The position on here remains skeptical about the ability of our banks to deal with our own mortgage crisis where one in four mortgages is in some form of difficulty. There is a target whereby 20% of distressed mortgages are to have resolution plans by the end of June 2013, but that equates to 25,000 mortgages out of the 125,000-odd buy to let and owner occupier mortgages in arrears at the end of December 2013. The disgrace is that we’ve known about the crisis for over two years, with the Keane report initiated in August 2011 and President Clinton acknowledging mortgage debt as the number one economic challenge facing the country, something accepted by An Taoiseach.
Ireland is not the only country in which there is a mortgage crisis.
Greece has put together proposals which are being sent to the ECB now, and which are expected to come before the Greek parliament before the end of May 2013. The Greek original is here and there is a pigeon translation here. You will recognize many of the elements of the scheme!
If
(1) You have net household income of €25,000 or less (for large families or where there is disability, the limit rises to €30,000)
(2) And your household income has declined by at least 20% since January 2010
(3) Mortgage and other lending of less than €180,000, mortgage lending of less than €150,000
(4) The value of the property is less than €250,000
(5) Total cash deposits are less than €10,000
Then
(1) You get a 48-week, that is, 4-year “umbrella” period
(2) Repayment of debt is limited to 30% of your net monthly income
(3) After the 4-year umbrella, repayments kick back in on the original terms
There are two additional measures
(1) If income is less than €15,000 then the interest rate during the 4-year period is capped at 0.75% over the ECB rate, or 1.5% at present
(2) If you are unemployed then you get an interest holiday during the first 6 months of the 4-year period
The ECB needs to be involved because these measures which are expected to apply to 200,000 households will have a negative impact on the banks, with both reductions in revenues and losses. There is no published estimate of these impacts.
These proposals may be shot down by the ECB, but it demonstrates the Greek government is at least trying to progress solutions, even if they have an impact on the banks. Let’s see how we get on in Ireland at the end of June 2013.
NAMA Wine Lake 
This plan covers about 200.000 persons that have so far kept up with their mortgage payments, despite a drop in income due to unemployment, illness etc. They are in difficulty but they have somehow managed to keep up with payments. Nevertheless, they need and deserve help as the drop in income and their difficulties could not be anticipated when they took up their mortgages.
Would it not be reasonable and fair for irish mortgagees to come to a similar arrangement with their banks before it is too late? If you only make a deal with defaulters, you are effectively punishing those that honestly tried to keep up with the payments. You are actually driving people to strategic default, whilst talking all the time about moral hazard.
Presuming that it was meant to be 48 months (not weeks)….although, it could to 48 months for the Government (Iriish or Greek) to get anything in place,
Yes, it is 48 months.
i think the troika plan is to get the fiscal house in order and then deal with the mortgage crisis.
I can’t see how banks can truly deal with the Mortgage issue without crashing through the ‘adverse scenario’ and bringing further capital requirements.
At the moment house prices and especially rents are being supported by the lack of action by banks meaning that huge numbers of properties that should be available for sale / rent aren’t.
There is a negative spiral awaiting Ireland, once banks act or are forced to act.
Supply goes up – prices / rents down – increased arrears / repocessions in the buy to let – supply goes up.
Honestly, right now, kicking the can down the road is a good policy.
“I can’t see how banks can truly deal with the Mortgage issue without crashing through the ‘adverse scenario’ and bringing further capital requirements.”
Karl, even If you cant see a solution, lets hope that (some of) those in charge do. Kicking the can down the road and hope that it will all somehow sort itself out is not what I would call a strategy.
I am not an economist (and neither do I have a mortgage) but in dealing with any problem, the first priority is to contain it. See that it doesn’t spread. Now, there are decent people, currently in need, that have been paying back their mortgages and the current irish recipe is for them to be shifted away from their trackers and/or to get them to pay exorbitant credit card fees etc as this may increase the banks’ profitability. My take on that is that our non solvent banks that survive with european money should see that their good clients remain in the system and the economy remains functioning. This is why Greece will legislate putting those people on trackers by act of law, even if they had signed for variable a few years ago.
Our host wants to know what will it cost, and I think it is always a fair comment but on this occasion you need to consider the cost of the alternative ie inaction until there is som much shit around that it invariably hit the fan.