[Article] Charity in call over debt group

Victor

http://www.irishtimes.com/newspaper/breaking/2010/0226/breaking67.html

Charity in call over debt group
ELAINE EDWARDS

A prominent housing and homeless charity has called on the Government to involve subprime lenders in a new expert group set up to help people in debt or mortgage arrears.

The Government this week announced the establishment of a group chaired by insolvency accountant Hugh Cooney of BDO Simpson Xavier to help provide solutions for those having problems paying such bills.

Focus Ireland called for “urgent action” to ensure the group includes a representative of subprime lenders, i.e. those who lend to individuals who have difficulty obtaining loans elsewhere due to their financial circumstances.

The charity said 40 per cent of repossession cases coming before the courts are taken by subprime lenders, despite the fact that these lenders account for only two per cent of the Irish mortgage market.

The expert group includes representatives from the main banks, the Financial Regulator and others with expertise on mortgages.

Focus Ireland said it had expressed ongoing concern that most of the repossessions going though the courts were linked to “a handful of subprime lenders who are already charging interest rates of over 7 per cent on their mortgages”.

Director of advocacy Mike Allen said: “These figures show that the subprime lenders are central to the issue when it comes to homes being repossessed and people running into serious mortgage difficulties.

“The Financial Regulator has said that more than one in five of the households in mortgage arrears for three months or more have a mortgage from a subprime lender.”

He said it was obvious that the subprime lenders needed to be at the table as part of the Government expert group so they could help develop “agreed actions” to protect the homeowners most at risk of repossession.”

Earlier, Minister of State Eamon Ryan rejected claims by Fine Gael that the expert group on debt would be no more than a “talking shop” and that it was a “pathetic response” to a national problem.

Mr Ryan said that, among the actions taken by the Government were mortgage tax breaks and a mortgage support scheme of about €60 million this year to help the 15,000 families in the most serious difficulty.

He said further action needed to be taken, including the implementation of some recommendations by the Law Commission in the area of debt management, so that people in difficulty with mortgages did not find themselves before the courts.

There also needed to be action in the areas of general and commercial credit to cover small traders who had put a personal guarantee on a leasing arrangement.

“We don’t want them wiped out for five to 10 years," he said. “We are not going to just wish debts away. I think it’s a matter of managing the system rather than just writing off whole swathes of some of the debts that were built up.”

Speaking on RTÉ's Morning Ireland , the Minister said that while problems in the banking sector had left a “terrible legacy”, and while “real mistakes” had been made, it was something we can “get over and get through”.

“If we’re clever in how we manage it. If we’re flexible and innovative...that’s what Government is delivering on.”

He said there was rightly anger at what had gone on in the banking system. But to let just one bank go could have brought down the whole banking system. “Yes there is a real, terrible, shameful legacy and individuals deserve to be brought to book on what happened, quickly. But if we just closed our eyes and said ‘this is terrible’ and let it come down, it would not be in the people’s interest," he said.

Focus Ireland welcomed the inclusion of the Free Legal Advice Centre (Flac) as a member of the expert group.

Flac’s senior policy adviser Paul Joyce, a barrister, has been nominated to it. Mr Joyce has worked with Flac on the reform of debt law as it affects consumers for almost a decade.

The organisation’s director general Noeline Blackwell said it was vital the group worked quickly to produce solutions. "The range of options open to people dealing with debt is far too narrow for the complexity and number of debts that people have today.”

www.focusireland.ie
www.focusireland.ie/htm/press/2007/Subprime-FINAL-Feb%2026.pdf

www.flac.ie

shoegirl

Why not use MABs?

Its a really good service but at the moment decisions and advice are not binding on the lender or borrower. If MABs artiration could be forced upon both, then it would be easier to keep cases out of court. For example, if a recommendation is made by MABs that is agreeable to 75% of the lenders, it should be binding on the 25% that don't agree. In that way, lenders have a better chance to recover and borrowers get a fairer deal.

Plus we can use existing experience and expertise without trying to pull in some new agency, and especially not from the Poverty lobby whom I often find tend to experience the side of poverty that people want them to see rather than the whole picture.

Victor

One thing is that MABs is grossly overworked at the moment.

shoegirl

They are, but they have got the experience and putting them on a more solid foot would justify additional spending on staff.

Its crazy at the moment that MABs can spend lots of time working with a client and make recommendations that the lenders can just dismiss at a whim. If they were forced to confer with MABs and lenders in any case it would reduce MABs workload as I am sure the refusal of many lenders to negotiate adds to their workload.

ntlbell

shoegirl wrote: »

They are, but they have got the experience and putting them on a more solid foot would justify additional spending on staff.

Its crazy at the moment that MABs can spend lots of time working with a client and make recommendations that the lenders can just dismiss at a whim. If they were forced to confer with MABs and lenders in any case it would reduce MABs workload as I am sure the refusal of many lenders to negotiate adds to their workload.

Why should the lender be forced to listen to or take recommendations from MABS?

MABS gives out great advice, but I don't believe lenders should be forced into it.

shoegirl

Why should lenders be bound? Because most people don't have just 1 or 2 lenders - they may well have 4 or 5. This can mean that just one lender objecting to an arrangement can leave the other lenders stymied which means that MABs have to start all over again. I've seen this with somebody I know who previously spent a lot of time with MABs and all their lenders were happy except one which meant that nobody got anything and the problem borrower was left in a position where one lender was demanding a huge arrears that would have left everybody else with nothing.

What would have happened had something fortiuituous not occured was that lender would have ended up taking the borrower to court, and everybody - including themselves would have ended up losing out.
(The guy had a heart attack the following week. He lived and it transpired his small but important life insurance was still valid. He was able to clear off all he owed and get on with his life).

This meant that the arrangement wasn't going to "work" as MABs basically divvy up what you can afford to pay amongst the various lenders.

ntlbell

shoegirl wrote: »

Why should lenders be bound? Because most people don't have just 1 or 2 lenders - they may well have 4 or 5. This can mean that just one lender objecting to an arrangement can leave the other lenders stymied which means that MABs have to start all over again. I've seen this with somebody I know who previously spent a lot of time with MABs and all their lenders were happy except one which meant that nobody got anything and the problem borrower was left in a position where one lender was demanding a huge arrears that would have left everybody else with nothing.

What would have happened had something fortiuituous not occured was that lender would have ended up taking the borrower to court, and everybody - including themselves would have ended up losing out.
(The guy had a heart attack the following week. He lived and it transpired his small but important life insurance was still valid. He was able to clear off all he owed and get on with his life).

This meant that the arrangement wasn't going to "work" as MABs basically divvy up what you can afford to pay amongst the various lenders.

That doesn't really answer the question.

if 4 or 5 lenders say yes, you deal with those lenders, you bring the MABS purposal to court and let the judge decide on the lender who won't play ball.

A loan was taken out with the borrower, they signed the contract.

It seems absolute bizarre to me that then people moan that the lender won't deal with this other 3rd party.