BoI only big player seeking debt after clients lose home

It said much about the joint Oireachtas finance committee's hearings into mortgage arrears that, when its members were grilling Bank of Ireland chief executive Richie Boucher yesterday about figures relating to 2013, the Department of Finance was publishing the latest arrears statistics for February. The story was moving on around them.

Spread over three days, the hearings involved the chief executives of Ulster Bank, Permanent TSB, AIB and Bank of Ireland.

Essentially, this was a follow-up to the marathon sessions that were held with the banks last September about their books of arrears and the solutions they were providing to customers who are behind in payments.

It was a useful piece of work given that there was such little information in the public domain at the time. It had been just six months since the Central Bank of Ireland had published its mortgage arrears targets for proposed and concluded solutions, and it was before the new personal insolvency regime had taken hold.

There was less bite to the figures about solutions this time, and more focus on repossessions, the number of legal cases in the system, and write-downs.

Each bank had its own story to tell but there were noticeable differences of approach by the main players, AIB and Bank of Ireland.

The AIB delegation, led by chief executive David Duffy, informed the committee that they have completed write-downs of one sort or another in about 2,000 cases.

By contrast, Bank of Ireland will not countenance any write-down of debt, even for those who hand the keys back on the properties that they simply cannot afford.

Chief executive Richie Boucher made it clear to the committee that it was not the “policy or practice” of the bank to write-down debt and that he has a responsibility to all his stakeholders, including the State, which owns 14 per cent of the bank, to ensure that secured debt such as mortgages is repaid.

Mr Boucher said the only exception is when somebody is declared bankrupt or some other legal process intervenes.

The bank said customers who surrender their properties would be required to repay the residual debt plus the interest costs.

A repayment schedule would take account of reasonable living expenses and the amount repaid could be as low as €50 a month.

AIB determines how much of a debt is to be paid back after an agreed voluntary sale is concluded and does not review this arrangement or seek to change the deal if the customer’s financial circumstances improve afterwards.

Mr Duffy said the decision to do this arose after they had considered points made by Independent TD Stephen Donnelly at an earlier committee hearing.

'Unhelpful distraction'
Ulster Bank, which was first up with the committee on Tuesday, also made it clear that it does not write-off mortgage debt.

"The write-down or write-off of debts is, we believe an unhelpful distraction that is likely to create issues around moral hazard, transparency and fair outcomes for customers," its CEO Jim Brown said.

AIB said about 1,000 might end up being repossessed while Permanent TSB put the figure at 2,000 to 4,000.

Mr Boucher steadfastly refused to offer a prediction as to how many repossessions might be involved for Bank of Ireland, stating that, as a public company, it could not put such figures into the public domain unless they had been verified.

Similarly, Ulster Bank declined to give such a prediction.

All of the banks stated their desire to see as many customers remain in their homes as possible and their willingness to offer solutions where possible.

Buy-to-let
What is clear is that a thousands of mortgage holders are currently facing the threat of repossession from their lender. PTSB said that at the end of the first quarter of this year, 5,318 private dwelling accounts were involved in legal proceedings. The figure for buy-to-lets was 1,518. This is everything from an assisted voluntary sale to a judgement being enforced.

AIB said 6,702 owner-occupied and 2,569 buy-to-let loans are in some form of legal proceedings or surrender. These figures relate to the end of December.

Bank of Ireland has 7,630 private homes and buy-to-let accounts in some form of legal process while the figure for Ulster Bank is 6,020.

Ulster Bank noted that it can take more than two years to process a repossession case through the courts due to resource constraints in the courts and a build-up of cases entering the system, many of them as a result of customers refusing to engage with banks, thereby leaving them with little option but to go legal.

Michael McGrath of Fianna Fáil described as "frightening" the prospect that so many people were facing the prospect of repossession.

“It’s absolutely not in our interest . . . to go down the repossession route,” Mr Brown stated, a sentiment echoed by his counterparts at the other banks.

All of the banks sought to put a spin on their arrears to project that they are on top of this problem and are dealing with it efficiently and expeditiously.

The Department of Finance figures yesterday suggest that the peak has been reached and that arrears are declining.

This data, which covers six institutions, shows that just under 60,000 permanent mortgage restructures were in place for owner-occupied properties at the end of February, which represents an increase of 5,699 on January.

Splice or dice
The total number of mortgages in arrears of one day or more at the end of February fell by 3,883 compared with the previous month, with the figure for more than 90 days reducing by 1,217.

The picture for buy-to-let mortgages is less bright. The number of these accounts in arrears of 90 days or more increased by 176 from the end of January.

The number of rent receivers appointed rose by 969 from the end of last year to the end of February.

Splice or dice these figures which ever way you like but with 31,000 mortgage accounts in arrears with the four main banks, the problem will be around for some time to come.