Mortgage Arrears: September 2010

The latest quarterly report on mortgage arrears from the Central Bank is available here. The report shows a continuation of the steady increase in the fraction of mortgages that are more than 90 days in arrears. This fraction rose from 4.6% in June to 5.1% in September, in line with the previous increases over the past year.

13 replies on “Mortgage Arrears: September 2010”

It will be interesting whether the impending budget will produce a measurable increase in arrears.
Or if it can be estimated before hand

One for the brainy lads…

20-25% of already rescheduled loans going sour. No hard figures on rescheduling yet. Nothing on unsecured debt which should be added to give an overall picture of householders troubled loans. e.g. one of the biggest credit unions has been forced to make provisions for 14.5% of its book – €20m in a medium sized provincial town – credit unions and others were lending unsecured to first timers to fund their downpayments.

Still if you can cover 66% of your interest you can buy a five year forebearance option if you DIS through MARP – a new mortgage for the celtic twilight the “dismarp”.

Once people owe more on the loan than their property is worth there is little that can be done to avert default. At least that has been the US experience. People were asking for and getting loan modifications but having to struggle to make payments on a home that is losing value makes it a fools errand.

Now many people just stop making payments and wait for the bank to take the house. The banks aren’t in any hurry either for two reasons. First, they don’t want to recognize the loss and two, they and the courts are overwhelmed with the volume of cases. There is also, as you may have heard, some legal difficulties owing to the securitization process and bank shortcuts taken during the boom. Thus people have come to realize they can save a year or two’s worth of mortgage payments before they must move.

When finally forced out they find they can rent an equivalent house, often identical, that has been foreclosed upon and sold to an investor for 50% of what they had originally paid. Thus, not only have they reduced their housing
costs, they have pocketed quite a few thousand dollars in the process.

One reason not to default on a mortgage is the possibility that the insurance company may pursue the debtor for the balance.

New lending is quite conservative and may mean that buying another house is quite difficult, particularly if the possibility of bankruptcy has not been ironed out as a contingent liability that could cause realization of the new mortgage.

Emigrating means no such problems, unless a judgement is obtained.

Of course if the debtor is worth less than say 40,000 Euro then they are worth scaring, but not suing in view of High Court costs. They will end up renting and saving, but if they save enough before the staute of limitations they face a suit as above.

US mortgages are non recourse but in Ireland because the banks it would appear ran the State, the banks can pursue the mortgage holder beyond the grave for all monies outstanding, even after the house has been sold.

But you have raised an obvious critical point in relation to this matter. The defaulting owner must live somewhere and in the absence of a proper policy to deal with this issue will make his or own best arrangements.

Does it not make more sense for the State to take 50% ownership of house and allow the owner to remain paying half the original mortgage. When the house sells the banks nad State can share the losses. If there is a profit it can go to the State. Owners will always have a chance to buy back the 50%.
It seems a lot more sensible to me than throwing people out onto the road where in Ireland they are required to be housed by the State.

The above type of arrangement was not even considered by the working group of dealing with mortgage arrears because of “moral hazard”. How they kept a straight face and steady pen when writing “moral hazard” is quite beyond me. Ireland right now has a millstone of “moral hazard” around its neck in the forms of the banks, many of whose employees still earn well over $US 500,000 per annum.

Yeats, in one of his poems had a line
“This is no country for old men”.
It is now no country for young men either.

Am I right in saying the average decrease in a mortgage since 2nd quarter 2010 is 400 euro per mortgage i.e. 316m/789k? (or approx 420 if we exclude those in arrears >90 days) Given the average mortgage is about 148k (117.4bn/789k) this would suggest an incredibly long repayment time even in the absence of defaults.
Am I missing something obvious?
How much should a fully performing mortgage for 148k have decreased during this period? Can we infer a lower bound for how many people are in arrears (including less than 90 days) via an assumption that everyone else is fully repaying?

My guess is that there are at least as many (if not more) who are currently repaying fully but are ‘on the cusp’ and near to the tipping point. I think even MK underestimates the problem. It only takes a straw to break a camel’s back and I can see the current ‘bale’ out (apologies for the crap pun) talks stirring up a few stalks.

I don’t see any projected estimates of either the DIS/MIS or the Social Housing proposal in the report. How is it possible to assess whether it will work or how much it will cost? Given what is being discussed this week, we could be looking at radically different numbers of people who require recourse to supports.

NB our method of funding long-term elder care is the Fair Deal, the sustainability of which was not only based on 2006 house values but on the high rates of outright home ownership.

By coincidence, IL&P published their figures for mortgage arrears and other arrears today. Report in Irish Times:

Early mortgage arrears at IL&P level off.

IL&P gas said early-stage mortgage arrears have levelled off since May, while those over a longer period continue to rise. Arrears in consumer finance continue to decline in both categories.

Analyst Stephen Lyons of Davys said it was good news that IL&P’s deposits were stable and even better news that residential mortgage arrears of less than 90 days had levelled off. “It does show that the doomsday scenario that was painted by some is far too pessimistic.”

I wonder who he is referring to?

One day, Morgan Kelly will be called to account.

re: One day, Morgan Kelly will be called to account.

On the day that fiscal sovereignty and financial credibility of the ROI is publicly lost is there anybody other than Morgan Kelly that you believe should be called to account?


“Mortgage accounts in arrears for more than 90 days increased by 11.1% since the end of June 2010.”

“IL&P gas said early-stage mortgage arrears have levelled off since May”

Now given that IL&P would be part of the data that is quoted from the Central bank then Irish permenant must have been cleverer in who they chose to borrow too.
In fact the Average arrears for the QTR would have increased by a lot more than 11% if it were not for IL&P.

So either IL&P are not a good reflection of the rest of the market and therefore the comments they are making dont represent the market and therefore the extrapalations Davys are making based on their numbers for the whole market are ‘optimistic’


Days are talking up the market again.

With every month that goes by the question for 1000’s of mortage holders is the same; am I throwing good money after bad?

I can afford my mortgage but have stopped the payments.

Negative equity increases every month and the future in Ireland looks very bleak with rising taxes, and increasing poverty all around…. I think I’ll take my chances in Germany instead.

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