SINCE THE BEGINNING of the Irish debt crisis, distressed mortgage holders with the major banks had to rely on own resources or charity and non-profits’ support to finance independent advice and representation. The banks, well-resourced and fully staffed, enjoyed not only the continued protection of the policymakers but also the comfort of knowing that their borrowers had little resources available to them.
At last, this scenario is changing. The Irish Mortgage Holders Organisation (IMHO) in conjunction with AIB Group announced a new initiative yesterday offering homeowners an independent facilitator to advise and engage with AIB Group on their behalf.
The new facility will involve IMHO setting up a separate support office with dedicated professionally accredited staff to handle the clients that hold mortgages with AIB, EBS and Haven – all parts of the AIB Group. The office will provide financial advice and support in the completion of required documentation, including the Standard Financial Statement (SFS), preparation of the proposal for a sustainable solution suitable to the borrower and presentation of these to the AIB Group. The IMHO will carry the case through to the completion on behalf of the clients, representing solely the clients’ interests.
Free of charge
The initiative, co-funded by an unconditional grant from the AIB Group, will be accessible and free of charge to all AIB Group residential mortgage customers who wish to avail of this service. It will run parallel, but separately from all other IMHO operations.
To facilitate the initiative, AIB Group has set up a special dedicated channel tasked with expediting the cases for borrowers represented by the IMHO.
This is the good news for a large number of distressed borrowers who need independent advice and representation, but cannot afford one. IMHO operates on a not-for-profit basis and the new standalone facility is resourced to handle up to 300 cases a month. In fact, we at IMHO expect the scheme to reach this target fairly quickly.
This is a groundbreaking initiative for the IMHO and within the broader context of the Irish mortgages crisis resolution. For the first time in the history of this crisis, distressed borrowers facing a major bank no longer have to worry about the cost of securing independent and non-profit-oriented professional advice and support. Beyond the crisis, it also holds the promise of setting the longer-term foundations for the system of structured, bilateral approach to secured debt resolution in Ireland.
The core driver for this initiative is the historically unprecedented scale of the mortgages crisis in Ireland. In Q2 2013, the total volume of mortgages at risk or in default (mortgages in arrears, mortgages restructured and not in arrears, and repossessions) rose to 33.4 per cent of the total mortgages pool. Some €46.6 billion is now either in arrears, or restructured.
Compelled to action against ‘non-engaging’ borrowers
The IMHO has always actively and constructively engaged with the Central Bank and other authorities in providing policy analysis and suggestions on the issues relating to the crisis.
In particular, the IMHO were and remain critical of some specific provisions in the code of conduct in mortgage arrears, which was launched in July 2013. The code compels banks to take action against borrowers who have not engaged, regardless of the reasons for such non-engagement. The banks are now facing no other choice, but to pursue legal approach to resolution of arrears in the case of thousands of borrowers who have not responded to communications and have not completed an SFS, irrespective of whether the banks can or cannot offer these borrowers a sustainable solution.
Our experience shows that a large number of borrowers in arrears currently can or indeed do fund at least 70 percent of their mortgages obligations. Many, at the same time, are resisting engaging with their lender. These borrowers are now at a risk of being classified as ‘non-cooperative’ and facing, as the result, legal proceedings. This is doubly unfortunate as the banks can structure simple and sustainable solutions for such borrowers without the need for initiating legal proceedings against them.
Enormous pressure on borrowers
This initiative aims to help these borrowers and others who are reluctant to engage with the banks. The enormous pressure on borrowers who are faced with financial distress frequently leads to a fear of dealing with their lenders. The same pressure often translates into borrowers inability to understand and supply accurate and complete financial information required to file an SFS. The borrowers also often feel unequipped to deal with the banks in negotiating sustainable suitable solutions.
We anticipate that this unique arrangement will help to drastically reduce these pressures and fears. The IMHO has successfully concluded many agreements with AIB Group in the past year and this joint initiative is a recognition of the success that can be achieved. We believe that this initiative represents a wonderful opportunity to help a larger number of borrowers who are in arrears.
And it aligns with the core objective of the IMHO – to provide professional and independent advice and help to distressed borrowers and to contribute positively to the resolution of the current debt crisis consuming our society.
Dr Constantin Gurdgiev is Director of the Irish Mortgage Holders Organisation.
For further information of the IMHO services to all distressed borrowers and the new initiative, visit www.mortgageholders.ie