Mortgage Arrears Data

If unemployment is 15% what % of arrears would be expected? I thought a good chunk of those unemployed were under 30 and unlikely to have a mortgage. Is much known about the group of people in arrears who are still working ?

http://www.centralbank.ie/press-area/press-releases/Documents/Trend%20Data%20end%20Sept%202011.pdf

This link give a better comparative view of the quarters.
Karl Whelan’s focus on mortgage balance in addition to numbers is very relevant in this regard.

The number of mortgages in arrears has increases as follows over the past 4 quarters.
Quarter No % in Arrears Value % in arrears
Dec 2010 5.7% 7.4%
Mar 2011 6.3% 8.3%
June 2011 7.2% 9.4%
Sept 2011 8.1% 10.8%

Assuming unemployment is stabilising (emigration and further training/education may be feeding the perception that no more jobs are being shed) the outlook for those over forty finding employment in time is still bleak – not just by way of age, but family, health, welfare trap, etc play a role. Let’s assume for the sake of argument that most of those purchasing owner occupied houses between 02 and 07 were 30 years old. Anyone in that category is now shading under forty and if they are out of work the prospects are not sanguine. Of course a percentage of these would have entered permanent PS employment. Be interested Karl on you thoughts on this. But it seems that for some years to come, the situation can only disimprove.

The second point, and one likely to be overlooked in shock of the figures, are the implications for property sales and credit. The country is awash with property, but claims that it could become awash with mortgage default do not look excessively exaggerated. In this situation credit will tighten up even more, as if that is possible. Property prices will fall even further. Business investment will shrink even more.

Switching to anecdote mode, when I am back in Ireland I spent a deal of my time checking meat prices in supermarkets. This time I have been struck, more than other times, at the number of shoppers who seem stressed and irritable, harried looking. Several times I have overheard a mother tell her son or daughter that she just didn’t have the money for something or other. Sorry for going off topic but beneath the figures there are real people.

@Ahura Mazda
“I mightn’t be popular to say, but the arrears stats are made worse by banks not completing workouts i.e. there’s a flow in, but no flow out.”
And even when there is a workout, banks are hoarding inventory – we now have to factor in shadow REO (with no geographical breakdown) when trying to figure out available for sale supply.

Michael Lewis gives California the Lewis treatment

http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111

It’s really about the collapse of the debt machine. Poor Vallejo.
He makes the point that post 9/11, with incomes stagnant for many of the middle class , debt and home equity releases replaced salary increases. Otherwise debt and equity release financed unsustainable lifestyles
And it was the same in Ireland.

In future banks should have to disclose aggregate ‘mortgagee capital’ figures, as well as relating them to the quantum of mortgages per mortgagee

So I’m thinking these are relevant to ‘mortgage capital’ :
– value of other unencumbered assets
– a ‘human capital score’…keeping it simple, would suggest past average earnings, age, years experience and educational level

Also more detailed information about the mortgages should be revealed:
– LTV ratio,+ date when V was calculated
– property asset class info (based on nationally agreed categories, likely location, property purpose and size)

All of this data would be very useful for regulators, and more importantly investors in assessing the health of the bank.

As a barbed aside….such info would be very useful to the mgmt/directors of the bank also, were they to have it, or know what to do with it.

The time for these reforms is now, and they would vastly diminish chances of another bubble, and allow investors much more confidence in the banks. Fact is banks are complex entities, and need to release more data in order to be properly funded,valued and regulated.

Does these figures include people who have negotiated a change of terms with their bank? e.g extending the maturity or moving to interest only for a period.

