Habemus Mortgage Arrears Plan

Today the Irish government and Central Bank together announced a new set of plans to tackle the mortgage arrears crisis. The new plan reverses two policy decisions from the recent past that are now acknowledged to be flawed: the 2009 Land Conveyancing Act, and the Financial Regulator’s 2011 Code of Conduct on Mortgage Arrears. The plan also imposes ambitious targets on all Irish domestic banks, first, to offer each mortgage holder in arrears a specific proposal for resolving their arrears problem, and second (during 2014) to ensure that a majority of these individual plans are implemented or suitably modified.

The targets seem fairly aggressive, with over 55,000 individual arrears resolution plans to be offered by December of this year. It is not clear when the new process can begin since the legislative changes to the 2009 Land Conveyancing Act may not be ready for several months (today they were promised to be completed by the summer recess of the Dail).

Key documents:

Irish Central Bank press announcement:

Mortgage arrears resolution targets:

Consultation on changes to the Code of Conduct on Mortgage Arrears:

33 replies on “Habemus Mortgage Arrears Plan”

I regret to say it but, in the absence of defined written objective resolution criteria from the Central Bank, this is the green light for mortgage write-down for the well connected.

The achievement of resolutions is no problem. Ensuring that those resolutions were equitable was always going to be a major problem.

The problem is now solved. The CB just needs quantity.

@Joseph Ryan

“this is the green light for mortgage write-down for the well connected.”

Please explain? I don’t get your drift. Serious question.

I can see what he means. They have to reach a certain target, so they’ll do deals for a golden circle.

I worry about the target for offers. They could offer horrible deals.

Will the AIB NDA’s still apply I wonder?

@PR Guy / Sarah Carey

As Sarah, there is now a target to reach. On what criteria will the queue be drawn up? From the pool, do I fill the queue from the gilded circle or from the residents of postal district 33?
What is the objective defined criteria for mortgage write-down, an expense which is in effect government expenditure?
Apparently there is none. Why?

This worries me.

I know of a 2 couples with 3 houses. They are not swimming in cash and you would not class them as wealthy.

In each case, he and she had a house before marriage which became their investment when they bought the family home. They are paying the mortgage on the family home so they will not loose that but refuse to pay anything on the other 2 houses. They collect rent on these but it does not cover costs. They were happy to pay on the investment as long as it made profit and refuse now because they are making a loss. Investments may go up or down appears to have been lost on them and many others.

Why should the taxpayer bail them out ? These are a prime example of can pay- won’t pay people.

Should we all chip in so nobody has to give up the 6 bed home they overstretched on ? I can hear the cries of “we cannot give up the family home” on Joe Duffy already., quietly ignoring the reality of stupidity of many. Lets blame the banks for our own ills.

The banks were fools chasing unrealistic profits but the irish public was no better in believing everything they said without sitting back and asking “if it is too good to be true then it must be the case”

Damien: those couples could be spending that money in their community instead of posting it into a bank for a house worth less than is owed. Must local businesses be starved of customers to satisfy your sense of fairness?

The simple answer to me seems to be to close the mortgage and allow the state to take the properties for social housing. The state will get a number of quality properties for social housing, failed investors (banks and property owners) will lose their investment but gain a chance to draw a line on their losses and local businesses will see customers return.

Looks like a win all over.

Again I’m very disappointed that in all the analysis of the mortgage arrears problem that there’s no acknowledgment of the systemic inevitability of loan defaults.

If banks lent out other people’s deposits how could there possibly be so many ‘can’t pays’?

Of course the answer is that banks create the money they lend and in doing so the create more debt (P+I) than they do money (P).

@ Kevin,

Many people without a property called it right and did not buy. Also of course many of them couldn’t buy. They rented. They now want to buy a cheaper house. The houses would be cheaper if the rules were applied. The houses would be cheaper if there was no massive intervention already, incl NAMA etc.

The renters weren’t totally correct, many of them were trying to increase their savings by putting money in other things, like the stock market. This is also down and there is no ‘write-down mechanism’ for their losses. Why should there be a mechanism for one asset (which aided the collapse (by buying the damn house)) but not for others?

Why do you want to punish the poorer renters who will be able to buy a home if the price falls far enough as it should with repossessed homes coming onto the market (even in ‘firesales’ as in other countries)?

