Dear John McGuinness, Chairman

I listened with great interest to last week’s Oireachtas Finance Committee where you, as Chairman, asked Ger Deering (the Outgoing Ombudsman for Financial Services) his view on culture in the Public Service and that you believed there was a culture issue within the Civil and Public Services. You went on to list many individuals that you felt had been abandoned by the Public Service.  

I have, since the start of 2021, attempted to appear before your Committee about an issue that affects thousands of individuals in this country. Thousands that I believe have been abandoned by the State and suffer in silence. They are individuals that were mis-sold mortgages prior to 2008 and now live in fear of the future. These individuals can only obtain justice through the services of the Financial and Pensions Ombudsman as mis-conduct by banks cannot be tried in the normal court system and the Ombudsman was set up for this purpose. 

I have made the case that the Financial Services Ombudsman has been preventing a significant number of complaints to proceed to investigation. Many are rejected as the Office of the FSPO deems them as out of time. The banks, the subject of the complaints, have not raised any objection that the complaint is out of time and Mr Deering’s Office has made this determination on his own initiative. It contrasts with the situation and position held by some banks over the tracker mortgages. To understand the scale of the matter, in 2020, Mr Deering rejected c. 2,000 out of 6,000 complaints that his Office “Closed”.

I have submitted many papers to the Committee and also sought help from opposition parties to get in front of the Committee. The clients who I currently assist with their complaints have also submitted pleas to their local TD(s) and the answers that come back are similar and drafted by the appropriate Civil Servants. Thousands of people struggling with their inappropriate mortgages, with a fear for their future or who have already lost their homes, are being denied their only channel to justice and Mr Ger Deering is ignoring them due to the irrational interpretation of banking matters made by legal staff in his organisation. However, he is seen as doing a great job and is wished well in his new role. I believe he is part of the problem by limiting complaints and protecting the banks from their past behaviour.

In effect, I am a whistle blower in that I am an experienced banker who was working overseas when this misconduct was carried out and can see it for what it was. As part of other work with the (advocacy) group “Right(2)Homes,” I came across thousands of these mis-sold mortgages.  

The legislator had the foresight in 2017 to amend the FSPO Act to allow the Ombudsman to investigate past misconduct by the banks if the consumer complained within 3 years of becoming aware of the misconduct. Mr Deering continually holds the position that the consumer should have known of the misconduct when they signed the loan documents – that is an irrational interpretation as consumers have no banking knowledge of what conduct is expected within the banks and conduct driven by regulatory guidelines, consumer protection codes and good credit policies.  

You listed 16 people ignored by the State over the last 10 years. I implore you now to allow me to put the case for the thousands of our citizens who continue to struggle with potential homelessness or the fear of becoming homeless. Many have had their loans sold to overseas investors who now seek the highest possible return and unjust enrichment on their investments. 

Regards

Ben Hoey

As I sit working and listening to RTE’s Liveline (22^nd September 2021) I realise there is another section of our society that lives in fear; fear of the future as renters. They are getting old, tired and worried and all because they have no security of tenure on their home.  They recant their stories of always renting, never having the opportunity to save for a deposit, being a single parent family. There are those with good jobs and one income while one bedroom properties assume two renters when it comes to pricing the rent.

Like the distressed family home borrowers that I work for, this cohort of citizens uses similar words and phrase such as shame, fear of their retirement; a general feeling of anxiety about their security in old age.

One caller outlined how her parents, on one industrial wage, rented from the council, went on to buy that council home and eventually traded to their retirement home. This caller made the point that this was not possible today for most people and that the system was broken. But in fixing the system, she pleaded that the decision makers ask themselves “would I like or want to rent my home for 25 years?”.  She pleaded that when looking at the problem could the decision makers address the entire system and not just put sticky plaster here and there. “Please  recognise that the entire system has failed”. 

To solve these callers’ problem, we need to understand the history as we, as a nation, moved from being an economic none entity to becoming one of the richest countries in the world and I chose my words carefully “richest countries” not “richest citizens”.  We have yet to start that journey.

As we progressed from poverty and merged with our rich EU founding members and their strong currency, we saw everyone’s boat rise and moved to the “every man for themselves” form of capitalism.  Over two decades we abandoned our socialist approach of ensuring that citizens did not have to rent from absentee landlords. We abandoned the basic need to house our citizens. This period was compounded by cheap money and an exuberance of our society that we Irish could do no wrong. Experienced Irish workers returned in their thousands bringing all that valued FDI with it, the tax rate was lowered to encourage foreign investment.  House prices rose and due to the high ratio of homeowners, many became paper millionaires and all felt great hope for the future.

To fuel the party, the foreign bankers arrived, sniffing around at all this new paper money and confidence, paying locals great bonuses, etc. to fuel the party. They deployed their final weapon of mass destruction, the interest only mortgage to the masses, prices surged and then there was silence.

