There’s an interesting and even useful piece by senior policy analyst Paul Joyce of the Free Legal Advice Centres on the current state of mortgage default. As he notes the report by the Expert Group on Repossesions was released quietly this month by the Department of Justice. And it brief was to assess the appropriateness or otherwise of statutory repossession processes in the Irish courts.
He relates how:
… [this was in the context of] the troika’s concern with what it saw as abnormally low rate of repossessions in Ireland and the lengthy complicated and expensive repossessions system.
As he also notes, unsurprisingly while the report has a certain rhetorical sympathy for borrowers its findings are essentially behind lenders in large part in order that ‘funding be made available for the purchase of residential and other property’. As Joyce asks, how can a new boom to bust be avoided in such a context?
His thoughts on arrears figures is that they ‘may have stabilised’ with overall arrears figures at 24% [this is on principle dwelling houses], a figure that would have seemed enormous even a short enough while back… and even still. These are declining somewhat and slightly, and there’s been a ‘marginal’ decrease in those in arrears for more than one but less than two years. But he also points to the fact that:
…critically, those in the long-term over two years arrears category increased by almost 3,000 to almost 32,000 accounts, with an average arrears amount of more than €40,000.
And also that ‘more than 80,000 accounts were in arrears for more than 90 days… and [of those] more than 60,000 remain to be restructured.’
His conclusion is that:
…the evidence indicates that we still have a very deep arrears problem that is being resolved far too slowly at a time when the gates have opened to potential repossession.
And he argues that write-downs are ‘sporadic and confidential’ while ‘it is open to question how sustainable a number of restructured mortgages will be over time’.
I’ve noted previously that one major problem is what happens when interest rates go up – and the question arose as to why they would. There appears to be a general consensus amongst those that are observers in the area that they inevitably will over the next number of years if only because they are at historically low levels. Obviously for those already in trouble this is bad news further exacerbating their woes, but for an halo of others who are just about getting by now this is deeply problematic as they see their mortgages slip into arrears.
Finally, Joyce makes a counter-argument to those who argue that many of these problems were self-induced.
With 90,000 plus households awaiting social housing and mortgage-rent schemes that have only delivered a small number of results of of a far larger number of applications, a spate of repossessions would neither be advisable nor fair to the many who borrowed to buy family homes, as they were encouraged to by both lenders and government.
That last is central. I was a bystander to all these processes in the 2000s, watching almost unbelieving as the market heat intensified, advertising to prospective borrowers became ever more extravagant and baroque (remember the adverts directed at those who had their own houses so that they could ‘unlock’ the value in order to assist their offspring to purchase houses?) and as government wasn’t so much asleep at the wheel but was collusive in a process that seemed uniquely designed to prise away as much money [mostly] from those with less than was necessary to sink present and future capital into property, and all this whipped along by an equally collusive media for whom the good times could never end, for whom every scrap of a house on a stamp sized portion of land was a ‘great investment’. There’s been so much written about this, but I can think only of how in Raheny and Kilbarrack strangely shaped houses would spring up on any spare piece of land, the corners of new houses tapering away in improbably acute angles.
Personal greed on the part of purchasers? Of course, it was a market. But a massive lack of information as to potential consequences and therefore insufficient data for most to make clear-headed assessments. I’ve mentioned before how later on – after all the crisis had broken – I had to borrow some money for work on the house I live in and during the stress testing was told quite frankly by the people loaning it that even though on paper all looked grand, it wasn’t a large sum, even still there was a risk, that there was always a risk. There’s a lesson in that, but what is the lesson and what is the chances that it will be heard in a society where the media and political and economic circles argue so trenchantly that house-owning is some combination of virtue and necessity. Look back at Joyce’s point about the paucity of mortgage-rent schemes and the insufficiency of social housing programmes.
Joyce covers much of the ground I’ve just outlined:
The expert group seems to envisage resurgence in the mortgage market thought it is arguably cash buyers and investors who are driving demand.
That last is well worth considering in itself, but he continues:
Curiously, there is nothing in its report on some of the causes of the crisis in the first place – the privatisation of the housing market, government over-reliance on stamp-duty revenues, regulatory inaction and lender greed resulting in reckless credit provision.
A proper state social housing policy, ethical and affordable lending (and borrowing) standards an deregulation with teeth will all be required. Sometimes it seems, though that the institutions in control when the mess was created are the ones exclusively charged with plotting a way out.
Strange that.
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