If people lose the property they live in now then they are entitled to shelter, we are a civilised society; but surely they are not entitled to decide which house they get (i.e. the one they couldn’t really afford in the 1st place)? And you are not suggesting that they should also be entitled to ownership aswell?

Why should they jump the queue for social housing? The people on social housing queues didn’t do anything wrong. They should be housed first (& quickly) and then house anyone who lost a home, but maybe they’d have to live in a postcode which is not their 1st choice.

Now all of the excuses that were predicted 12 years ago (pre-dot.com crash) are being invoked so as to take money from the citizens to give to a particular group (who were also partly responsible for the crash).

Also Ireland needs to have no moral hazard now, so that it stays in the “race-memory” and there is no repitition in the future.


If it were only so simple.

Your argument fails because the property market, like it or loathe it, is different.

Other asset markets are cash driven , property is credit driven. And this makes all the difference. You see its not the citizens that should have been telling all the thousands in arrears and struggling that your bet could go wrong its the lending banks job to make that assessment and say no to any deal that doesn’t make sense athe outset.The banks did the opposite.

They played with the cheap credit and allocated stupidily when they, above all the players in the property the market, should have known better. This is the reason why making comparisons with equity markets etc doesn’t hold up because the price of Ryanair is the price on the day whereas the price of #1 Ordinary Street, Ordinary Town is not driven by anything other than a banks ability to lend against it. As a result ultimately banks price property. The folks in Dame Street and elsewhere don’t want to believe that side of the argument but unfortunately it happens to be the truth.

Yes you could argue that nobody was ever forced to borrow money and be it on their head the debt lays but banks are Regulated entities and sing to a higher tune of responsibilty. This was also forgotten. And now that the folks who bought into, what now seems crazy prices (as determined by the banks lest we never forget) are having their ability to repay their original lending cut as the Govt seeks to repay the banks financiers 100% of their bet. It all seems a bit one sided to me. Bad decision to lend, bad decision to guarantee, bad decision to recap but an even worse one to assume that the banks remain blameless.

@ Yields or Bust
In the long run the value of an asset must be linked to the income that can be generated from it(rent in the case of property ,dividend in the case of shares). It is quite possible for individual assets to shoot up in price since residential areas can become more fashionable and companies can have very successful products . But in aggregrate, share and property prices are constrained by the growth rate of the economy,which in turn depends on the stock of productive capital(new factories and so on)
Below is the link to the elementary property valuation error that banrupted Ireland;

The analysis may be simplistic but unfortunately it is not flawed. Banks
ask valuers to tell them what the market value/exchange price is at a
point in time and then lend vast amounts over time based on that simple
number. The surveyor gives them that simple number and do not think it
is their job to tell the banks that the question they have been asked is
stupid on its own and what they should have asked for is the underlying
value. It was obvious in 2005 and 2006 that prices in the property
market were higher than could be sustained by any rational cash flow
analysis. But in a culture that rewards individuals for short term
performance rather than longer term perspective, it was in neither the
bankers’ nor the valuers’ interests to stop it. I cannot see anything in
what the UK regulatory authorities have proposed that makes me think
they understand the role of property valuation in driving asset bubbles
and will prevent it all happening again sometime in the 2020s.

Neil Crosby Professor of Real Estate and Planning University of Reading

Neil has been Professor of Real Estate at the University of Reading since 1994 having been previously Professor at Oxford Brookes and lecturer at Reading and Nottingham Trent Universities. Before that he was a practising valuation surveyor in a combined residential and commercial property private practice firm based in Nottingham. He specialises in commercial property appraisal and the commercial Landlord and Tenant relationship and has undertaken a series of major research studies funded by the UK Government and the UK property industry in these areas. In 2002 he was awarded the International Real Estate Society’s annual achievement award for his work in real estate research, education and practice. He has published well over 100 papers on the various topics listed above and the third edition of his textbook on Property Investment Appraisal with Andrew Baum was published in 2007.

The surveyors/auctioneers i.e the property professionals are a self regulated organisation which in Ireland means no regulation. These property professionals were responsible for three practices which created the bubble.

