Distressed mortgage-holders need three key issues to be addressed

The recently announced surge of 8,000 repossession proceedings by State-owned banks and other lenders is prompting Government action. While a number of new measures have been announced, some requiring legislation, many key issues still need to be addressed.

First, published statistics do not give a true picture. Central Bank reports on mortgage arrears and repossessions rely on data from lenders, with Central Bank staff producing valuable analysis. Based on the 760,000 principal dwelling house mortgage accounts, with 110,000 in arrears, the disparity between these accounts and actual mortgaged homes was evidenced in the Central Statistics Office's Census 2011.

Some 583,148 homes accounted for 782,429 principal dwelling house mortgage accounts at the time. This indicates some people may have two or multiple mortgages. CSO reports showed 8.7 per cent heads of mortgaged households being unemployed at the time. In half of these households, no one was employed.

Recent reports of mortgage lenders “concluded solutions” – a term with unfortunate historical European connotations – showed 16,683 cases in which property owners would potentially lose their house. Some 15 per cent are expected to be voluntary surrenders/sales, with the remaining 12,500 advancing towards court-sanctioned repossession, although complying with the code of conduct for mortgage arrears. Of course, this relates only to the six bank lenders, while the greatest arrears levels and repossessions arise among the further 20,000 mortgage accounts (we don’t know how many homes) with non-bank lenders (including “subprime”). Remarkably, these do not have the limited protection of the code of conduct for mortgage arrears. Here, arrears amount to more than half the total outstanding mortgage balances, and are being sold to international “vulture” funds – presumably at less than 50 per cent of their formal value. In this context, troika influence has led to courts service distinction between “home” loans and other mortgages in repossession cases. Further useful statistical repossession data could also be collated.

EU law

Second, the recent EU-law-generated single supervisory mechanism, where the European Central Bank micro-prudentially supervises the main Irish banks, is rarely invoked. Nor is the ECB’s compliance with EU law’s procedural and human rights obligations examined. The mortgage arrears resolution targets with their “concluded solutions” are an integral part of this process.

Third, despite the valuable activities of State, charitable and commercial organisations and individuals supporting distressed borrowers, there is an absence of any representative consumer organiser of borrowers, either at national or EU level. Although Irish legislation in 2009 imposed consumer law definitions on “housing loan” mortgages, this integration of property/mortgage and consumer law has presented conceptual challenges for a few lawyers and courts.

No mortgage-related referrals have emanated from Irish courts to the EU Court of Justice for clarification, and there seems little awareness of European Convention on Human Rights’ “respect for home” provisions in authorising repossessions.

Courts in at least one other European country, with a constitution similar to Ireland, have held that "evictions to nowhere", especially where children, vulnerable or dependant people are involved, can constitute a violation of human dignity. However, no representative organisation of consumers advances the law beyond the current individually defended cases. There is no consumer/borrower equivalent to the banking federation, providing a key point of contact for Irish policymakers, regulators and legislators to better integrate Irish and European law and policy.

Pillar banks

State rescue and nurture over five years has resuscitated the so-called pillar banks into potentially profitable (but not fully private) corporations. However, the reported levels of fear, distrust and poor representation and information among vulnerable borrowers in arrears remains indefensible. Lender behaviour and State support for global financial decorum, often perceived as prioritised over the dignity of financially vulnerable citizens, has impacted on public opinion.

Political leaders should, in 2015, have accurate information on how many “mortgage accounts” in arrears involve unemployment, illness, relationship breakdown, death of family member, children, people with disabilities and adult dependants, as well as the numbers of homes involved. Since the main banks are directly supervised by the ECB, it should now be different to 2008/2009. We need less fog and fear. It might be useful to consider some of the ideas of the new EU mortgage credit directive, making all residential mortgages non-recourse, and ending reckless home-loan lending once and for all.

Dr Padraic Kenna is a law lecturer at NUI Galway and director of an EU research project on evictions