@ Desmond

Ireland is nowhere near having the infrastructure required to ensure “never again” for the banks . Here is one key missing component :

http://www.iput.ie/uploads/documents/news/SCS_article_in_The_Irish_Times.pdf

“The Society of Chartered Surveyors has been calling for the establishment of a public database to maintain and publish relevant details of all property transactions including sales, lettings and rent reviews along with details of all incentives and side agreements which would address the issues raised.
Such a database is vital for a fully transparent commercial rent review process. The need is now more pressing and a report published in July 2010 of a working group established by the Minister for Justice concluded such a database would provide transparency, help raise confidence in the rent review process and assist in fixing rents which would be demonstrably consistent with true market values for comparable properties.
The database is also capable of delivering fundamental improvements to the commercial banking sector.
The valuations, which are an essential part of loan and banking decisions for transactions, would be more reliable because they would be founded on accurate up-to-date information. If all those involved in property transactions have access to such information, then better quality projections can be made, leading to improved decisions. This could be a major plank in developing key elements of a programme of economic recovery and the restoration of credibility for Ireland.”

@Ahura Mazda
“I see what you’re getting at – proportion of distressed households. What I tend to use is proportion of distressed debt.”
Yeah, it depends on what you are trying to measure really.

Proportion of debt that is distressed will give some idea about the state of the banks (and maybe aggregate demand?).

The proportion of mortgages issued in distress probably says something about what future bank margins/LTVs are going to be like.

Proportion of households with mortgages in distress is, as I say, the ‘social’ indicator – my guess is that’s the one that interests politicians. The ‘wheresmyNAMA’ camp tend to conflate all the numbers together picking the highest one to suit their case. The ‘itsquiteasmallproblem’ camp do the opposite…

There have been some suggestions that there is an increased number of “won’t pay” as opposed to “can’t pay” borrowers in the recent increase because of the debate about debt forgiveness and bankruptcy last August and September.

I’m always perplexed by this “can’t pay” “won’t pay” dichotomy in relation to mortgage holders. They seem to be the only people in the entire state who have ever seen a “won’t pay” label attached to them.

None of the banks, none of the developers, none of the companies, none of the civil servants, none of the businessmen, none of the bankers, none of the politicians, none of the Nama wide boys, none of the Quinns; none of these has ever had a “won’t pay” label stuck to their pin. It’s always been “can’t pay”, “couldn’t possibly pay”, “would love to pay, but there’s no money”. “That’s all gone.. it’s not coming back” in the contented words of one Nama-ed Harry Crosbie.

But the mortgage holders? No, they won’t pay. Squeezed from all sides though they may be, forced to shoulder the bailouts, debts, pensions and more of all of the above, seeing rates, taxes, prices shoot up, and wages and hours plummet down; they just won’t pay. How dare they spend so much on food, and heat, and clothes! Those covetous, profligate, house buying scoundrels can pay, and should pay, and must pay; every last cent they agreed to and more besides.

Whether they can or not, the mortgage holders must pay in order to pay for the others in Ireland who didn’t pay and who will never pay. The devil will have his due.

@OMF

The problem with your post is that is inconvenient. There is a fiction at play in Ireland. Ever since I was a boy it has had the same story arc. It relies for persuasive affect on no one denying the major premise, that would be subversive, inconvenient. From endless assurances about soft landings to promises of a Wondrous Smart Economy. So instead of facing down this self-serving blather, the endless debate focuses on how many epsilons fit on the head of pin, how some set of variables or other vary with time in the presence of some other set of variables, and while this is important but it is also largely safe. It allows orchestration of the enormous political fiction that all the policies and talk about debt, bailouts, recovery and mortgages can be conducted in a value-free zone, untainted by the various existential crises being played out in homes and small businesses up and down the country. Awhile ago on one of my trips here, I attended the funeral of a man who, I was told, was in such despair over debt that he may have placed his head under the hammer of a post driver. Of course, it could have been an accident. I won’t go into details. Many times on this blog in the past I have argued that default begins at home, while almost everyone seemed to argue it should begin with overseas debt. If Ireland is to come ‘good’, some major and radical rethinking will have to be done about those who are forced to shoulder the variety of balls ups that have occurred. But that would require more than blogs, tweets and face booking. It would require something to happen at popular street level, but somehow I believe that an atavistic masochism among the ‘ordinary people’ plus a huge swathe of state dependents will prevent that from happening. You’ll never be promoted for denying the major premise.