First the valuation error i.e valuing all 5 euro notes as 20 euro
Second the feudal commercial property lease law organised by a cartel.
And third,ninty five per cent of all property sold in the state is sold by surveyors/auctioneers.
They controlled where the property advertising money was spent. Almost all of it was spent with the broadsheet media and the Irish Times, the mouthpiece for the property industry and owner of MyHome.ie , got the lion’s share. These property professionals. controlled the Irish Times property propaganda and all the other broadsheet media property propaganda. They had enormous influence in these papers editorial policies.

This third item was the fatal one–the media faciltating this propaganda. There were other useful idiots like the soft landing economists etc etc.

Is ‘offered’ not the key word in those targets. As in ‘if you start paying your mortgage again, we’ll give you an AIB T-shirt’. Tick.

It’s certainly Joe Duffy tastic. i.e. promises to bring a whole new batch of winners/losers/unfairness etc Not to mention umpteen references to the famine, though we’re not in the 1850s and the last time I checked renters weren’t dying in ditches?

@ Sarah and Joseph

I hope you’re comments aren’t true. Though your opnions and attitudes are in a way symptoms of the what’s happening in Ireland. It’s a kind of social rot. All our citizens have watched and read as time after time they’ve seen the concept of the ‘common good’ or ‘society’ let down by those in charge. So many people that should have been affected by what has happened haven’t been for one reason or another.

So Noonan says to a guy, who ‘can pay’, that it’s only ‘right’ that he does. I mean, it’s laughable really. Like it’s only right that he pays for his mistake, while it’s ok that Developers/Bankers/Regulator/Journalists/Institutions don’t.

Incidentally my cycnical levels had retracted some with the way IBRC was dealth with, fair play to Noonan on that (I hope there’s no row back). That AIB pension move really sickened me. In fact I’ve taken an oath never to bank with them again.

The bigger picture is as Y&B said above, the banks essentially set the price for these assets, via their Loan to income ratios. Which is one of the key drivers of prices. So presumably after we get rid of the banks to the ESM, we’ll copper fasten that ratio forever, at a reasonable levels, say 4 times gross salary, 20% deposit.

So we can spare future generations the social devastation we’ve had to endure. Imagine how depressing it would be if we seen another property bubble in our lifetime.

Wow..13 posts in and nobody has yet blamed the public sector. Sure we know that all the btl properties are owned by guards? Not a single solicitor or medic or auctioneer or FDI branch manager ever bought an investment property. When will we realise that the only solution is more beatings?

Free houses for every one, or at least you can pick a house, anyone you like, decide what you want to pay for it, and the state will subsidise the rest.

If this madness of allowing everyone with a sob story to keep an asset they can’t pay for is allowed to grey the difference between wrong and right then no future investor in their right mind would lend to home buyers, rates will reflect risk. If this concept is to work then the cost of such childish logic must be paid for by draconian laws to recoup the excessive profits made selling property during the boom. It’s from the same school of go been logic

” Housing prices should not outstrip inflation in the long term because,except for land restricted sites,house prices should tend towards building costs plus normal economic profit” Bob Schiller

Folk purchase a property (their home) so that it is convenient(as possible) to their place of employment, schools for their kids, shops to shop in, public transport, etc., etc. Homes are NOT an investment. In fact they are a money sink (I paid back DOUBLE the amount of money I borrowed (over 30 years) to purchase my home – DOUBLE!!!).

Anyone like to enlighten us about some maverick fellow – Alan Sugarman. Seems he might have some words-of-wisdom about very bad (possibly fraudulent) lending practices by various financial institutions into the Irish property market.

I ye olde dayze about 1 – 2% of private residential mortgages ended up going sour. Now I wonder why that was? To-day its 12% – and rising. A TEN FOLD increase! Hey up folks! Someones have a huge amount of explaining to do here. But they artfully avoid this by displacing the issue onto those who cannot explain what happened. And then blame the poor sods into the bargain.

If there is a ten-fold increase in something, then the probability of ‘enemy action’ is 100%. Pay close attention to this shambles.

In my personal opinion, the comments thread for this entry has drifted into issues of fairness, whose fault it is for what past wrong, and similar political/philosophical issues which perhaps belong more on politics.ie than on this website. I think that the key unknowns deserving economic analysis are to predict the capital cost of the plan for the banks, the unwinding strategies of foreign versus domestic banks, the likely rate of increase in repossessions (moderate or high?), possible impact on property prices, rents, sales volumes, bank lending. I thought the commenters might offer some insight on these types of economic issues rather than the more political/philosophical ones.

