Revised Repossession Law May Help Curb Irish Bank Arrears

khards

http://www.reuters.com/article/2013/06/13/fitch-revised-repossession-law-may-help-idUSFit66069920130613

Revised Repossession Law May Help Curb Irish Bank Arrears

June 13 (Fitch) Ireland's proposed revised repossession law could help bank arrears to level off in 2014 by returning to the banks their recovery powers to resolve some long-term mortgage arrears, Fitch Ratings says. However, it may take some time before repossession numbers pick up. We expect repossessions to rise - from a very low 0.3% of arrears in 2012, according to the IMF - when the draft Land and Conveyancing Law Reform Bill 2013 is passed into legislation. Repairing the gap in the law should raise customer engagement and help normalise the recovery process for banks. The draft bill, together with central bank-imposed targets to reduce arrears through providing sustainable solutions, could help the banks to bring the high level of mortgage arrears under control. But the rate of foreclosure may be slow at first, as the proposed law will not apply retrospectively - and lenders will need to start legal proceedings again. It should take some time to clear the backlog of previously adjourned cases, and this may raise the costs involved. The speed at which repossessions may rise will be influenced by the way in which customer behaviour changes following a credible threat of repossession, and the extent that customers seek a personal insolvency arrangement (PIA). The new bill proposes to give the court power to adjourn a repossession case for two months initially, so that a borrower can make a proposal for a debt arrangement under the personal insolvency framework that became operational in Q2. We do not expect a wide-scale take-up of such arrangements for delinquent borrowers, since a bank can vote against a PIA proposal that it believes is an inappropriate solution. However, the provision for borrowers to seek a PIA could add to the length of time before repossessions rise, even though the draft bill would remove the block for certain foreclosures. The proposed legislative change will help reduce the foreclosure period for loans originated prior to 1 December 2009. But if the time taken to complete repossessions is to shorten by a meaningful extent, then additional measures to enhance the efficiency of the process would also be needed. Asset quality could receive some immediate benefit when the revised law is in place, as there could be fewer customers that had been previously unwilling to pay following rumours of potential debt forgiveness. The authorities have made it clear that large-scale debt relief will not be forthcoming, and the new bill supports this stance. The proposed legislation is designed to address deficiencies in the Land and Conveyancing Reform Act 2009, which repealed certain sections of the previous legislation, specifically in relation to repossession rights. The Dunne judgement in 2011 ruled that lenders could only repossess homes where mortgage borrowers had defaulted if they demanded full repayment before 1 December 2009. This prevented banks from foreclosing many mortgages in long-term arrears. The new bill has passed through the committee stage in the lower house of the Irish parliament, and is scheduled to come into operation in Q313.

So it looks like those repos. will be coming on to the market for September and the end of year buying season.
Should be a few bargains around to be had, most likely better stock than has been coming to market recently as the people who want to hang on without paying are most likely to be in great locations and houses.

Would you volunteer to give up a nice house that you were not paying for?

lOWCOUNTRY

khards wrote: »

http://www.reuters.com/article/2013/06/13/fitch-revised-repossession-law-may-help-idUSFit66069920130613

Revised Repossession Law May Help Curb Irish Bank Arrears



So it looks like those repos. will be coming on to the market for September and the end of year buying season.

Which September? Even if the banks get out of the traps straight away, there will be a two month adjournment initially then further adjournments and finally a stay on the order for possession for six months. It will be late next year before any repos started now will come on the market.
The banks had alternative means of enforcing their security but didn't avail of them before now. They have used the legal problem as an excuse. They simply don't want to have lots of repos. Their priority is to repair their balance sheets, not evict people and crash the market.
.

khards

lOWCOUNTRY wrote: »

Which September? Even if the banks get out of the traps straight away, there will be a two month adjournment initially then further adjournments and finally a stay on the order for possession for six months. It will be late next year before any repos started now will come on the market.
The banks had alternative means of enforcing their security but didn't avail of them before now. They have used the legal problem as an excuse. They simply don't want to have lots of repos. Their priority is to repair their balance sheets, not evict people and crash the market.
.

So if I hear you correctly the banks are not going to chase the 20,000 who are 3 years+ worth of payments behind on their mortgages?
They are not going to persue buy to let landlords pocketing the rent and not paying back the mortgages?

There is a massive backlog of repossessions that should have happend during 2011, 2012 and 2013 just waiting to come through the system whether the banks like it or not.

In many cases it will free the lives of people who would forever be debt slaves as property prices will not return to their highs during a lifetime.

hfallada

khards wrote: »

So if I hear you correctly the banks are not going to chase the 20,000 who are 3 years+ worth of payments behind on their mortgages?
They are not going to persue buy to let landlords pocketing the rent and not paying back the mortgages?

There is a massive backlog of repossessions that should have happend during 2011, 2012 and 2013 just waiting to come through the system whether the banks like it or not.

In many cases it will free the lives of people who would forever be debt slaves as property prices will not return to their highs during a lifetime.

