Cast your minds back in August 2011 and you might recall economist Morgan Kelly’s last contribution in the old Irish media when he warned of the growing mortgage crisis. The knee-jerk reaction was the announcement, out of nowhere, of the Keane working group which delivered a report in October 2011 which has gather dust ever since. At the time, the Government declined to provide details about the Keane working group, its terms of reference, budget, resources, objectives, time frames or deliverables. That episode strongly suggested the government was caught on the hop and that it was not in control.
Fast forward to March 2013 and Minister for Finance Michael Noonan makes fanfare announcement in which he outlines targets for banks providing sustainable solutions to mortgage borrowers in distress. No, the Minister would not tell us what a “sustainable solution” was nor who would judge if a solution was sustainable or not, but the Minister did trumpet targets and the first target is that 20% of mortgages in arrears would be offered sustainable mortgage solutions by June 2013.
In the Dail this week, Minister Noonan was challenged about this target. Given that Minister Noonan had previously said that distressed mortgages were defined as those in arrears of more than 90 days, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister if – by reference to the latest arrears figures for the three months ending 31st December 2012 which showed approximately 125,000 buy to let and owner occupier mortgages in arrears over 90 days – was the Minister really saying that 25,000 mortgage borrowers would be offered “sustainable solutions” by June 2013 which equates to 2,000 mortgages per week or 400 per working day. The Minister was asked if these targets would be constantly monitored so that we don’t reach June and find out the targets are Alice-in-Wonderland.
The Minister responded “the Central Bank has informed me that, while demanding, the level of the targets have been calibrated taking account of the current operational capability of the banks’ arrears management.” So the Minister who was goal-hanging the notion that this Government was finally doing something about the mortgage arrears crisis in March 2013 is now passing the parcel to the Central Bank.
Does anyone really believe our banks are carefully examining the mortgage status and finance of borrowers and proposing 400 “sustainable solutions” every working day? We’ll find out in June, but the betting on here is that we will be lucky to have 400 “sustainable solutions” per week.
The full parliamentary question and response is here.
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question 194 of 26 March 2013, in which he stated that banks have been given targets of proposing sustainable mortgage solutions to 20% of mortgage loans that are 90 days in arrears by 30 June 2013, and that this would equate to 20% of 94,488 PDH and 28,421 BTL loans by reference to arrears at 31 December 2012, his views on whether it is feasible that banks can propose solutions to 25,000 mortgage accounts in the forthcoming three months, equivalent to 2,000 per week or 400 per working day; and if the Central Bank of Ireland will be monitoring progress on reaching targets on an ongoing basis..
Minister for Finance, Michael Noonan: The Deputy refers to the targets set by the Central Bank which require the main lenders to systematically work through their mortgage book to offer durable solutions to mortgage holders covering arrears cases that are 90 days or more overdue.
The Public Targets will have the following elements:
§ Quarterly targets will be set in relation to the number of sustainable solutions proposed to customers. These will become progressively more demanding over time. The application of targets will commence at the end of Q2 2013, and will be enhanced in subsequent quarters, with 2014 targets to be set in due course;
§ Progressively more demanding quarterly targets will be set for the conclusion of sustainable solutions. These will apply from the end of Q4 2013 onwards; and
§ Targets regarding subsequent performance of these solutions will be set.
The Central Bank has informed me that, while demanding, the level of the targets have been calibrated taking account of the current operational capability of the banks’ arrears management. The banks will be required to publish their performance against the targets and make quarterly reports to the Central Bank. The Central Bank will consider each bank’s performance against the targets, including assessing whether the modifications provided are in fact sustainable solutions.