This may help….cheat sheets or cliff notes from DofF.

For market intel. or comps. I use Allstop,their year end results available at their site,for most recent auction results this is outstanding.

It’s a bit of myth that the Irish property market is “distressed”…Allsop sold over 100 million last year with a 93% success rate.Total number of lots 777.
Can the market absorb 100,000 say repos nah…but another couple thousand from BTL sector yes absolutely.
The banks should focus only on public sector BTL owned ones….a joke…they should target a zip code to test out all this new fanged legislation,regulations etc.
Why not D4 ……

@ Gregory Connor,

I like your entries in general, but re: “..issues of fairness…belong more on politics.ie”, no, that is gratuitous;

Aspects of “Political Economy” belong on this site.

@peadar- it might have been phrased poorly. On the other hand soon after I wrote it there was a very substantive comment so perhaps it worked.

How do the maths on this ‘new’ approach work? By not repossessing OO housing the state ie the banks will fail to recoup the revenue from the sale of these houses. The cash balance that cant be paid will be parked – rather than written down – making the banks look better. There is no sense of emergency this is a political creation that might be affordable in a ‘blip’, already in this country ‘owners’ and renters have very different rights, now it seems ‘owners’ dont even have to bother paying for the asset they helped inflate – this is completely political argument/initiative as the finance side of this is another diddle-i-do creation. There is no black and hite here only political opinion on who should get a free house and who shouldn’t. Please enlighten me on where such a scheme has worked previously and i would be happy to discuss the application of the model in Diddle-I-do land


I heard you on radio 1, well done!

It sounded like you were of the same opinion (about the risk of strategic defaulters) as many on here!

As David Brent said, the posters here “probably spurred you on”.

You see, they don’t deserve to be banished to politics.ie after all!… 😉

@Gregory c’mon gives us a link…..is that RTE ?
But congrats hopefully the sound of reason in a rather emotional and hysterical debate,the irish govt. continued with a judicial review process PRIOR to foreclosures,in US its NOT required by all states.


Latest,US repo/foreclosure numbers,dual track is worth watching,the irish banks can hit the 20% first target easily…file foreclosure action as this qualifies as a ‘solution’…
“In this regard, initiation of legal proceedings for repossession will count towards meeting the ‘proposed’ target measure”
pg.12 link above.


@ GC: Gregory, this IS a Political Economy site – since any attempt to apply a Miltonian assumption – that is: economics is an apolitical science, is pure nonsense. The current residential mortgage fiasco will only be finally unwound when our legislators put the citizen in first place and relegate the private lending institutions to where they belong – in a liquidator’s filing cabinet.

But no. We have an almost impenetrable piece of so-called Personal Insolvency. And now we have an equally opaque piece on Mortgage Sustainability. This government should be damned from all sides for what it has done, failed to do and has no intention of doing: protect the citizen. Mind you there are a few citizens who deserve a good root in their financial arses. But will the get it? Probably not.

The lenders should have issued repossession notices against all BTLs. Then put all repossessed properties up for public auction without delay. Get shot of the damn things. Let the ‘market’ clear. All losses will have to be shared by both lender and borrower as I suspect that some hinky lending practices were indulged in. The lender can always place a recalcitrant (strategic defaulter) borrower in bankruptcy. But will they? I suppose it depends, doesn’t it.

The OO mortgage holders are another issue entirely. Now you are attempting to deal with persons (and families) in their own homes. I’m not asking for charity nor forgiveness for these unfortunate folk – but the solution MUST not increase their debt load. There must be absolutely NO interest only loans: full amortization over 30 years. Given the most uncertain economic situation, I’m of two minds about fixed v variable rates. But rates can only rise. All OO mortgages must written down to the historically known stability level (twice the actual income of ONE of the occupiers. No hinky income statements! If some folk want to transfer to a similar property in another part of the country – try to facilitate this. If any borrower refuses to accept the lower mortgage arrangement – they’re out and have to fend for themselves. All losses are taken solely by the lenders. The sting in the tail for OO who avail of the write down is they may not be eligible for any credit for some time and ownership of the property shall automatically revert to the lender in the event that the borrower misses six repayments (in aggregate). You got one fair shot at it. No seconds! Our legislators need to get off the cumfy fannies and deal with this before it morphs into an intractable mess. Actually, it IS a mess!

