this trend on debt owed in the US:
Dates back almost to 1950 – an almost perfect exponential shattered in 2008. As far as I understand the central banks have done their best to return to the status quo ante, but it’s not happening.
So returns on all investments will be minimal – unless you chance your arm in stocks & commodities, in which case you will probably lose the arm. Overall I don’t see inflation, which means banks and investors will be suffering for a long time.
83,000 homeowner mortgages in arrears in excess of 90 days. 50% of home loans underwater.
Question for the politicians – If the mortgagors cannot even pay their mortgages at present, how do you think they will pay a new property tax that will equate to an extra one months (minimum) to two months mortgage payments per annum?
This is not a trick question, but you should know that our taxation system is getting ever closer to the revenue raising concepts of that great 19th century economist, Jesse James.