Permanent TSB increases court actions against defaulters

Permanent TSB has significantly increased the number of mortgage holders in default whom it is bringing to court, the bank has told an Oireachtas committee.

Having focused on more manageable cases in the earlier stage of the crisis, it is now focusing more on arrears cases where there are greater difficulty.

The bank has offered "long term treatment arrangements" to 61 per cent of its customers who have mortgage arrears of more than 90 days, chief executive Jeremy Masding told the Joint Oireachtas Committee on Finance, Public Expenditure and Reform.

He said the bank has exceeded the Central Bank’s target of 50 per cent by the end of December 2013.

The committee also heard that the bank has significantly increased the amount of legal action it is taking against customers in arrears.

Permanent TSB had 22,109 private home mortgages in arrears of more than 90 days at the end of last year, and 3,815 buy to let mortgages in similar arrears.

Mr Masding told Michael McGrath of Fianna Fail that up to 20 per cent of customers in arrears are not involved in “meaningful engagement” with the bank in relation to the their mortgages.

The shift towards a greater focus on such customers has meant an increase in cases where the bank is taking legal action and it expects the number of repossessions this year to be “in the hundreds,” Shane O’Sullivan, managing director asset management and non-core units, told Pearse Doherty of Sinn Fein. This compares with 60 repossessions last year.

The eventual figure is likely to be between 2,000 to 4,000 repossessions, he told independent deputy Stephen Donnelly. These would constitute a mix of private home mortgages and buy to lets, with the latter being the majority.

While there were 1,095 legal proceedings initiated in the final quarter of last year, for private home mortgages in arrears, this number increased to 2,609 in the first quarter this year.

Mr Masding said two thirds of the bank’s mortgages are tracker mortgages and that this was costing the bank up to €100 million per year in cost of funds.

Mr Masding said the bank had issued mortgages totalling €105 million in the first quarter of this year, compared to with €14 million in the same quarter last year. “So that’s almost an eight-fold increase in just 12 months.”

The committee was told that the bank is not pursuing people whose homes have been sold leaving a shortfall in the repayment of the mortgage, if there is no economic reason for doing so.

However Mr Masding agreed there had not been any write-downs of debt yet and so the debt was “left hanging” over the persons concerned.

He said the bank was involved in a pilot programme involving assisted voluntary sales and was learning as it went forward, he said.

While 90 per cent was the highest loan to value ratio being offered, the norm was 70 per cent to 80 per cent. The mortgage period was down to 25 years.

The committee heard the bank's debt to the European Central Bank had been reduced to €6.5 billion as of the end of last week, compared with almost €11 billion in 2012.

Mr Masding said the past year had been transformative for the Permanent TSB group and that the bank had made very significant progress on re-entering the retail market, particularly in mortgages and current accounts.