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FactCheck: Is Fine Gael right to claim the credit for a fall in mortgages in arrears?

Fine Gael has been on Twitter and Facebook, promoting a set of claims about its role in the fall of mortgages in arrears. Do they check out?

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THE MAIN PARTY in government last week took credit for a purported decline in mortgage arrears cases, claiming on Facebook and Twitter that “Fine Gael has helped the number of primary home mortgages in arrears fall by 42.5% since 2013″.

They added: “That’s nearly 61,000 people and families who are safer and more secure because of Fine Gael”.

Is that all true? Do those numbers check out? And is it really “because of Fine Gael”?

Padraig O’Mara got in touch with us on Twitter to ask FactCheck to look into it, so we did.

(Send your FactCheck requests to factcheck@thejournal.ie, tweet @TJ_FactCheck, or send us a DM).

Claim: Fine Gael is responsible for the decline in the number of primary home mortgage arrears since 2013, which has left nearly 61,000 people “more secure”.
Verdict: Mostly FALSE

  • The 42.5% decline is accurate (although it should be rounded up to 42.6%)
  • Fine Gael policies have made a very modest contribution to that decline
  • However, Fine Gael’s claim that “nearly 61,000 people” are “safer and more secure because of Fine Gael” is grossly misleading, and ignores far more significant causes, as well as some of the very unpleasant reasons why the number of mortgages in arrears can decline.

What was said:

Here’s the graphic in question:

THE FACTS

There are roughly three parts to this: the 42.5% decline; whether Fine Gael has helped bring it about; and whether “nearly 61,000″ people are “safer and more secure because of Fine Gael”.

We’re going to evaluate each part and then arrive at an overall verdict for the entire tweet, at the end.

Let’s check out those numbers first.

The Numbers

Source: For a full-size version of this chart, click here

In response to our request for evidence, Fine Gael directed FactCheck to recently published Central Bank figures on mortgage arrears.

To download a spreadsheet containing the Central Bank data, click here.

The latest figures show that the number of mortgages in arrears in June 2016 (82,092) is 42.55% lower than in June 2013 (142,892).

So the first part of the claim is accurate, although for some reason Fine Gael used “42.5%” rather than “42.6%” in its tweet.

However, for the sake of completeness and to provide context, it should be noted that the total value of these mortgage arrears is significantly higher now than it was in 2013.

In June, the total value of primary home mortgage arrears was €2.46 billion. In June 2013 it was €2.02 billion – that’s a 21.6% increase.

Source: For a full-size version of this chart, click here

Did Fine Gael help?

A party spokesperson cited a number of policies and developments which they claim contributed to the fall in the number of primary home mortgages in arrears.

This is tricky. We know that the number of mortgages in arrears has fallen, but figuring out what causes contributed to that, and how much, can be a bit messy.

Nonetheless, let’s have a look at what Fine Gael presented as ways in which they helped bring this about.

1. Personal Insolvency Bill

This was a significant piece of legislation passed by the Dáil in December 2012, and very much championed and pushed through by then Justice Minister Alan Shatter of Fine Gael.

Among other provisions, it shortened the period of bankruptcy from 12 to three years in Ireland, and allowed for a “Personal Insolvency Arrangement” (PIA), whereby the person in debt (the debtor) could come to a more structured arrangement with their creditors (those to whom they owe money – usually banks).

In the case of debts of up to €20,000, it also allowed for a “debt relief certificate”, whereby, if a debt remained unpaid for three years, it would be written off.

To oversee these measures, the law created a new Insolvency Service of Ireland (ISI) in 2013.

Since then, it has reached 2,728 arrangements between debtors and creditors – Personal Insolvency Arrangements, Debt Relief Notices, Debt Settlement Arrangements – and 1,330 bankruptcies.

Of these 2,728 arrangements, roughly half (1,365) were PIAs, which are primarily mortgage-related.

These figures would have contributed to the falling number of mortgages in arrears, so it would be difficult to reasonably propose that the passage of the Personal Insolvency Bill, and the creation of the ISI, at the behest of a Fine Gael minister, has not contributed to the 42.6% decline in question.

However, let’s put those numbers in perspective.

In June 2016, there were 60,800 fewer primary home mortgages in arrears than in June 2013. So the 1,365 PIAs achieved by the Insolvency Service of Ireland are equivalent to just 2.25% of that decrease.

