Mis-selling

Mis-sold Mortgages Ireland

Sunday Business Post – Using the law to help keep people in their homes…

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The Affordable Housing and Fair Mortgage Bill 2018 has been written by Master of the High Court, Edmund Honohan, with the aim of enacting government policy in such a way as to keep people in their homes.

Introduced in the Dáil last July, the bill highlights Ireland’s adherence to EU law and the European Convention on Human Rights in the context of the housing crisis and, in particular, mortgage arrears.

“I have difficulty with the notion that the defendants in these [home repossession] cases are bound to fail,” Honohan told The Sunday Business Post.

“I feel that this notion has become all-pervasive and feeds into this idea of ‘strategic default’. Because of that, we have families who are being evicted in breach of public policy.

“As far back as September, 2013, the then Taoiseach Enda Kenny said ‘the government has made it perfectly clear that the repossession of houses should be a very last resort’,” Honohan continued. “That is government policy and this bill is about enacting that policy.”

Proposed measures 

Introduced in the Dáil last July by Fianna Fáil TD and chair of the Oireachtas finance committee John McGuinness, The Affordable Housing and Fair Mortgage Bill 2018 provides for a national affordable housing exchange and a non-compulsory purchase option for preferred not-for-profit housing agencies.

It proposes the expansion of the mortgage-to-rent rescue model to voluntary, mutual and not-for-profit housing providers, funded privately and without recourse to public funds or state guarantee, and the reconfiguration of the Abhaile scheme as a mortgage resolution agency.

As Honohan sees it, the odds at present are stacked against lay litigants who find themselves before the courts appealing possession orders on homes that have fallen into mortgage arrears.

Legal aid 

“I have challenged the Minister for Justice to justify the failure to give legal aid to these defendants in light of the complexities of the legal principles and facts at play,” said Honohan.

“They come to me looking for an extension of time to appeal a court order and it is really disheartening to see them. They have no papers. They have not filed an affidavit or they do not know what to say in it.

“They probably think ‘the game is up – we haven’t paid the mortgage and, therefore, there’s nothing more we can say.’ But, they still want to fight it because that is a human reaction. They want to stay in their home.”

Discretionary matter

“The judge in these cases is given to expect that they will have a fully informed basis on which to make a decision, but in these repossession cases, the question is: what information does the judge need to have?” said Honohan

“You might think ‘is there a mortgage and is it a default? End of story’. In fact, the granting of an order for a repossession is a discretionary matter.

“Some judges take the view that the defendant is bound to fail, so there is no need to ask them if there is anything more they want to say once the affidavit has been given.

“So, the defendant is not encouraged to put their best foot forward and I am not sure that the European Court of Human RIghts would be happy at all with the situation whereby an Irish judge simply sits back and allows a defendant to fall flat on their face.”

Abhaile Scheme

The Abhaile scheme was established in 2016 by the Insolvency Service of Ireland with the aim of helping homeowners to find a resolution to their home mortgage arrears.

Abhaile provides vouchers for free financial and legal advice, a service Honohan regards as wholly inadequate in fulfilling its purpose.

“People availing the scheme get a voucher for €200 worth of legal advice. They do not get a representation in court,” he said.

“They do not get a solicitor to attend court and speak on their behalf. They do not get help with the drafting of materials. They do not get advice on the issues they should address. From what I can see, all they get is a quick look over their paperwork.”

Insolvency service

The Insolvency Service of Ireland (ISI) is an independent statutory body established in 2013 with the aim of restoring insolvent persons to solvency.

“In 2013, the government passed a piece of legislation allowing Circuit Court judges to adjourn or recess cases to allow the borrower [in repossession cases] to consult a Personal Insolvency Practitioner,” said Honohan.

“Having availed of this consultation, the borrower could
then go back to court and say, for example, ‘I can afford to pay €800 a month in rent’.

“If we are looking at proportionality in this case and weighing the possibility of a windfall for a vulture fund as against a flow of rental income and allowing the person to remain in their property, the question then becomes: is balance in favour of the borrower?

“It seems to me that it quite clearly is, but the idea that the litigant can consult a PIP in this way has not gathered momentum.

“The judge should tell them off their own bat, but they never do. Abhaile isn’t telling them either and there is no way a lay litigant is in a position to address these issues themselves.”