No. The bank makes you pay the difference between what they sell it for and the loan that was outstanding.

lOWCOUNTRY

khards wrote: »

So if I hear you correctly the banks are not going to chase the 20,000 who are 3 years+ worth of payments behind on their mortgages?
They are not going to persue buy to let landlords pocketing the rent and not paying back the mortgages?

There is a massive backlog of repossessions that should have happend during 2011, 2012 and 2013 just waiting to come through the system whether the banks like it or not.

In many cases it will free the lives of people who would forever be debt slaves as property prices will not return to their highs during a lifetime.

Why haven't the banks done it up to now? The legal problem is just an excuse.It is up to the banks to initiate repos. They will continue to do what suits them. They have defied the government all along and will continue to do so.

khards

Why haven't the banks done it up to now? The legal problem is just an excuse.

Sorry, that is a fallacy. If that was true then why ammend a law that does not need to be amended.

For your entertainment, banks work in the following manner:

1, Ramp up an assets prices (housing stock etc.) with excessive lending.
2, Halt the lending, causing prices to fall.
4, Use arms length instruments to buy up the cheap assets.
5, Ramp up lending, causing another asset boom, whilst selling the assets back to the market at a profit.

Rinse and repeat, would it be any different this time. Ireland is no different!

The banks do not care about the people living in what is essentially the banks property. The only thing banks (and politicians) care about is profit and growth.

stevedublin

khards wrote: »

5, Ramp up lending, causing another asset boom, whilst selling the assets back to the market at a profit.

This did not happen in other countries (I'm thinking of the US in 2008/2009) where banks immediately sold foreclosed properties at an enormous loss to themselves (the owners who lost their houses walked away debt free, but probably got a bad credit rating for a few years).

lOWCOUNTRY

khards wrote: »

Sorry, that is a fallacy. If that was true then why ammend a law that does not need to be amended.

.

I don't know why you are sorry. The law that caused the problem was a quick summary procedure. There were, and are, alternative procedures available by way of well charging orders. The banks just don't use them very often. They could have been seeking well charging orders for years.

khards

stevedublin wrote: »

This did not happen in other countries (I'm thinking of the US in 2008/2009) where banks immediately sold foreclosed properties at an enormous loss to themselves (the owners who lost their houses walked away debt free, but probably got a bad credit rating for a few years).

Of course, you are correct as this has not happened yet as the banks are holding many of the repos in their shadow inventory.

http://www.investopedia.com/terms/s/shadow-inventory.asp

In the case of Ireland the banks have not been repossessing (because they could not) and have been using the underwater mortgage holders as tenants.
They will kick-out the non-paying tenants so they they can make a profit.

khards

lOWCOUNTRY wrote: »

I don't know why you are sorry. The law that caused the problem was a quick summary procedure. There were, and are, alternative procedures available by way of well charging orders. The banks just don't use them very often. They could have been seeking well charging orders for years.

'Sorry' to point out what seems obvious as I did not want to embarrass you.

Proceedings commenced after the 1st December 2009;

1. Proceedings can be instituted prior to that date provided that the lender had acquired the right to apply for an order pursuant to s62(7) by the 1st December, 2009;
2. A lender has not acquired the right to apply for an order pursuant to s62(7) if the principal monies secured by the mortgage have not become due.
3. The principal monies do not become due until default or certain other events have occurred and demand for repayment of the principal monies has been made.
4. In any case in which demand is made for repayment of the principal sums due after the 1st December, 2009, the lender has neither an acquired or accrued right to apply for an order pursuant to s. 62(7) and consequently the provisions of s.27 of the 2005 Act will not avail such a lender.

Which means that mortgages registered before 1st December 2009? where
proceedings issued after the 1st December 2009 cannot be repossessed in an economical way.


Why spend more money than you have to perusing these debtors when you know that the law will be fixed?

Waiting for enactment of the new law will maximize profits by minimising the legal costs and time taken with each case.

stevedublin

hfallada wrote: »

No. The bank makes you pay the difference between what they sell it for and the loan that was outstanding.

From insolvencybillireland.ie

Do I eventually have to pay my debts in full?
Debt Settlement Arrangement: No
Personal Insolvency Arrangement No
Bankruptcy No
Debt Management Yes

gaius c

hfallada wrote: »

No. The bank makes you pay the difference between what they sell it for and the loan that was outstanding.

Not necessarily. If you go through the insolvency process and your income is below the guideline amount required for "living expenses", then the bank have to sing for the difference.
As it should be for people who are genuinely insolvent.

The people who have larger incomes and cannot pay their debts will probably have to work out how to make their living standard match the relatively generous spending guidelines as their income above the guidelines will almost certainly be used to pay some of their debts until they emerge debt free.

lOWCOUNTRY

khards wrote: »

'Sorry' to point out what seems obvious as I did not want to embarrass you.



Which means that mortgages registered before 1st December 2009? where
proceedings issued after the 1st December 2009 cannot be repossessed in an economical way.