Ever since I was a boy it has had the same story arc. It relies for persuasive affect on no one denying the major premise, that would be subversive, inconvenient.

There is indeed a deep amorality in Irish public life. It has always been present; our civic figures and institutions have always been indifferent to the plight of the people and the state of the country. It’s a national failing, today more so than it has ever been.

Nothing like a bit of Aogan O Rathaille at such times

Tir gan eaglais chneasta na cleirigh!
Tir le mioscais, noch d’itheadar faolchoin!
Tir do cuireadh go tubaisteach, traochta
Fa’smacht namhad is amhas is meirleach!

A land without a meek church or clergy!
A land which wolves have spitefully devoured!
A land placed in misfortune and subjection
Beneath the tyranny of
enemies and mercenaries and robbers!

OMF & Dork & Alchemist
Those posts are close to poetry!
Things are really dark out there

@ alchemist
‘The country is awash with property, but claims that it could become awash with mortgage default do not look excessively exaggerated. In this situation credit will tighten up even more, as if that is possible. Property prices will fall even further. Business investment will shrink even more’

That is logical. A death spiral.

@ sefaoid

‘Official Ireland is shite in so many ways that people don’t know about. And it is too much of a load for the country to carry any more.’

There is a fair bit of consensus on that now. The problem is one of state reform. Democratic state reform. cf Paul Hunt.

@ dork

‘I am getting these Edwardian collapse nightmares lately……does anybody else out there see something very dark when we finally turn the fourth corner ?’

Yes. Child abuse/neglect, prostitution, loan sharking, forgery and con tricks, etc etc.. Overcrowding and breakdown of hospitals and other institutions. Random violence fuelled by alcohol, hash and kill-em video games. A post-welfare state Hades.

@ alchemist

‘If Ireland is to come ‘good’, some major and radical rethinking will have to be done about those who are forced to shoulder the variety of balls ups that have occurred. But that would require more than blogs, tweets and face booking. It would require something to happen at popular street level…’

Ireland has a lot of ghettos. Let’s hope that muggings, assaults and household tie-ups dont’ become the popular street level response. We have eight to a cell on occasion at Mountjoy already. Not to mention slopping out.

BTW, today’s IT is pretty explicit about the role played by Wall Street’s man in our downfall. He didn’t cause all our problems but he sure added to them. Thanks Tim.

http://www.irishtimes.com/newspaper/frontpage/2011/1119/1224307824125.html

@Paul
I can recommend the book “Pure Cork” by Micheal Lenihan for Christmas (you can flick through it before sending it to the Americas or elsewhere).

It sounds People Republics of Corkish but it is’nt really.
It has the most evocative unworldly pictures some of which have not been seen before.
It starts off with the Cork International exhibition of 1902 which must have been quite something.
It then covers wide ranging topics such as entertainment & transport.
Then it covers banknotes and invoices with banknotes issued before Peels bank act I guess and then the Ploughman notes of the currency commission days.
But what really caught my eye was a picture of Bridge street 1910 (directly below Patricks Hill) – a large gleaming white car with occupants dressed in Finery ,with a tram ,horses and pedestrians.
Little did those passengers realize that the burning of that oil rather then coal or horse calories would change the worlds entire monetory system – with a massive shift of wealth to the petro dollar after the Great war.

Anyhow its a strange picture for a Corkonian or any Irishman really and sits it stark contrast to the burning of Cork Pictures.
But I sense you are thinking of a kind of 19th century Jekyll & Hyde Edinburgh transfered to a Irish 21rst century context.

I get the feeling the Jackeens don’t quite understand the Irish collapse of the 20s & 30s as Dublin was still a British Empire administrative zone in the 20s & 30s – The Empire was somewhat insulated from the 20s European collapse and subsequent American collapse of the 30s ( Royal Navy strike excepted)
But Cork was much more tied into Continental trade until 1914 – while at that time the core exploded and its trade shocks were felt outwards , this time the periphery is imploding due to complex & not so complex financial engineering in a attempt to prevent another European disaster in the core.

