Snippets of the Keane Report on Mortgage Debt: More Questions than Answers

Morgan Kelly’s comments (and research paper) last month on mortgage debt restructuring forced the government to come up with an expert group to recommend solutions to the problem of highly indebted households. The expert group’s report will be presented to Cabinet this week and has helpfully been leaked before that. Today’s Sindo carries a small piece by John Drennan on the content of the ‘Keane’ report that raises more questions than it answers.

In addition to really, seriously, and, like, really, advising people who can do so to pay off their mortgages, the report contains some specific recommendations. From the piece, then:

“Homeowners who can no longer pay the mortgage could negotiate with their lenders to hand back the property but remain on as tenants.

Banks who repossess homes will then lease them to local authorities to deal with housing shortages.

The timeframe to get discharged from bankruptcy to be cut from up to 20 years to just three years.

People facing bankruptcy will be offered a “non-judicial” route — meaning they won’t have to go through the courts in all cases.

The Money Advice and Budgeting Service will be beefed up with hundreds of “front-line” financial advisers who will deal exclusively with distressed mortgage holders.”

The most important part of the report is contained in a rather throwaway sentence–that banks “should engage in debt settlement“. The mechanics of this process (or processes) of debt settlement are very important and should be discussed on this blog and others when the full report is eventually published.

It looks like the group is taking a multi-pronged approach to the problem, which is welcome. It also looks like there is some attempt to deal with the issue of those who will never pay their mortgages via movements to local authority lists. That is not a simple process either, as NamaWineLake has recently shown.

It is important to note the timescales here. Right now, according to the government’s legislative programme, any bill to reform our bankruptcy laws is not even a twinkle in Minister Shatter’s eye, despite his assurances that the personal insolvency legislation would be substantially complete by Christmas or early 2012. That means the lynchpin of the strategy–that people can fail, and fail relatively cheaply through expedited personal insolvency proceedings–will likely not be in place before the summer.

Other questions present themselves, such as: when ‘negotiating’ with a bank on whether to hand the house back and/or rent it back again, will there be a code of conduct for these negotiations? Who will decide?

Third, the super-MABS body may only have an advisory role, rather than an adjudicatory role in the debt resolution process, meaning that the banks retain most of the power in the debt resolution process. Or not. We just don’t know.

The sooner this potentially very important report gets 100% leaked after Cabinet approval, the better.

Austerity and social unrest since World War I

Jacopo Ponticelli and Hans-Joachim Voth have just published a CEPR Discussion Paper looking at the relationship between austerity and social unrest in Europe between 1919 and 2009.

Real conservatives have always worried about social cohesion..

..which is why it makes sense that this article should have appeared in the Telegraph rather than the Guardian (HT FT Alphaville).

Some Cheerful Demographic Statistics

To take our minds off the heavier economic / financial topics for a while I thought I would share some thoughts provoked by the Annual Summary of Vital Statistics for 2010 published at the end of June. Taken in conjunction with the preliminary results of the 2011 Census, it reveals some surprisingly positive trends for a country in the throes of a very deep recession.

Our birth rate is holding up despite the surge in unemployment and the resumption of net emigration (even if at a more modest rate than previously feared).

Over 75,000 births were registered in 2008 – almost 60% more than in 1994 and the highest number recorded in modern times. However, this was probably the peak, as the annual total for 2010 was 2% lower than that for 2008, while the 2010Q4 figure was 4% lower than the corresponding figure for 2008.

The surge in births will have far-reaching implications for the economy’s medium-term prospects.  Most immediately it is placing pressure on the educational system, but over the longer run it could be argued that our relatively youthful population will bestow a competitve advantage relative to the rest of Europe, where the ageing of populations is becoming an acute problem.

Census 2011 – Preliminary Results

The preliminary results of last April’s Population Census are available here.

They show continued strong population growth, averaging 1.6% a year over the last five years.

The CSO is to be complimented on the timely production of this very informative release.