Tuesday 21 November 2017

Dan White: Low repossession levels simply make homelessness worse

According to Fianna Fail, there is a "tsunami" of home repossessions "sweeping the country".

Even allowing for the fact that we are in the middle of the so-called "silly season", this still smacks of gross exaggeration.

According to the latest Central Bank statistics, 351 owner-occupied properties and a further 206 buy-to-let properties were taken into possession by banks in the first three months of 2015.

Over half of the owner-occupied properties, 195, taken into possession in the first quarter were surrendered voluntarily while 83 of the buy-to-lets taken into possession by lenders were surrendered voluntarily.

While each one of these cases represented a personal tragedy for the property owner concerned, it hardly justifies Fianna Fail's description of it as a "tsunami".

Indeed, one of the most remarkable things about the housing market since the bubble burst in 2007 is how few properties have been repossessed.

Compare the relative handful of repossessions in this country to the 5.5m repossessions in the United States between 2008 and 2014.

Now that's a tsunami.

Rather than base its assertions on actual repossessions, Fianna Fail has chosen to concentrate on repossession orders issued by the courts and on new cases initiated by the banks instead.

As anyone who knows anything about the housing market will testify, there is an enormous difference between a bank beginning legal action against a mortgage borrower in arrears, or even securing a repossession order, and actual repossession.

In practice the courts will bend over backwards to prevent a repossession if the borrower makes even a half-hearted effort to meet the terms of his or her mortgage.


Legal proceedings very often form part of the negotiating process between bank and borrower.

The reality is that, even where the banks take legal action against mortgage borrowers in arrears, the final outcome in the vast majority of cases is a compromise that doesn't involve repossession.

If that wasn't the case then tens of thousands of the 240,000 mortgages that have been in arrears at some point since 2008 would have led to repossessions. That hasn't happened.

And that is mainly a very good thing. However, as I have repeatedly argued in this paper, there is a world of a difference between a struggling borrower who pays most of his or her mortgage most months and someone who hasn't paid a cent for a year or more.

At the end of March mortgages on over 55,500 owner-occupied properties and over 21,500 buy-to-lets were at least 12 months in arrears.

It's difficult not to suspect that many, perhaps most, of these 77,000 mortgages in long-term arrears are hopeless cases.

This may seem like a harsh assessment but it's hard to see how most of these loans can ever be put on a sound footing. However, the refusal of the banks to write off any shortfall on the mortgage when a repossessed property is sold means that most of these property owners will seek to hang on to the bitter end.

If they quit the property voluntarily then they give up any leverage in their negotiations with the banks. This is patently absurd. It would be far better if Fianna Fail and the other political parties began to question why the banks are so reluctant to write off outstanding mortgage debt when a property is sold.

Ironically, this reluctance to write off outstanding mortgage debt and pursue repossessions is almost certainly a contributor to the homeless crisis, as it prevents houses and apartments that would otherwise be sold from coming onto the market.

With an election eight months away at most, Fianna Fail seems to be rapidly reverting to type and becoming all things to all men.

Rather than ask some of the hard questions, even if that would upset some group of potential voters, it seems determined to avoid causing any possible offence.

By doing so, far from helping either group, it is doing a disservice to both the homeless and those in long-term mortgage arrears.

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