And this doesn’t take into account the fact that not all the mortgages associated with these PIAs are primary home mortgages.

Indeed, we know that of the mortgage debt associated with new applications brought to the ISI so far in 2016, for example, 61% of it related to buy-to-let mortgages, and not primary home mortgages.

This suggests that so far the ISI could reasonably be estimated to have achieved, at absolute most, a fall of 0.96% in the number of primary home mortgages in arrears, but it is certain to be less than that.

So the Fine Gael bill, via the Insolvency Service of Ireland that it created, can reasonably be said to have contributed to the 42.6% decline in the party’s tweet.

But it was not a significant contribution.

2. Central Bank mortgage arrears targets

23/11/2016. Reviews of Mortgage Measures. Pictured Central Bank Governor Philip Lane, speaking in Dublin on Wednesday. Source: Leah Farrell

In March 2013, the Central Bank gave six banks performance targets to encourage them to find sustainable solutions to arrears for their mortgage customers.

The targets appear to have have some measure of success. By November 2013, the banks were 13% ahead of target, allowing the Central Bank to then increase the targets.

By April 2015, the Central Bank observed:

Under the Central Bank’s assertive supervisory engagement the capacity and approach of the banks for dealing with distressed borrowers has materially improved, with a significant shift from relying on short term forbearance, to longer term sustainable solutions.
This changed approach has resulted in sustainable solutions being proposed to the majority of those in arrears, and concluded in 62 per cent of these cases.

So this initiative has had a significant impact on restructuring mortgage debt, and therefore on the number of mortgages in arrears.

However, the Central Bank is independent in its actions, and the benefit from this initiative cannot reasonably be attributed to Fine Gael or Fine Gael ministers in government.

We don’t know why Fine Gael presented actions taken by the Central Bank as being attributable to Fine Gael, when they’re not.

3. Insolvency Service of Ireland suspends fees

In October 2014, the Insolvency Service of Ireland (ISI), announced it was waiving its fees, which had ranged from €100 to €500.

However, the ISI is (again) an independent statutory body, and there is no evidence that this decision was influenced by anyone in Fine Gael.

Indeed, the ISI’s Director Lorcan O’Connor stated at the time that the decision was prompted by research conducted by the market research firm Behaviour and Attitudes, and concluded: “Application fees were raised by some people as a potential barrier, so we have removed them”.

4. Abhaile

3/10/2016. Money Advice Services Frances Fitzgerald and Leo Varadkar, at a press conference to launch Abhaile - the Mortgage Arrears Resolution Service - in October. Source: RollingNews.ie

Fine Gael also pointed to the introduction of Abhaile, the Mortgage Arrears Resolution Service.

This scheme was put in place by the Fine Gael-led government, specifically Fine Gael ministers Frances Fitzgerald and Leo Varadkar.

It is linked to MABS (the Money Advice and Budgeting Service) and is aimed at providing free expert legal advice to people in arrears on their mortgages.

However, it was only launched in July, so it’s actually impossible for it to have had any bearing on the number of mortgage arrears during the period June 2013 to June 2016.

In light of this fact, we’re really not sure why Fine Gael presented it as an example of how the party has helped bring down the numbers during that period.

5. Removing the ‘bank veto’ on insolvency deals

This one is dubious. Originally under the Personal Insolvency Bill, banks had the ability to reject insolvency deals that were reached via the ISI.

This provision was criticised at the time, and in March 2013, Fianna Fáil unsuccessfully introduced legislation to remove it.

But in May 2015, Fine Gael Justice Minister Frances Fitzgerald introduced a successful government bill which included a similar provision.

In January 2016, ISI Director Lorcan O’Connor said the removal of the veto had, along with other factors, contributed to an increase in the number of settlements in the final quarter of 2015.

You can cut this both ways. It was Fine Gael who eventually removed the bank veto, but it was also Fine Gael who included it in the new insolvency regime in the first place, and then resisted attempts to remove it by others.

6. Expansion of mortgage-to-rent

13/5/2015. Cabinet Decides Over Mortgages Issues Frances Fitzgerald, Michael Noonan and Alan Kelly speaking at the announcement of a package of mortgage-related measures, in May 2015.