The Irish Times – AIB hints at further loan sale to tackle ‘deep long-term arrears’

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AIB’s new chief executive, Colin Hunt, is set to indicate to Oireachtas finance committee members that the bank may sell more troubled loans this year to lower its non-performing debt ratio to 5 per cent.

“AIB is still carrying a large chunk of deep long-term arrears that simply must be reduced by year end,” Mr Hunt, who succeeded Bernard Byrne as group CEO early last month, will tell the committee on Thursday morning, according to a copy of his opening address, seen by The Irish Times.

Non-performing loans (NPLs) “inhibit banks’ primary function of lending to the economy and ultimately they increase bank costs, resulting in higher rates for businesses and home buyer,” he said. “It is also true to say that those individual customers who do meet their loan repayments are, in effect, negatively impacted by those who don’t pay.”

Sources said last week that AIB was considering the sale of a final batch of problem loans later this year, after it announced a deal to sell €1 billion of NPL loans against 5,000 assets, mainly made up of investment properties, to a group led by US distressed debt. The original value of the loans is believed to be almost €3 billion.

Vulnerable

The portfolio included about 220 owner-occupier mortgages where the property was “included as cross-collateral to a wider commercial connected debt”, it said on April 1st. AIB sold a €1.1 billion pool of non-performing commercial and investment property loans last year to the Cerberus-led consortium. Both Cerberus deals also involved regulated debt-servicing firm Everyday Finance.

The latest portfolio sale will lower AIB’s NPLs ratio to about 8 per cent, about half the bank’s rate of problem loans at the end of 2017.

“The European average is approximately 3.5 per cent and our aim is to reach circa 5 per cent by the year end – but this is a milestone, not a destination,” Mr Hunt said.

“AIB has to ensure it is not left vulnerable to future economic downturns, from existing non-performing loans and potentially new defaults. And while the bank is very well capitalised, I as CEO would find it unconscionable to allow the bank confront future shocks while still fettered to legacy issues that we can actually deal with now.”

The Irish Times – Ulster Bank to sell €900m in mortgages

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More than 3,000 home owners to be affected, plus 400 buy-to-let loans

More than 3,000 home owners, who owe Ulster Bank €900 million, face the prospect of their mortgages being sold to a vulture fund.

The bank signalled late in 2018 that it intended selling boom-era home loans where borrowers are several years in arrears. The bank confirmed on Tuesday that it is selling 3,200 owner-occupier mortgages, where it loaned €810 million to people to buy their own homes. In addition the lender is offering for sale 400 buy-to-let mortgages, where it loaned €90 million to people to buy properties that they rented to others.

Figures

Ulster Bank’s figures show that the average owner-occupier involved owes arrears of €33,000 and is 58 months behind with repayments. The buy-to-let customers have fallen 41 months behind and owe €36,000 in arrears on average.

The bank is likely to sell the loans for less than the €900 million owed, but the borrowers will still be liable to repay the full amount to any buyer.

It is thought a “vulture fund”, that is an investor which buys debts or other assets in financial difficulty at a discount, could purchase the mortgages.

US company Cerberus, which over the past five years has bought Irish property debts on which more than €20 billion was due, has purchased several tranches of troubled loans from Ulster Bank.

Fianna Fáil finance spokesman Michael McGrath TD, argued that 3,600 homeowners faced “uncertain futures” as a result of Ulster Bank’s move.

“By selling the loans in this fashion, the bank is taking the easy way out and has demonstrated little regard for the long-term welfare of its customers,” he said.

Ulster Bank said that the borrowers have had multiple “forbearance arrangements” where the lender agreed to cut loan repayments while borrowers dealt with financial difficulties.

It is understood that these generally involved agreeing that the borrowers paid only the interest due on their loans every month for a set period of time. The owner-occupiers involved have typically had five such arrangements, while the buy-to-let clients have had three.

Customers

Ulster Bank said that it only included the loans against customers’ homes after concentrated efforts to ensure that borrowers with difficulties were given every opportunity to agree “sustainable solutions” allowing them to stay in a house they could afford.

“For all of these customers, the continued extension of forbearance cannot unfortunately be maintained,” the bank said. The bank pointed out that it was obliged to cut the level of home loans in serious arrears on its balance sheet.

“For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position,” the bank said.

David Hall of the Irish Mortgage Holders’ Organisation claimed that the families involved could not afford to repay their home loans and faced homelessness as a result. He accused the Government of being complicit in the sale of family homes to vulture funds. “The taxpayer, of course, is the one who keeps on paying to house families,” he added.