Homes had become commodities, just like gold, Apple shares, hotels, etc. Homes of our fellow citizens, future homes of our children, our cousins were now fair game in the international world of capitalism.  In capitalist systems, property owners always win, property means ownership, not just bricks and mortar.

Now arrived the second wave of bankers, ready to arbitrage a people who could afford high rents but could not get the cash to buy. When property is freely traded and delivers a steady cash flow then it will attract a particular investor, a profiteering investor who scours the world looking for the strongest yields, the best risk adjusted returns. Furthermore, no local tax to pay on my gains; a no brainer as they say in Corporate America.

The job of the profiteers’ to find strong returns is greatly eased when competing investors are stymied by local restrictions. Who are the competing investors?  Us, the locals, the very people that built the homes, our children, our cousins, our fellow tax payers. 

The Central Bank of Ireland has placed restrictions on the us when borrowing to purchase a home while placing no restrictions on overseas investors; how can that be fair?  The Central Bank’s intentions are good in that that they do not want the Irish citizen to borrow too much money ever again. Coupled with this they have ensured that the Irish banks’ capital is high enough to support further disasters and reflects their past behaviours, i.e. their behaviour preceding 2008 when this place was the banking wild west, not my expression. While this aspect is complicated, all the reader has to understand it’s the reason why interest rates on home loans are so high, sins of the past, etc.  

In layman’s terms, you the citizen place your tax paid savings on deposit with an Irish bank and receive 0%, your kids, neighbours borrow to finance their homes at 3.99%.  The Vultures borrow at levels at least 50% lower in international markets. Who do you think will own the property?

Any idiot can now see that the combination of factors outlined above will make it more and more difficult for ordinary tax payers to purchase a home while they can afford to service the rents on those homes. 

Now putting aside the stress and the fear of the future that this lack of security is having on our citizens, the current system will also contribute to a rise in wage demands as workers need to fund ever increasing rents.  The country and our economy will become uncompetitive as rents rise and that will have consequences for us all.

It is possible to solve this challenge by focusing on how we fund and finance the development of residential homes but it will take different characters than those currently charged with the responsibility. As the Liveline caller said, they have no intelligence.  She was not insulting, merely stating that they do not have the skills or experience to address the problem; intelligence is the ability to acquire and apply knowledge and skills.

I would not underestimate the numbers that are affected in our small society. I can identify at least 550,000+ citizens in this position. This position of fearing for their future. They range across those that rent in the private sector to those with unsustainable restructured mortgages, most held by the overseas vultures plus the many young people trying unsuccessfully to get on that ladder.   

There is a more sinister reason why we might not want to define and solve the real problem of property ownership.  The more fair the system is, the less profit exists for existing property owners.  There is an enormous conflict of interest right across the spectrum of those charged with this significant societal challenge.  We all need to ask ourselves, can we give up the enormous paper wealth that comes over time by owning our homes. Or at the very least, can we share it?

There is a solution, we just need to look in the right place.

Ben Hoey

Ireland is being mugged over and over again due to our lack of understanding of how capitalism works.  Capitalism is about efficiency of finance and capital is attracted to the most efficient processes; capital chases yield.  We, the Irish, seem to be happy to let our children, our future feed that capital. 

For centuries Irish people were slaves to the land and to feudalism.  The British, in various forms, over the centuries controlled our greatest asset, the land. Their weapon was their military presence.

That all changed in 1922 and we became independent in many ways but did we really gain our financial independence as the country struggled financially up to the 1990s.  The writer migrated to the UK in the 80s like many; my personal tax rate on a low wage was in the 70% bracket and unemployment high, opportunities low.

Then the noughties came, EU membership was kicking in, the Euro was delivering cheap money and we had the first modern day financial invasion.

They arrived from England, Scotland, Denmark, The Netherlands and Belgium. They portrayed themselves as bringing financial competitiveness to the Irish consumer.  They propagated “Interest Only” loans and hired locals to bring them market share. What was their main weapon; cheap finance.  They lashed it out, ignoring consumer codes, code of practices, regulatory guidelines and all good standard banking practices.  They rewarded their local management, our fellow countrymen, with vast financial incentives; anything to grow their balance sheets. 

The previous invasions were funded by military strength; this invasion was funded by easy cheap money and we could not get enough of it.

There is a comparison here to the international crash of 2007/2008 that was caused by fraud as the originators of suspect subprime mortgages in the US passed the risk to foreign investors and pension funds and the supply chain widened and accountability and sight of risk disappeared.  In Ireland the local employees of major banking corporations handed out Interest Only, Self Cert and loans past retirement dates, with no thought or question as to how they would be repaid.  Unfortunately, due to commercial pressure, the local banks followed suit and joined in this “misconduct” in order to save their market share.

