Central Bank reports rise in home mortgages in trouble

The Central Bank
1

irishtimes.com/newspaper/bre … ing25.html

Some 100,700 of the country’s 770,000 residential mortgages are in arrears or have been restructured, new data from the Central Bank showed today.

Over 9 per cent of home loans had fallen behind by 90 days or more at the end of December, which accounts for 70,911 mortgages. The numbers of homes in arrears is up by almost 8,000 compared to the end of September last year.

The figures show that 74,379 residential mortgage accounts had been restructured compared to 69,735 at the end of September.

More than 36,797 householders are keeping up with the restructured arrangements, but 37,582 are experiencing some form of arrears.

Arrangements whereby at least the interest only portion of the mortgage is being met account for just over half of all restructure types.

Banks repossessed 133 properties during the quarter, 83 of which were voluntarily surrendered or abandoned. The remaining were repossessed by way of court orders.

The total number of properties taken into possession in the last quarter dropped by 18 per cent with 29 fewer properties being seized compared to the previous quarter.

During the quarter, legal proceedings taken in 95 cases comprising arrears totalling €13.9 million on loans equating to €37.8 million. Some 187 court proceedings were concluded last quarter, of which the Courts granted orders for possession or sale in 109 cases.

Some 118 properties were disposed of in the quarter, meaning the banks held 895 properties at the end of December 2011.

The Central Bank said the number of mortgages also continued to fall in the three months to the end of December with 768,917 private residential mortgages held in the State, totalling €113.5 billion. This compares with 794,609 held at the end of September 2009.

Director of consumer protection at the Central Bank Bernard Sheridan said it was important for consumers struggling with mortgage repayments to make contact with their lender as early as possible.

“It is important that borrowers cooperate fully with their lenders in order to be able to avail of the protections under the Central Bank’s revised Code of Conduct on Mortgage Arrears,” he said.

2

895 properties would dwarf the Allsop auction if they were actively trying to sell them but they won’t sell them for less than they are worth.

3

I was just thinking the same thing.

Newspaper headline anyone?

4

This is an attempt to create a slightly more complete picture from the recently published Residential Mortgage Arrears and Repossession Statistics to December 2011

centralbank.ie/press-area/pr … r2011.aspx

centralbank.ie/press-area/pr … 202011.pdf

When you fill in the blanks from the data supplied, you get the following slightly better view:

     Number Balance (000) % Loans % Balance Arrears (000% Arrears # % Arrears €  Avg Loan € Avg Arrears €20 Year € # Payments 25 Year € # Payments 30 Year € # Payments
A    768,917   113,477,283                                                           147,581                 855.91               738.82               662.70
B     17,825     3,273,772   2.32%     2.88%      89,146                   7.98%     183,662        5,001  1,065.16       4.70    919.45       5.44    824.72       6.06
C     53,086    10,667,015   6.90%     9.40%   1,027,975                  92.02%     200,938       19,364  1,165.36      16.62  1,005.94      19.25    902.30      21.46
D     70,911    13,940,787   9.22%    12.29%   1,117,121                 100.00%     196,596       15,754  1,140.17      13.82    984.20      16.01    882.80      17.85
E     74,379    13,290,957   9.67%    11.71%     316,250                  28.31%     178,692        4,252  1,036.34       4.10    894.58       4.75    802.41       5.30
F     36,797     6,100,786   4.79%     5.38%           0                   0.00%     165,796            0    961.55       0.00    830.01       0.00    744.50       0.00
G     37,582     7,190,171   4.89%     6.34%     316,250      53.00%      28.31%     191,320        8,415  1,109.58       7.58    957.79       8.79    859.11       9.79
H     33,329     6,750,616   4.33%     5.95%     800,871      47.00%      71.69%     202,545       24,029  1,174.68      20.46  1,013.99      23.70    909.52      26.42
I     24,811     4,777,289   3.23%     4.21%      97,800      34.99%       8.75%     192,547        3,942  1,116.70       3.53    963.94       4.09    864.62       4.56
J     13,222     2,247,597   1.72%     1.98%      35,785      18.65%       3.20%     169,989        2,706    985.87       2.75    851.01       3.18    763.33       3.55
K     11,097     2,323,389   1.44%     2.05%      93,208      15.65%       8.34%     209,371        8,399  1,214.27       6.92  1,048.16       8.01    940.17       8.93
L      9,178     1,001,909   1.19%     0.88%      10,372      12.94%       0.93%     109,164        1,130    633.11       1.78    546.50       2.07    490.20       2.31
M      9,014     1,687,686   1.17%     1.49%      46,923      12.71%       4.20%     187,229        5,206  1,085.86       4.79    937.31       5.55    840.74       6.19
N      3,520       647,111   0.46%     0.57%       6,927       4.96%       0.62%     183,838        1,968  1,066.19       1.85    920.34       2.14    825.52       2.38
O      3,445       590,797   0.45%     0.52%      24,739       4.86%       2.21%     171,494        7,181    994.60       7.22    858.54       8.36    770.08       9.33
P         82        13,023   0.01%     0.01%         375       0.12%       0.03%     158,817        4,573    921.08       4.97    795.08       5.75    713.16       6.41
Q         10         2,156   0.00%     0.00%         121       0.01%       0.01%     215,600       12,100  1,250.39       9.68  1,079.34      11.21    968.14      12.50

