Mortgage Arrears Q1 2013

It is a little later than usual but the first quarter mortgage arrears statistics have been published by the Financial Regulator.

There is one additional element in today’s release which is in relation to restructured mortgages.

A total stock of 79,689 PDH mortgage accounts were categorised as restructured at end-March 2013. This reflects an increase of 1.8 per cent from the stock of restructured accounts reported at end-December 2012. Of the total stock recorded at end-March, 53 per cent were not in arrears. Restructured accounts in arrears include accounts that were in arrears prior to restructuring where the arrears balance has not yet been eliminated, as well as accounts that are in arrears on the current restructuring arrangement. New data collected this quarter indicate that 76 per cent of restructured PDH accounts were deemed to be meeting the terms of their arrangement. This means that the borrower is, at a minimum, meeting the agreed monthly repayments according to the restructure arrangement. Meeting the terms of the arrangement should not be interpreted as a measure of sustainability, as not all restructure types represent longer-term sustainable solutions.

The 76% figure is broadly in line with statements made by representatives of AIB and BOI to the Oireachtas Finance Committee last Autumn. 

AIB: “Between 69% and 70% of our 33,700 customers who are in forbearance are affording the new restructured loans we have put them into.”

BOI: “Some 86% of those customers who are subject to forbearance or restructuring are fully meeting the revised arrangements.”

If the restructure is a payment moratorium or a payment less than interest-only then meeting the terms of the restructure is not an indication of long-term sustainability as stated in today’s release.

The number of early arrears (less than 90 days) fell very slightly in the quarter.  The was also small drops in the bounded categories between 90 and 180 days and between 180 and 360 days.  This suggests a slow-down in the number of cases falling into arrears but the number of long-term arrears cases continues to rise.  To convert mortgage accounts to households note that there is an average of around 1.27 mortgage accounts per household in the series.

The total stock of residential mortgage debt continues to fall.  It was €118.6 billion when the series began in September 2009 and now stands at €109.9 billion.  Over the same period the total amount of arrears has increased by €1.5 billion.  The proportion of debt in arrears of 90 days or more now stands at 16.5%.

17 replies on “Mortgage Arrears Q1 2013”

What sort of mortar was used in those pillars ? I don’t think it’s standing up to the damp Irish climate.

“The total stock of residential mortgage debt continues to fall.”

Good?. Its 9 bil less. Where did that come from? Forgone consumption?

“Over the same period the total amount of arrears has increased by €1.5 billion. ”

Oh, oh! That pesky compound interest is a real bitch!

Now if we only had honest (true and fair) valuations of those residential assets. And interest rates were at 6% – 8% (which would be ‘normal’]. And we knew the extent of neg equity. And we knew that lenders were demanding 20% down and would only lend 2x one verified salary. If only!

AIB: 30% approx are underwater!!! BoI: 14% ditto. Excuse me. But I understood that the risk model of sustainability of residential mortgages only permitted an underwater rate of 1% – 2% MAX!!!.

A submersible cannot surface if its air compressors are faulty and are unable to expel the water out of its ballast tanks. And ours are badly f**ked up. Rescuing stranded submariners is tricky – to say the least!

Long, long way to go yet!

@PQ: “What sort of mortar was used in those pillars?” Mayonnaise!

The Central Bank going native with it’s own “Central bank Code of (Mis) Conduct on Mortgage Arrears.

Paul Joyce of FLAC succinctly summarised it as follows; it is much less favourable than the draft circulated earlier, it is a take it or leave it, “either you comply with what the lender wants or you face repossession”. “There is no independent appeal?”

No mortgage advances at all at all.
Things will get a lot worse before they get worse.

I’m always curious when economists discuss the extent of the mortgage arrears problem.

Does everyone realise that it’s not possible for all loans to be repaid? Banks only create the principal of the mortgages but expect about twice as much back.

When every euro originates this way it’s not hard to see the problem of mortgage arrears developing.

Also, by what logic can we resolve the mortgage arrears problem under the present system under which any new euros will also comes with an even higher and even more unpayable debt.

@PF: Some folk are a tad challenged in the math department – especially where exponential functions are involved.

“Does everyone realise that it’s not possible for all loans to be repaid? ”

No they (in large measure) do not. And attempting to explain the problem of debt growth only begets a pissy argument.

“Also, by what logic can we resolve the mortgage arrears problem under the present system under which any new euros will also come with an even higher and even more un-payable debt.”

As above. Logic hardly matters. Its the dopey, ill-informed views, opinions, ideas and beliefs about how a modern monopoly-finance consumer economic system does not work. The reigning religious tenets of neo-classical economics insist that the paradigm MUST work – hence it actually does! And it must. Hence all views, opinions, ideas and beliefs to the contrary are axiomatically wrong – and will so prove up to be.

Unfortunately the inconvenient empirical refuting evidence piles up. and up and up! Then its woopsie time! 2015?

A declining income and your inability to discharge your debt are the same side of the same coin. [apolos to Galbraith pere]

I’m sorry, but you guys have noticed the billions being written off in personal bankruptcy and liquidations, right? Loans to the likes of Treasury Holdings and Sean Dunne are never coming back — likewise with the monies which were transferred out of those operations.

Debt forgiveness is an accepted principal in Ireland, as long as you are a member of the right class. If you are not, then we have this childish adherance to absolute debt.