Having said all that I was walking through Pana today and I could feel the wealth again – for the first time in 3 years !!
If the Euro boys can learn to expand the money supply and at the same time tax this hopefully rising supply in intelligent ways that concentrate commercial activity in our cities things might work out – but if the money supply keeps falling all bets are off.

@ dork

Interesting ref. I am sure you are correct in your suspicions about the capital, but you are too knowledgeable to engage in namecalling. Ordiinary Dubliners have sacrifced a lot. The 1913 Lockout , the associated meningitis epidemic and the Citizens Army to name a few things. How many had to go to Liverpool for work ?

@The Dork

Trying to find a gentle way of putting this – but the Deeds of Cork are being used as collateral by AIG in New York to get more dosh from Timmy G and Benny B. to gamble on ever more dodgy derivatives in the EZZ. It follows that all Certificates of Authentic Corkness are deemed to be null and void as sent down in Decision KJI87/lolr/111111 of the Deutsche Constitutional Court. Tuff ol times alrite … and not a rebel in sight.

Perhaps a popular movement to address debt may be in the cards after all – a friend of mine brought the report to my attention today, possibly it has already been covered in the Irish media, apologies if it has.

A bit off topic..but are we in mortal danger of falling behind the Greeks by next year…
“The minister presented two possible scenarios affecting the budget deficit – one taking into account a bond swap foreseen in the latest European Union debt deal for Greece and the other disregards the swap. In the first case, the deficit would be reduced to 5.4 percent of GDP from the 6.8 percent foreseen in the budget while in the second scenario, the deficit would drop to 6.7 percent.

The aim is for Greece to report a primary budget surplus of 1.1% of GDP next year, Venizelos said. “It will be a small primary surplus but a surplus nonetheless,” he said.”

Remind me what percentage we are scheduled to have next year?

@ Dork

Have you bought one of these yet?

http://peoplesrepublicofcork.buy.ie/catalog/index.php?cPath=144_204

It appears that 1-in-4 households have more than one loan http://www.businessworld.ie/livenews.htm?a=2841177
(h/t Ireland_is_different on the ‘pin).

@ Alchemist
“There is a fiction at play in Ireland. Ever since I was a boy it has had the same story arc. It relies for persuasive affect on no one denying the major premise, that would be subversive, inconvenient. From endless assurances about soft landings to promises of a Wondrous Smart Economy. So instead of facing down this self-serving blather, the endless debate focuses on how many epsilons fit on the head of pin”

There is perhaps an even greater fiction than this at play not just in Ireland but in many other Anglo-American countries too. This is the fiction of agency – the assumption that the macro character of the socio-economic trajectory into the next 10-15 years can be influenced by individuals, organisations or governments. I see no objective evidence for any such belief based on either attempts 80-odd years ago or over the last four years to stave off depressions.

What is interesting to me at least are national differences in facing up to the reality of not being able to shape the future. The mapping of global cultural areas over time as reported here:
http://www.worldvaluessurvey.org/wvs/articles/folder_published/article_base_54 has a mapping by Inglehart and Weltzel that is thought- provoking. Official Ireland exerts considerable effort to try and maintain a fiction of agency, anticipation and control which is increasingly fatuous. (This includes political communication, ‘independent’ commissioned reports and strategies, manifestos, and the implicit assumptions underlying much media comment and even the content of this learned blog). Why does official Ireland feel the need to treat its citizens like children by persevering with this fiction? Broadly similar behaviour is in evidence in the other countries identified in IW’s map as ‘English Speaking’. Yet in the group of countries labelled ‘Protestant European’ notably Iceland, Switzerland, Norway, Denmark and Germany my sense is that there is no comparable fiction and the character of communication is adult.