Included in the same May 2015 package announced by Fitzgerald was a change to the mortgage-to-rent scheme, which allows mortgage-holders in arrears to sell their property to housing authorities, then rent it back from them.

In May 2015, the government increased the valuation ceiling for the scheme from a maximum of €180,000-220,000 to €250,000-350,000, which essentially made it available to a greater number of mortgage-holders.

It stands to reason that this measure would have helped reduce the number of mortgages in arrears, although we were unable to find specific data on this.

7. Strengthening of MABS

Also in May 2015, the government announced it would expand the role of MABS – the Money Advice and Budgeting Service, which provides free expert advice to anyone in debt.

This entailed, for example, providing ‘court mentors’ for mortgage-holders addressing insolvency in court, and the provision of Personal Insolvency Practitioners (PIP).

Some of these measures were only introduced after June 2016, but some were introduced before that.

Again, it stands to reason that the increased availability of expert advice and legal help would be conducive to more mortgage restructuring and insolvency arrangements, but we have no hard data to establish a direct causal link there.

What the ISI has said

Reflecting on a 70% increase in the number of insolvency settlements in 2015, ISI Director Lorcan O’Connor attributed this rise to:

  • Increase in the debt relief notice threshold to €35,000 (applies mostly to non-mortgage debt, not relevant here)
  • Extension of the waiver of fees (enacted by the ISI)
  • Removal of ‘bank veto’ (achieved by Fine Gael-led legislation)
  • Reduction of duration of normal bankruptcy to one year (achieved via legislation pushed through by Labour party TD Willie Penrose)

Are nearly 61,000 people “safer and more secure because of Fine Gael”?

Source: For a full-size version of this chart, click here

This is a significant component of the tweet and it is, frankly, grossly misleading.

“Nearly 61,000″ comes from the figure of 60,800, which is the size of the decline in mortgages in arrears between June 2013 (142,892) and June 2016 (82,092).

But the causes of that decline, as this article has shown, were complicated and multifaceted.

To simply claim that the 42.6% decline was “because of Fine Gael” is to ignore that and vastly, even ridiculously, oversimplify the reality.

As the Central Bank stated in April 2015, the targets it set had brought about a scenario where the six major banks had found “sustainable solutions” for the majority of mortgages in arrears on their books.

Therefore this measure alone constitutes a far more significant contribution to that 42.6% decline, than the comparatively very small impact of insolvency arrangements reached by the Insolvency Service of Ireland, which was created by Fine Gael’s Personal Insolvency Bill.

Fine Gael policies did make a small contribution to that figure of 61,000, but to claim that it is simply “because of Fine Gael”, is demonstrably false.

And this is quite apart from the spurious claims of credit for measures like Abhaile (which wasn’t even launched until after the period in question), and the ISI’s removal of its fees (which Fine Gael had no part in).

Furthermore, lowering the number of mortgages in arrears often does not leave people “safer and more secure”. Far from it.

Some of those 60,800 mortgage-holders are no longer counted as being in arrears because they were evicted, declared bankrupt, had their homes repossessed, or because their debts were taken over by a third party.

Indeed, as the chart above shows, primary home repossessions have increased by 68% since June 2013 – from 1,001 to 1,683 in June 2016.

These people, who are among that 60,800, are hardly “safer and more secure” now.

Conclusion

Fine Gael undoubtedly have the figures right. Between June 2013 and June 2016, there was a 42.55% fall in the number of primary home mortgages in arrears. This part of the claim is accurate.

And it appears that the new insolvency arrangements introduced by Alan Shatter in 2012 and 2013, in particular the Insolvency Service of Ireland, have facilitated an increase in insolvency settlements and bankruptcies, and therefore made a contribution to the decline in mortgages in arrears.

But that contribution appears, based on the evidence available, to have been very modest indeed.

And the third component of the tweet, the claim that nearly 61,000 people and families are “safer and more secure because of Fine Gael” is grossly misleading and very much false, as we have shown.

Taken as a whole, we rate the claims in this tweet Mostly FALSE.

As our Reader’s Guide explains, this means: “There is an element of truth in the claim, but it is missing critical details or context”.

TheJournal.ie’s FactCheck is a signatory to the International Fact-Checking Network’s Code of Principles. You can read it here.

For information on how FactCheck works, what the verdicts mean, and how you can take part, check out our Reader’s Guide here

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