And if the lenders baulk: liquidate them! It will only have to be done once – select the biggest. And no, the Irish taxpayer shall not be liable for one more cent. Have our legislators the testicles for all this? No. They will lie down and complain about the ‘rain’ when in fact they are being pissed on.

@ rich: Owners do not ‘inflate’ the actual value of their properties – except they want to sell and they do ‘inflate’ their apprehension of a possible market value. Its the lenders who first inflate the money supply (via very dodgy fiat credit creation): they are chasing market share. Property values then chase the increase in the money supply. Alan Sugarman ring a bell?

@Brian….was their what we call ‘predatory’ lending in ireland,yes,the link from seafoid above relates to this with a Spanish angle.

With the advances in social media and the irish media’s weird obsession, almost pornographic in my opinion,with evictions,the banks will tread very carefully around “OO”.Its as if the media want or desire families getting dragged out….reality TV Irish style…interchange with famine era pics some mood music…how bout bit wolfe tones…its a smokescreen/strawman.Ever wonder how many ‘media’ personalities and execs have BTL properties…


@ JG: The obsession is indeed weird. Something is also badly amiss. You could obsess about it all night and still be no wiser in the morning. Maybe we lack leaders with moxie. They’d jump at their own shadows. I believe its a complete failure to be truthful about some very inconvenient (economic and political) truths.

I’m just sharpening my pencil for my next excursion to the polling station. That’s the only ‘revenge’ I dish out.


Tonight on RTE….great timing!
“Evictions like these were common in Ireland from Famine times right up to Independence and even today eviction, losing your home, is still highly emotive and a most traumatic event in anyone’s life.”

The govt. has made a number of strategic errors in the above,most importantly by continuing with a judicial review process for BTL foreclosures.
“Time to Clear'” is significantly impacted by this-if deadbeat owners are unhappy or think the lender has liability then they can litigate afterwards.By lumping them together,this is making the whole emotive issue of ‘evictions’ somehow entwined with foreclosing or repossessing BTL-the ultimate no brainer.


The surveyors/auctioneers i.e the property professionals are a self regulated organisation which in Ireland means no regulation. These property professionals were responsible for three practices which created the bubble.

First the valuation error i.e valuing all 5 euro notes as 20 euro
* Second the feudal commercial property lease law organised by a cartel.
And third,ninty five per cent of all property sold in the state is sold by surveyors/auctioneers.
They controlled where the property advertising money was spent. Almost all of it was spent with the broadsheet media and the Irish Times, the mouthpiece for the property industry and owner of MyHome.ie , got the lion’s share. These property professionals. controlled the Irish Times property propaganda and all the other broadsheet media property propaganda. They had enormous influence in these papers editorial policies.

This third item was the fatal one–the media faciltating this propaganda. There were other useful idiots like the soft landing economists etc etc

*Extract -Oireachtas Joint Committee on Enterprise Trade and Employment; Commercial Rents discussion 30th March 2010.

Mr. Frank O’Dwyer: (Irish Association of Investment Managers)

Deputy Ciarán Lynch asked for the numbers. Some 258 tenants sought concessions, 207 of which were retail while the others were office and industrial tenants. A total of 184 tenants provided financial information, of which 153 were retail. Of those, concessions were offered to 143, of which 118 were retail.

The Deputy also asked about the scale but I did not ask for that information. I spoke with seven institutions but it would be legally impossible under the Competition Act 2002 to gather data from a small group of people who control the market. When I asked for the information for the purposes of bringing it before the committee I asked that frivolous concessions, such as changes in the terms of rent payable from quarterly to monthly in arrears, be excluded. I was informed that the predominant concession was a reduction in rent and I can get more information for the committee if that is necessary.


The above is the link to the ful transcript of the Joint Committee on Enterprise Trade and Employment–Commercial Rents discussion; 30th March 2010
in which Frank O’Dwyer (Irish Association of Investment Managers)
states “I spoke with the seven institutions but it would be legally impossible under the Competition Act 2002 to gather data from small group of people who control the market”

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