The rows contain the following:

A	Total residential mortgages
B	In arrears 91 to 180 days
C	In arrears over 180 days
D	Total in arrears
E	Total residential mortgages restructured
F	Restructured and not in arrears
G	Restructured and in arrears
H	In arrears and not restructured
I	Interest Only 
J	Reduced Payment (greater than interest only) 
K	Reduced Payment (less than interest only) 
L	Term Extension 
M	Arrears Capitalisation 
N	Payment Moratorium 
O	Hybrid 
P	Deferred Interest Scheme 
Q	Other

The columns

20 Year
25 Year
30 Year

give an estimated monthly repayment for those durations based on an interest rate of 3.5%.

The information is still limited. It does not specify the mortgage duration, the duration left and the interest rate. So the problem with sub-prime mortgages cannot be assessed. It also does not give any information on the type of property on which the mortgage is not being payed: principal residence, second property, BTL, or whether the mortgage is a top-up, etc. The arrears value does not contain a breakdown of unpaid installments and any fees/penalties added. It is also just averages over the whole population of mortgages and does not contain distribution information that would be more useful in assessing the real problem.

The balance value is the value of the outstanding mortgage including arrears, accrued interest, and any unpaid customer fees and charges. It does not specify the original mortgage amount. The column Avg Loan € then specifies the average outstanding balance.

This means the exposure of lenders if they have to repossess and sell such properties and their likely, if any, loss can be estimated.

36,797 mortgages have been restructured and not in arrears while 33,329 are in arrears and not restructured. These latter group represent 71.69% of the total arrears. Each have an average arrears of 24,029 representing close to two years of payments. Why should this group that is nit engaging with any process expect to get special treatment?

You can start to make assumptions such as those experiencing problems are more likely to be those with newer mortgages with longer to run, closer to the property purchase amount or top-up amount.

The average outstanding balances are all quite low. So the average arrears amount 196,596 is probably close to the property purchase price/original mortgage but how near cannot be quantified.

In general, it is hard to see this information representing a very serious problem.

The low level of repossessions means people do no have to crystallise their losses. The headline howling from commentators is just the usual sloppy, shallow, superficial knee-jerk reporting.

There is a spectrum of actions that can be taken, from reducing the interest rate charged by sub-prime lenders to more standard amounts to separating actual arrears from any fees and penalties added and limiting these to concerted repossession of second and subsequent properties.

These options are not been discussed.

5

I put it to you that on a micro and macro economic basis we are fucked.
In the same way that we can’t afford our national debt irrespective of how low the interest rate is these people with the jumbo mortgages in default with no income steam can’t afford to clear their mortgages regardless of how low the interest rate is.
Are you going to counter and say that like the national debt all they need to do is service the debt.
unlike a country people excluding bernanke must clear their debts within their lives.

6

The arrears v repossessions figures for Ireland are a complete scandal. I’ve been saying it for ages.

A comparison of Arrears to Repossesions in UK v Ireland as of Q4 2011 is startling.

The UK arrears rate per 100,000 mortgages is just 2,069, whereas in Ireland at the end of Q4, 2011 it was 9,222.

The UK have 353 repossessions per 100,000 mortgages. In Ireland our repossession rate is approximately 79 per 100,000 mortgages.

So we have 4.5 times the arrears but 1/5 of the repossessions!

7

I understand that there is no real point in banks repossessing homes that won’t sell for half of what they were owed at the moment, but what is the point of doing nothing? I feel sorry for people in difficulty, but why would you pay your mortgage if nothing will happen to you if you don’t?

8

I fear some people have taken this attitude.