You are right. The provision is too low and will climb over the next two years as forbearance wears off. BOI will take another 7bn of losses over and obove NAMA in the next three years. However, this and more is incorporated in the FR’s stress test. So no surprise there.

Why do you think BOI is raising equity?

When you replied to my post about inadequate bad debt provisioning at Bank Of Ireland, should you not have declared your personal interest in the matter?

Even more frightening than its inadequate bad debt provision against mortgage debt is Bank of Ireland’s meagre 1.2% provision against loans secured on investment property!

I would guess that BoI’s current overall bad debt provision will emerge in time to be light by about €5-€10 billion.

I would be more cuddly-bear than perma-bear. I bet my predictions about the mortgage arrears problems in Ireland are not far off the mark though. More to do with realism and application of common sense than being bearish. When I see something positive I will make a positive comment but the evidence tells me not to at the mo.

I probably read more than you too and talk to a lot more politicians and business people because it’s my job to (though I could be wrong of course as I don’t know you). There’s a big hoo-ha going on in the UK at the moment about this mooted CGT change and it’s potential impact on the housing market. Even Robert Peston agrees with me!

Next stop for me is to talk to a few Italian trade union people about their take on Silvio’s actions this week. I wonder if they’re feeling ‘positive’?
“Piove sempre sul bagnato” - is I think what they say over there!

Have you ever had a positive thought or are you just a perma bear? Alternatively are you short housing and using this site to reverse broke?

I understood the market over there was about to be flooded with sales (buy-to-lets, second homes, etc.) to try and avoid problems when CGT rises to income tax levels over there (as looks likely will happen)?

A short, sharp correction to the housing market is surely the most likely short’ish term scenario in the UK? It’s also hard to see house prices there not coming down generally anyway given the ‘pain’ to come that the new government is heralding well in advance.

But almost half the mortgages are in the UK where house prices are now rising so LGDs are falling. The FR stress test provides for a 5% hit on the Irish book & if you look at analyst models, you can back out a 2%-3% hit.

You say that a 5% write-off on mortgage debts looks reasonable. I wouldn’t disagree with you although I wouldn’t rule out 10%.

Right now, Bank Of Ireland (the supposedly good bank) has a provision of just €360m against mortgage debt of €60bn (= 0.6%).

Can’t remember precisely but the last time I saw a figure (last year) it was less than 10.

This (link below) also looks like another problem a-brewing. I didn’t realise that 13.5 percent (probably more in reality) of credit union loans had not been repaid for more than 10 weeks. Anyone able to quantify that amount? 13.5 percent of how much?

http://www.irishtimes.com/newspaper/finance/2010/0528/1224271297777.html

Intersting. Grauniad always a humanist rag. Amost like they care!

What is ahead as we plug the gap in the deficit? Fun times, I’ll be bound. Self governance is such fun, anyone can do it! Who needs laws against corruption? If everyone is corrupt, they will never be enforced! Glad to see that the Judges can be bullied into reducing their pay. What else can we bully them into doing?

Does it reveal who told the Sunday Independent who it was refused to sign the first tax assessment? The Govt cocked that up too. Some of the Acts dealing with CAB did not come into effect until the Govt actually signed off on CAB and that did not happen until sometime in Oct 1996, I believe? It couldn’t be that a high ranking Garda broke the Official Secrets Act?

Bankruptcy is designed to protect the debtor from her creditors. It also did away with imprisonment despite no assets. Imprisonment is available for those who refuse orders of court for payment of debt.

The reason bankruptcies are so low in Ireland is that debts are of no effect, if not acknowledged! after 6 years or after 12 years if under deed as in a mortgage. Never acknowledge a debt! Statute of Limitations Act 1957, is that protection for debtors. High Court proceedings are far tool expensive. Thank God, for those expensive Bar Stewards! They all have hearts of Gold! 24ct Gold!

Any legal issues ask me! I’m only 30 years out of date!

“Can Irish people do that (go over the the UK and make themselves bankrupt under their more lenient regime)?”

See a recent article on bankruptcy tourism from one of the UK’s top personal finance websites:

http://www.thisismoney.co.uk/news/article.html?in_article_id=489549&in_page_id=2

I feel like I should be putting in some warning here that bankruptcy is a very serious matter and anyone considering it (and some people might be at their wits end and vulnerable) should seek independent qualified advice.

BTW, does anyone know the number of Irish bankruptcies each year (ie individuals being declared bankrupt) - I heard it was 5-10?