In essence, Ireland does not have a debt problem; it has a class warfare problem.

Ok – here goes
BOI – being prepared for sale will not lend much and will be pretty ruthless
AIB – already a lost cause will be a bit kinder.

If it wasn’t for the fact that the rest of the world is so f***ed up between economic melt down and a war between sunni and shia muslim sects I’d say we had a problem.

At the moment I think we should just continue in this parallel reality we have created – not do anything too harsh on any of our citizens – and just thank our lucky stars that we’re generally fairly pragmatic.


There are those that are too big too fail, then there are those that are too small to save i.e. ordinary tax payers who nobody gives a toss about.

The politicians, quango’s that are supposed to be looking after the public interest along with the DoF, NTMA and CB all make grand, cooing and gurgling noises but at the end of the day, every law, every policy, is basically designed was designed, to transfer wealth from tax payer to banks , big 4 accountancy firms, law firms and selected, chosen developers the vast majority of bondholders were paid off.

Neither, would I underestimate the importance for politicians at the fulcrum of power to be able to create jobs, at critical times, for family members of what have been referred to as political dynasties.

Peter Bacon was hired by the government because they already knew he would “suggest the bad bank”. Then 3 years later, he was hired by Treasury to say that NAMA was a crock. Fair play to him he delivered each time and got paid twice.

The latest Act in the selective demises of the Celtic Tiger, episode X is “The Central Bank [Penal] Code of Practice on Mortgage Arrears”, they talked tough, threw shapes and shadow boxed to conceal from consumers, the fact that they are 110% on the side of the banks they are supposed to be regulating. Nothing has changed Honohan spoke of regulatory capture, group think, and deference and then he did all three.

The game is rigged from start to finish. They make the laws, they appoint the judges, they create the quango’s, they give themselves Croke Park and Beggars Bush agreements, they create NAMA’S, IBRC’S what ever they need at will, they decide on the timing of bailouts for themselves. Next come the “precautionary loans” aka bailout II. I can see that this is being spun out for a nice “soft landing” otherwise know as, a national default.

@ eureka

+1 You would have been at home with Kavanagh, O’Brien and Behan.

@ Robert

As my late father used to say, you sure said a mouthful. The game is a lot more complex that what you describe, but your fundamental sense that it is rigged has a ‘good proportion of truthiness’ 🙂

Any power structure will always have stakeholder groups struggling to dominate it, and so direct the benefits of power to themselves. As our old pol corr John Healy used to call it ‘the granite block’. Sociologists, political scientists and historians have many times proven this to be case, and with mountains of empirical evidence. As the lawyers say, beyond all reasonable doubt’.

We have no difficulty in believing that Ancient Rome worked like that. We can easily accept that far away places like China or Russia operate on those principles. Here in Europe, however, we are supposed to have left that sort of thing behind us, ‘because we have democratically elected governments’. If only.

Here in Ireland, we are supposed to believe that our politicians, our senior civil servants, our judges and even our successful businessmen, are all ‘dedicated to the public good’. That is the position which must be taken by all ‘responsible’ persons. This sort of conservative groupthink requires the case against the elite to be proven ‘beyond all unreasonable, self serving doubt’, so it can never be proven. No wonder we are in a bind.

IMHO, irresponsibility, and self-interest have been confuted, and raised to the level of a principle. The pernicious notion of ‘unimpeachable senior persons’ is what gave us the cover up of clerical sex abuse, the Neary cover up, and of course, the great banking bubble cover up. What a brilliant wheeze to extend the Fitzpatrick pre-trial proceedings for years. Justice delayed is justice denied, and the real defendant in this case is our group of leading bankers and baker cronies. Whistling Dixie.

A pluralist society entails competition between different poles of power, so there will always be struggles. Schumpeter’s creative destruction has its social and political equivalents. The record shows that those persons with the most serious responsibilities have failed us the most. A minority of them have bled, and continue to bleed the state in the most brazen manner, for the benefit of themselves and their cronies. The greater proportion, of whom too many are inept, simply reap the rewards of tacit complicity. That sort of stance can merit no respect.

We have zombie government, as well as zombie banks. I agree that the process is being spin slowly out towards default, and that the fate of AIB and the Irish state are fatally intertwined. The management know it, the civil servants know it, the ECB knows it, and the unions know it, but all will sleepwalk on for want of any escape strategy. As Eureka implies, Richie and Wilbur are busily slicing and dicing assets, and checking their golden parachutes, to the sound of that old Chuck Prince refrain.

I wonder if there will be a default. It might just go on for a very long time with regular infusions of junk to keep the wolf from the door

The way the people running the show and minding their cashflows have stayed in place despite all the evidence of their ineptitude is very impressive. I suppose it’s like what happened in Egypt after Mubarak left.
Who you gonna call?

Meanwhile, the dark clouds of interest rate rises are gathering on the horizon.

Imagine what the default rate would be like if we were on 4 or 5% rates…..

Have they finally released that Anglo tape yet?

Below is the most important letter ever written to an Irish newspaper re property;

Professor Neil Crosby’s online response to this letter;

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.

And meantime, in the absence of either a flow of new construction or a flow of repossessed stock entering the market, rents are tightening in many parts of the country and there are whispers of price rises.

You’d almost think it was a concerted attempt to fix prices in a (supposed) market. De Beers, anyone?

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