MORTGAGE DEFAULTS continued to increase in November. But the Government’s proposed extension to the moratorium on legal proceedings may undermine the ability of banks to source capital from mortgage-backed bond investors, according to the ratings agency Moody’s.
The incidence of mortgage-backed bonds where the underlying loans have been unpaid for more than 90 days increased 123 per cent in the year to November, data from Moody’s Investors Service showed. The proportion of outright defaults is also up 218 per cent over the period.
The data shows that among the prime lenders that have parcelled residential mortgages into mortgage-backed funds for the securities market, EBS has experienced the sharpest rise in its loan delinquency and default ratios.
Loans that have been categorised as delinquent for more than 90 days have surged more than 200 per cent and defaults are up 487 per cent at the building society over the 12 months to the end of November.
Mortgage-backed funds relating to loans advanced by First Active, the former subsidiary of Ulster Bank, have the highest delinquency and default ratios.
Moody’s index of Residential Mortgage Backed Securities is one of the only independent sources of information on delinquency trends in the Irish mortgage market.
The ratings agency compiles the data for investors who buy up tranches of mortgages advanced by lenders and take on the risk that borrowers will default.
According to a separate report from Moody’s, the existing obligation on the banks to adopt a six-month moratorium on taking legal action against borrowers in arrears does “appear to be having the intended effect of suppressing current repossessions”.
Under the scheme, banks will decide on a case-by-case basis to defer payments, extend the mortgage term, change the mortgage from repayment to interest-only or add the arrears and interest into the total capital owed.
The Government announced last month it would extend the moratorium to 12 months, a move welcomed by consumer groups, housing charities, advocates for the unemployed and borrowers.