The EU may have legislation in the works, never waste an opportunity …… Ireland is unlikely to want to embarrass itself more, by preoposing what may be amended soon after! TPTB may find themselves able to deal with their own debts more favourably, as in CJH and the AIB!

re UK bankruptcy relocation - dont think you can do it just by popping over, think you need to physically “relocate” for a period of time, ie maybe 12 months minimum. But doing the maths, its not the worst idea in the world for some people i’d imagine…

Assuming that’s not a rhetorical question

er, none?

And I would guess those same people would have other debts too such as credit cards, loans, etc.

You see what I mean about the problem adding up…

Which makes me wonder… how many people out there have been/are borrowing money from other sources to pay the mortgage?

Can Irish people do that (go over the the UK and make themselves bankrupt under their more lenient regime)?

If so, sounds like a good business opportunity (arranging it all) for an ambitious accountant (or Ryanair). Set up a one stop shop for the process, the paperwork, the plane ticket, the minibus to and from Dublin airport, etc.

It would be funny if it wasn’t so bloody sad.

Applying loan losses of 32% to these loans results in losses of €1.33bn or €61k per householder at 45% it increases to €1.87bn or €85.8K per customer. What chance is there in recovering what becomes unsecured debt off people who have lost their homes?

That most of this will be linked to the rise in unemployment (but not just that) over the past couple of years is, I think, a reasonable statement.

Just looking at the unemployed…

By the time you add up those we know in arrears over 90 days,
those who have ‘restructured’ and aren’t shown in this 4.1 percent figure (”not in arrears because they have come to an agreement with their bank on a different repayment schedule.”)… but are clearly struggling,
those who are in arrears of less than 90 days,
those in receipt of mortgage interest supplement (@Tom Ronayne - your data and assumptions/anecdotals look correct) and will lose it soon enough,
those in receipt of some form of redundancy insurance - finite time limit,
those still living on savings and redundancy cheques until they run out, those being supported by family until that route is exhausted,
those two income families where one has lost a job and they are beggaring themselves to pay the mortgage until it comes to a point where they can’t,
those…

You get the picture.

Given that we still have… I dunno… another 60-80,000 to still go onto the dole over 2010-2011?

I could go on but I won’t. The point I’m simply trying to make is that there is a lot going on out there that isn’t readily apparent but once you start thinking about it, the figures start to add up and the problem looks - to me - a lot lot bigger than 4.1 percent… and it is a growing problem.

I blogged about this a year or so ago and back then, suggested a worst case scenario of 170,000 mortgages going into arrears in Ireland (and probable default) by the end of 2010.

170,000 sound over the top? That’s around a third of the people on the live register and given the push by government, financial institutions and even family to persuade people to buy their own homes in the past 10-15 or so years, it would be conservative to assume that only half of those who lost their job in 2008-2009 have a mortgage and that only half of those who will lose their job in 2010 have a mortgage.

How much does 170,000 x average mortgage tot up to? €20-30 billion?

Who’s going to plug that hole (h’mmm I suspect the dwindling base of taxpayers)?

What will happen when interest rates start creeping up again (that’s already started)?

Sounds pretty alarming to me. Will be alarming by the end of the year. ‘Jingle bells’ to be replaced by ‘jingle mail’ over Christmas anyone?

Ho ho ho (not).

Have we not guaranteed much of this already?

May 27th, 2010 at 12:52 pm
Ireland and Irish people will never ever default on their debt.

So true, 2.8% of all mortgages (+22,000) are >180 days in arrears while there are only about 1,000 repossessions a year. The courts are keeping the owners from defaulting even if the owners wanted to default!!!

The combined percentage of loans in foreclosure or at least one payment past due was 14.01% on a non-seasonally adjusted basis.

The number of recipients has increased dramatically since 2007. Between 1999 and 2006 the typical number of recipients was in the region of 3,000. It increased to 3,712 in 2007 and to 7,647 in 2008. The most recent figures provided show that it has more than doubled since 2008.

Anecdotal evidence suggests it is getting increasingly hard to obtain the Supplement. It is also notable that one of the conditions for refusal is that applicants had insufficient income to pay their mortgage when it was taken out!

Mortgage rescue and repossession work done in the government here in the UK prevents most of these problems from happening and at the moment so it’s a lot less likely to happen.
You’re protected a lot better in the UK than you are in Ireland.

Repossession and mortgages arrears are down significantly over the past couple of months so that should prop up the BOI AIB UK mortgages for the not so distant future anyway.

Errr…… except NAMA.