Banks calculate that two-thirds of those in long-term arrears on their mortgage repayments ultimately risk losing their homes, it has emerged.
About 26,000 people are 720 days or more behind with their home-loan repayments, classing these debts as being in long-term arrears.
An email from Central Bank economist Fergal McCann, responding to questions from consumer rights campaigners, says information from lenders suggests that two-thirds of the long-term mortgage arrears group have "loss of ownership flagged as the banks' resolution path".
Mr McCann’s mail, sent on July 30th this year, refers to a paper written by his colleague Terry O’Malley two years ago, but does not indicate that banks’ views have changed since then.
According to Mr O’Malley’s note, the Central Bank collects information from lenders on how they intend to deal with arrears cases.
“Sixty-seven per cent of the sample of loans analysed in this paper are linked to potential loss of ownership by the borrower,” it says.
Mr McCann tells David Hall of the Irish Mortgage Holders' Organisation (IMHO), Brendan Burgess of financial advice website askaboutmoney, and Seamus Coffey, University College Cork economist, that in half the cases, banks believe they will have to go to court to repossess the properties.
“However, this does not give any indication of where in the process the bank is,” says Mr McCann.
He adds that the Central Bank would need information from other sources for a conclusive view on that.
The Central Bank, which regulates financial services, says that the paper, Long-Term Mortgage Arrears in Ireland, does not reflect its position on tackling the problem.
The news comes as an estimated 37,000 borrowers face having their loans classed as being in default following extended Covid-19 repayment breaks.
The IMHO wants the Oireachtas to pass legislation to put mortgage repayments on hold to avoid this.
According to the organisation, which represents borrowers in dealings with their banks, 37,000 of the 86,000 homeowners who got repayment breaks when the virus struck in March still have the payment holidays.
Those breaks come to an end this month, but Mr Hall said on Wednesday that the scheme should remain as long as the Covid crisis continued.
He warned that borrowers could be forced into the mortgage arrears resolution process.
“This is a tortuous process which leaves people, who’ve done nothing wrong, living in limbo,” Mr Hall explained.
“They have no idea where that process will leave them. Some of them may well lose their homes.”
Many of those whose mortgage repayments had fallen behind before the Covid-19 outbreak were caught in the fallout from the 2008 financial crisis. They owe an average of about €60,000 each.
Consumer protections
The Central Bank says it focuses on ensuring that borrowers are treated fairly through consumer protections that include a code of conduct on mortgage arrears.
This governs how banks treat borrowers and requires that banks use repossession only as a last resort.
Instead, it demands that lenders agree repayment arrangements with borrowers that are sustainable and based on an assessment of the customer’s circumstances.
These include cutting or deferring interest payments, paying only interest for a specified period of time, extending the loan’s term or type, which cuts repayments, or several other options.