It is clear from the map that those countries which are most evolved (i.e. at the top right of the distribution – strong on self-expression and secular/rational values) seem best positioned economically to deal with a decade of depression and indeed are doing so. Over the last two decades Ireland values have apparently been shifting from the traditional (focus on family ties and religion) towards secular/rationalism – the Euro Protestant grouping. Yet ‘official Ireland’ still communicates and in some ways behaves as if nothing has changed. It seems inevitable that there will be mortgage capital repayment holidays asa minimum, sooner or later, despite pressure from all those not directly affected to leave matters as they are. It will be interesting to see how that plays out in coming years.

‘@Paul
No – I always thought Micheal D simulated the wild colonial boy routine that was acceptable practise in North Kerry and Limerick.
However this became folklore / as this became the real deal in Galway – long after independence this fiction created enough wealth to be exported to the teacher set of the time that reexported these new semi individualistic ideas to the New Gaelic proles.

PS in my Dorkish view the modern west is in the dollar zone just because it can – meanwhile the southern bit remains in the euro zone and Sterling middle & north is just is because it can…………
It would all be fantastically fucked up but in a interesting way.

@ dork
God preserve us from being fucked up in an uninteresting way. The old signal/nolse ratio has deteriorated a bit there. Must be the Beamish 🙂

@ a few

Professor* Colm McCarthy in fine form this morning –

Professor Franz, and numerous other opinion-leaders in Germany, could do with a tutorial on the “collectivisation of debt under the auspices of the ECB”. It is the Irish Government’s job to communicate effectively that debt has been collectivised on an industrial scale, and at the insistence of the ECB, in Ireland. The Government has failed dismally to get this message across where it counts, in Germany.

http://www.independent.ie/opinion/analysis/lets-prepare-for-the-long-stay-at-rock-bottom-2940087.html

*UCD response to TCD Unilateralism 😆

@An Taoiseach

A few more tooreen hurlin tutorials – and bring the hurley to Berlin next time!

@Karl Whelan

You handled Sinn; Issing isn’t worth the bother; who do we send in to tackle Franz? Wonder does that Kilkenny full-back do economics?

From Grimson here: http://articles.cnn.com/2011-10-21/tech/tech_innovation_iceland-president-social-media_1_iceland-olafur-ragnar-grimsson-social-media?_s=PM:TECH

@Paul
Yes one must do what it takes to provide urgent liquidity to the system.

I see Colm Mc still wants to reduce the defecit to zero – he will never learn me thinks – he is trapped in a 80s mindset.
The Basel thingy has made a nonsense of banking.

Where’s the weekly column on Colm McCarthy weekly doom fest ?

In the context of mounting mortgage arrears, the recently reported increase in rents is shocking and dire bad news.

I have on a number of occasions argued that high rents are a serious competitiveness obstacle to Ireland’s recovery. My presupposition was that the casual relationship always flowed from the sales market into the rental market – logical if one considers the high levels of owner occupancy in Ireland.

But now artificially high rents are also posing a problem in the other direction: High rents lock default homeowners into bankrupt ownership arrangements, making it harder again to clear the sales market in a way that will help bring rents down.

On this site, others have warned me that in Ireland it will never come to evictions. I don’t believe this is true. Five years ago I was just as readily informed that Irish people would never accept residential property taxes – a tune no one is singing today.

The policy priority for the entire country should be on cleaning up the housing market. It is really the only thing Ireland can do that will make any difference.

This requires coordinated action in terms of

– transparency: Every house must be valued, put on a national register, and every sale that house has been engaged in should be accessible through a google maps style application. As is: Click on it and you know its tax profile (rental revenue, imputed rents, last known sales price, no. of legal bedrooms, plannning permissions etc.)

– new bankruptcy laws: Clean it up. You don’t pay your debts? We get you through the courts quickly and out of the house you do not own and cannot hope to pay for. Get the frakkin’ judges on overtime (Saturday courts, anyone?) until they clear the backlog. It’s call taking one on the chin for the country.

