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Column: Pretending this mortgage crisis isn't happening won't make it go away

One in ten people who have a mortgage in Ireland are struggling to pay it off. Where is the urgency in solving this epidemic, asks Noeline Blackwell.

Noeline Blackwell

THE CENTRAL BANK’S latest figures on residential mortgage arrears and restructurings have raised the merest ripple of interest in the news.

Now in its fourth year, this set of quarterly figures has seen the arrears on people’s homes rise from fewer than one in twenty mortgages in trouble to now more than one in ten mortgages falling behind on payments.

Yet these figures reveal 83,251 households in arrears of 3 months or more and another 45,165 households which are not that far gone yet but have missed payments. Add to this the 40,221 ‘restructured’ loans not in arrears but which can only have been adjusted because borrowers couldn’t pay the full mortgage. That amounts to almost 170,000 households in Ireland right now.

It is clear to us in FLAC (Free Legal Advice Centres) from the people who contact us directly, from our contact with the Money Advice and Budgeting Service (MABS) and from talking to other NGOs working with over-indebted people, that the reason people aren’t paying the mortgage on their homes (because that’s all these figures capture) is that they cannot. They do not have the money to pay that one very basic debt.

We also know they are also unable to cover other basics of life, such as electricity and food bills. You don’t have to work in FLAC or one of the other support groups to know that these households are under constant, enormous worry and stress. For many, that worry is an ever-present ache, affecting them every hour of the waking day and into the night. Many people hide their concerns. Many hope they will go away by magic. Many bring this tension and anxiety into their family lives, resulting in ill-health, relationship breakdown and downright misery.

This we in FLAC know. However, this week’s data from the Central Bank is incontrovertible. Mortgages in trouble now account for 22.1 per cent of all residential mortgages – so more than one in five mortgages on a home is in arrears or restructured.

Let’s slice it another way. There are 1,654,208 private households in Ireland. The new data shows that households with mortgage problems actually make up 10.2 per cent of the total households in Ireland, with or without a mortgage. That is the scale of our mortgage arrears ‘situation’. And yet, even now, the steps our government is taking to deal with this problem – which it acknowledges is massive and urgent – are pitifully weak.

Lenders are supposed to have a code of conduct – why isn’t it working?

(Sasko Lazarov/Photocall Ireland)

Lenders are bound to a ‘code of conduct’ in dealing with borrowers who approach them about their distressed mortgages. What happens to a lender caught breaching this code? Well, the borrower (already in trouble with the lender) is free to lodge a complaint with the Financial Services Ombudsman. Where the lender complies with the code, the Central Bank explains that a solution will involve ‘forbearance techniques’ from the lender – reduce the monthly amount payable, extend the term of a mortgage, or add arrears on to the capital.

The Central Bank also tells us that ‘all mortgage lenders are currently piloting new forbearance and loan modification techniques to provide longer term and more sustainable solutions’. While pilot stage is better than nothing, it’s not much better – it is ‘advanced forbearance’. Apart from what various lenders have deigned to say about these new solutions, we have heard nothing from government or Central Bank. The banks have had plenty of time and space to explain their side of the story. We would now like to hear whether government thinks the banks’ proposals for advanced forbearance will actually produce fair, sustainable solutions for people.

While the code of conduct is not perfect, at least it forces lenders to engage with consumers on a residential mortgage debt. There is no such tool for other types of debt. Our experience in FLAC is that people have multiple debts and when they are pressed on one, it has knock-on consequences for others. Are we to believe that lenders seeking to minimise losses on a mortgage will care about any other debt? Speaking on the Personal Insolvency Bill on 18 July 2012, Justice Minister Alan Shatter TD said:

The reality remains that the banks, separately and internally, have no consistent policy for dealing with those who are totally weighed down by indebtedness and are facing circumstances in which it is appropriate to write down debt.

“This is society’s problem – and it’s not going away…”

The Personal Insolvency Bill presently being guided by the Minister through the Oireachtas will be one (woefully overdue) part of the solution. For those who can access its state-funded advice and advocacy services, MABS is another key element. But today, in many of those almost 170,000 households, people will choose between paying debts and eating properly. They will transmit their terrible tension and fear to other family members. They will feel at their wits end. So FLAC maintains that more, much more is needed.

During the last Dáil sitting day, Finance Minister Michael Noonan cited as ‘significant milestones’ the publication of the Personal Insolvency Bill, a mortgage-to-rent scheme and a website and telephone information line operated by theCitizens Information Board to provide information to mortgage holders. Milestones these may be, but they’re not going the distance needed.

In FLAC we’ve said it before and no doubt we’ll say it again. This is society’s problem. It is not going to go away unless we do something to clean it up. Our elected government, using the expertise available to it, must now finally come up with enforceable solutions that address this terrible, miserable, countrywide problem.

So yes, bring in the legislation so hopelessly over-indebted people can use it. It’s a good start, but we will not see it before the end of 2012. Yes, bring in the advanced forbearance, but if all that means is more sophisticated, reality-defying delaying mechanisms, then much more is needed. Lenders need to be forced to confront the reality of mortgage arrears with a bottom-line requirement to meet consumers’ interests.

Two serious gaps will remain even if this is done. People must be equipped to manage the millstone of their debt through expanded systems for legal and money advice and representation. And structures must be put in place right now to manage total debt, not just residential mortgage arrears. Most people want to pay their debts. They would like to do this in a dignified way. But at the moment, government inaction is stripping dignity and decency away from the people behind the figures.

Noeline Blackwell is Director General of FLAC. Prior to this role, she worked in general practice as a solicitor, with a particular interest in family law and in human rights law in general, refugee law in particular. She is a former chairperson of the Law Society’s Human Rights Committee and of the Irish section of Amnesty International. Noeline is a trustee of Front Line, the Dublin-based international foundation for human rights defenders at risk, and sits  on the boards of both the Immigrant Council of Ireland and the Citizens Information Board.

Read: Mortgage arrears in Ireland rise to highest level yet >

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Noeline Blackwell

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