These latter invaders lost their cheap money in 2008 and have since slowly departed these shores with the last leaving in 2021.

Now arrives the next invader and their weapon of choice; cheap money. We call them vultures.  We wonder why they can buy everything and our kids can afford nothing.  We wonder why all our building resources (i.e. builders) focus their output to meet the vultures’ desires; it’s simple, guaranteed sales of their output. 

My kids borrow off the bank at 3.9%; the vulture borrowers at 1.2%.  It does not take a genius to work out who can pay the most for the assets. Ask the question:-

“How come my kids can’t afford to buy a home yet they can afford to fund the rent on that very home”

What makes it worse is that the vultures borrow their senior money at ridiculously low rates from the very same banks that we place our deposits at – for zero or less.

The Central Bank has capped borrowing levels for Irish consumers (I hear you applaud) yet allowed others to participate in the housing market with no caps or restrictions.  Their objective was to cap or limit house price growth, however, if you just cap one participant class in a market, all you do is allow the others to arbitrage the situation and f*** over the restricted party.  

We have turned our housing market into a commodities market, a tradeable market with little regulation except over one investor type, our children.  I suspect we like this as it drives prices up and we, the existing home owners feel good and confident about things.  However, we have to realise there are three serious long-term effects of this policy of homes classed as investments:

1. Investors need to drive higher rents, higher prices and these will feed through into our productivity as a country, making us less competitive;
2. If you have a modest house and two or more children, then significant house price inflation makes your family unit less wealthy, do the math;
3. Lack of home ownership disconnects people from their community with all the ensuing social problems, both physical and mental.

Is this the country we want for our children?

Regards

Ben Hoey

Ben is a failed retired banker who left Ireland in the 80s and grew as an individual in a major global investment bank.  Having returned to Ireland, he now wants to repent. His profile can be seen at https://financialcounselling.ie.  He also assists people who know their mortgage was mis-sold at https://misselling.ie.

Business Post

Potential ‘wave of legal claims over mis-sold home loans @ianguider Ian Guider Markets Editor 8th November, 2020

A former senior banker is seeking compensation for people who were granted mortgages which were unsuitable to their financial needs

Ben Hoey, formerly of Bank of Ireland and Merrill Lynch, said he was advising some 30 people who had taken cases to the Financial Services and Pensions Ombudsman (FSPO) claiming misconduct by the bankers when their loans were granted.

A former senior banker has said he believes thousands of mortgage holders could be entitled to compensation for loans that were mis-sold to them.

Hoey had been part of the HomeOptions group which last year attempted to acquire distressed mortgage loans from banks in a friendly vulture fund sale. As a result of getting access to loan documents as part of the sale process, Hoey said he was disturbed by some of the lending practices at the banks.

Hoey has set up a new website – misselling.ie – for people who believe they may been missold a mortgage to assess whether they have a case. He is charging €250 to advise individuals on the FSPO process and 25 per cent of any compensation awarded.

He said in Britain claims similar to those of his clients were found by the financial regulator to be evidence of misconduct and customers were compensated.

“When we were doing the due diligence on these loan books, I kept coming across details of what I think are the misselling of mortgage or an unsuitable mortgage,” Hoey said.

“Since last year, I’ve got legal counsel on board and when we compared it to UK legal process, we’ve come to the conclusion that there’s some misselling from the bad old days where people are struggling to repay not because they borrowed too much, but because they were given mortgages that weren’t suitable for their financial needs.

“Our starting point is the Consumer Protection Code that banks have to follow some basic rules, and if they don’t and if it results in a mortgage being granted that is burdensome, that is a missold mortgage. We’re not challenging the validity of the loan, the individual signs up and has to repay. Where we focused on is if there was misconduct and, if there was, what compensation may be due.”

He added that among the issues that may form the basis for a case are interest-only mortgages and whether the banks assessed a customer’s ability to make the payment at the end of the interest-only period, whether the income of those seeking self-certified mortgage loans was accurate and, for those who took out loans that would bring them past their retirement age, how they would be able to repay on reduced income.

“The basic misconduct is not checking things. So you if said you earned €70,000 does your account statement show it?” Hoey said.

“You have to look at motives of the bank. The Ombudsman can award compensation if the motive was purely for their own gain. Most of the banks that did this are now gone and the loans have been sold on to vultures.

“The Financial Conduct Authority in Britain have said if you’re struggling to repay and your circumstances haven’t changed significantly, then it is highly likely you were missold. In Ireland, you can say we went to 15 per cent unemployment and down again, but yet we still have people struggling to repay their loans.”

https://misselling.ie/2020/11/08/potential-wave-of-legal-claims-over-mis-sold-home-loans-a-former-senior-banker-is-seeking-compensation-for-people-who-were-granted-mortgages-which-were-unsuitable-to-their-financial/