– auctions: Nothing clears a market like low-reserve auctions. We own the banks? Make them arrange auctions and get the property off their balance sheets. Their loss is the cash buyers’ gain. Because many of them will be Irish (or at least interested in the long-term recovery of Ireland, which is a lot more than we can say for the bank bondholders) this realisation of paper loss is a transfer of wealth from international gamblers to real people will mud on their Wellies.

– property tax: Based on an imputed rental value and a flat rate per square metre. Property taxes encourage occupancy, by putting more rental units on the market.

– close Nama: Sell its assets in a big auction. It was never a good idea. Its very existence makes people think the govt was committed to defending a price floor on property (which it was).

The goal should be to bring down rents by at least 40%. Abolish the minimum wage once someone on €7 / hour can afford a one-bedroom flat in Dublin (one bedrooms could cost as little as €500 a month).

Then we market Ireland as a dynamic European capital in which business can pay low wages to workers who can still afford to live.

The Arrears dilemma is a function of our decision to guarantee the banks, a function of our ‘guarantee’ of the commercial/residential property sector, a function of NAMA, a function of eurowide ECB support of the FIRE (Finance/Insurance/Real Estate) model of indentured indebtedness to preserve bondholders and commercial investment banks across the eurozone.

Its a business model built to fail. Its corrosive effects on our economy are well outlined by posters above.

In Ireland property prices/rental prices are now controlled by Frankfurt to extract our rentier state payments to support the banks and our precious .00000001 ‘growth’ in the eurozone?

In such a false economy when €3.6 can magically appear and reappear all growth forecasts of course are suspect.

What epsilon on what pin will burst the bubble!

@ LHE

I agree entirely. But it is most unlikely to happen in an organised way. Too many vested interests! But it will happen.

As to the increase in rents, at a guess, there are two main explanations (i) people unable to get mortgages are forced to rent and, indeed, this may become a permanent pattern (ii) the continued over-generous payment of rent supplement, effectively a subsidy to the quarter of mortgage holdings that are buy-to-let, a cabal of mainly small business operators who have influence across all the main political parties. Half are in negative equity (according to the CB report in the link just posted by Karl Whelan).

Rents are also impacted by the limited supply of accommodation in the right location because of Ireland’s abysmal planning record.

But, one must look to the bright side. Advertising in terms of “priced to sell” has begun to emerge timidly across the country as have smaller-scale distressed proprty auctions.

The trend on those arrears cases is of concern. Projecting it out to 2015 the artists formerly known as the banks are going to have a massive problem. Especially with austerity strangling growth.

@LHE,
Couple of other points.

1) A lot of people (including, I would guess, most of those who are economically literate) have no intention of buying until the market bottoms out, regardless of what the banks are prepared to lend, so they are renting.
2) On the employment and minimum wage issue, most of the increase in Irish unemployment can be accounted for by the collapse in construction activity, loss of employment in exporting industries caused by the recession, the resulting loss of spending power in the domestic economy, and a rational preference for saving and paying down debt. Only a small part can reasonably be attributed to the minimum wage. However, the minimum wage is a significant part of the explanation for why the economy is not undergoing the sort of adjustments needed for employment to recover.

the only problem is ludwig there are a few people who will be worse off i.e. those who live off Johns (whether rent or taxes)

which explains why current policy is to attempt to sustain the unsustainable.

@ Ludwig Heinrich Edler,

Good comments. If you’re starting a country from scratch, it’s certainly the way to go. Given the existing levels of debt(/wealth) tied up in property, a transition to lower house prices is a sensitive, and potentially expensive, process. We need borrowers to repay their obligations.

The banks’ unwillingness to move on unsustainable debts needs to be tackled. Over the last 2.5yrs banks should probably have worked out 10,000 mortgages (4k per annum is probably at the low end of what they should be doing). Draconian bankruptcy laws shouldn’t matter from a lenders perspective.