herald

Tuesday 21 November 2017

We need a NAMA for the little people

Mortgage arrears and home repossessions rose again in the first three months of this year.

This was despite the Financial Regulator forcing the banks to agree to a 12-month moratorium in seeking repossessions.

According to the latest figures, which were published today, 32,000 homeowners have not paid their mortgage for at least three months.

However, this figure does not include the many thousands more who have negotiated either payment holidays or interest-only deals with their banks.

Since last year the banks have agreed to hold off on seeking repossession orders on borrowers in arrears for 12 months, provided they make at least some effort to address their problems.

In other words, the current crop of repossessions is confined virtually exclusively to borrowers who have made absolutely no attempt to address their financial problems.



grace

However, as the repossessions moratorium was first introduced in February 2009, many homeowners in mortgage arrears have now either reached the end of their 12-month period of grace or are rapidly approaching it.

This means that, unless the moratorium is extended once again -- it has already been extended once from six to 12 months -- the number of repossessions is set to soar later this year.

This translates into utter disaster for a large and growing proportion of homeowners.

While the 32,000 homeowners officially in arrears works out at just over 4pc of all mortgages, add those who have come to some sort of temporary arrangement with their lender and the proportion of those who have fallen behind on their mortgage repayments is much higher, probably up to one in 10 of all homeowners with a mortgage.

And it's going to get even worse.

What we are seeing at the moment is just the tip of the iceberg. Since peaking in February 2007, average house prices have fallen by more than a third, according to figures compiled by mortgage bank Permanent TSB.



fall

In fact, the real fall in house prices has almost certainly been greater with most analysts now putting the extent of the fall at 50pc.

The ESRI estimates that up to 350,000 homeowners, about 45pc of all those with mortgages, will be in negative equity, where the amount they owe on "their" homes is greater than the value of those homes, by the end of this year.

This means that, even if they can meet their monthly repayments, they will be trapped, unable to sell if they need to move to accommodate a larger family or take up a new job.

Throw in the fact that more than 250,000 people have lost their jobs since the economic downturn began two years ago, and most of those still in work have seen their net incomes slashed by wage cuts and tax increases, and the scene is set for a huge increase in the number of homeowners falling behind on their mortgage repayments.

Something has got to be done to help the tens, possibly hundreds, of thousands of homeowners who are now staring disaster in the face.

If the Government can spend up to €80bn of our money bailing out the banks for their bad lending to builders and property developers, then it is inconceivable that thousands of homeowners will be put out onto the street.

NAMA is paying an average of less than 60 cent in the euro for the banks' bad loans to builders and property developers.

A write down of a similar magnitude on residential mortgages would knock approximately €120,000 off a €300,000 home loan.

For many homeowners that could be the difference between keeping and losing their homes.

The Government must act and act now before it is too late.

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