Why spend more money than you have to perusing these debtors when you know that the law will be fixed?

Waiting for enactment of the new law will maximize profits by minimising the legal costs and time taken with each case.

If the banks wanted to repossess they could have. They decided not to. Saving legal costs did not come into it. They are losing money by allowing mortgage holders to remain in default. A rational response would be to use well charging orders and get possession. They didn't do it because of the damage to their balance sheets. It makes no sense to say that they have been waiting all this time to pounce now that it is slightly easier and cheaper to repossess, having foregone the income they could have derived from the sale of those properties iover the past three years.

stevedublin

khards wrote: »

Of course, you are correct as this has not happened yet as the banks are holding many of the repos in their shadow inventory.

http://www.investopedia.com/terms/s/shadow-inventory.asp

So banks in the US did not sell most of the homes that they repo-ed in their bust?

gaius c

lOWCOUNTRY wrote: »

Which September? Even if the banks get out of the traps straight away, there will be a two month adjournment initially then further adjournments and finally a stay on the order for possession for six months. It will be late next year before any repos started now will come on the market.
The banks had alternative means of enforcing their security but didn't avail of them before now. They have used the legal problem as an excuse. They simply don't want to have lots of repos. Their priority is to repair their balance sheets, not evict people and crash the market.
.

I actually kind of agree with you in that the banks are using the legal situation as an excuse. They know the building is falling down around them but think hiding under their desk will make the problem go away.

Where your post is wrong is re reparing their balance sheets. Their balance sheets are actually getting worse as more and more people go into arrears because there appear to be no consequences to not keeping up your mortgage payments.

The Irish government might not force them to act but the Troika will.

khards

lOWCOUNTRY wrote: »

If the banks wanted to repossess they could have. They decided not to. Saving legal costs did not come into it. They are losing money by allowing mortgage holders to remain in default. A rational response would be to use well charging orders and get possession. They didn't do it because of the damage to their balance sheets. It makes no sense to say that they have been waiting all this time to pounce now that it is slightly easier and cheaper to repossess, having foregone the income they could have derived from the sale of those properties iover the past three years.

It is difficult to understand the rationale behind this as they are getting no income from the people occupying the property and not paying the mortgage.

If the property is sold, then not only do you make profit by issuing new mortgages, but you also free up money from a non performing asset that is otherwise making no money. Banks are a business and not a charity!

Banks letting people live in their assets for free because they don't want to upset the look of their balance sheet is a fallacy and wishful thinking usually peddled by those deep in debt.

Banks were repossessing property prior to 2011 and will continue repossessing them once the bill has been passed.

lOWCOUNTRY

khards wrote: »

Banks letting people live in their assets for free because they don't want to upset the look of their balance sheet is a fallacy and wishful thinking usually peddled by those deep in debt.

.

That is what has been going on. If the banks repossess property and dump it on the market prices fall. This means that the banks security on its remaining properties is weaker. More account holders are in negative equity. This has to be reported because the bank is now financially less stable. The banks could have been seeking repossessions all along. They chose not to do so. They used the legal case as an excuse. The Central bank wants repossessions but the banks don't. the banks will drag their feet.
Thinking that they won't is just wishful thinking by people hoping to buy a cheap house.

khards

lOWCOUNTRY wrote: »

That is what has been going on. If the banks repossess property and dump it on the market prices fall.

They will not fall if they lend people money to buy those houses that they are 'dumping on the market'

lOWCOUNTRY wrote: »

This means that the banks security on its remaining properties is weaker.

Thus not true.

lOWCOUNTRY wrote: »

Thinking that they won't is just wishful thinking by people hoping to buy a cheap house.

Repossessions will benefit the wider economy as banks make money issuing performing mortgage and closing down the non performing ones, bankers get commission on the new lending, solicitors get new instruction work, auctioneers make money as they work on a percentage.

The banks are going to be stress tested early next year, the reason for the delay is so that they can remove as many non-performing assets from their books as possible.
Mortgage approvals are up, but draw downs are currently down meaning that there is a supply of people out there ready and waiting to buy these non-performing assets from the banks.

It is now widely reported that this amendment will be enacted before the end of July, so we will see the effects when thousands of properties come flooding to the market along with these pre-approved buyers.

gaius c

Can't continue indefinitely LOW.
If they don't do something to staunch the flow, more will stop paying their mortgage.

lOWCOUNTRY

gaius c wrote: »

Can't continue indefinitely LOW.
If they don't do something to staunch the flow, more will stop paying their mortgage.

If they crash the market thus putting more people in negative equity, more will stop paying their mortgage.

The banks haven't wanted to crash the market up to now and still don't want to. The Central Bank is having to push them every inch of the way.
Even if this legislative amendment goes through in July it will be months before the first cases see the inside of a courthouse and longer again before the sheriff arrives to toss the occupiers out on the road.

gaius c

lOWCOUNTRY wrote: »

If they crash the market thus putting more people in negative equity, more will stop paying their mortgage.

The banks haven't wanted to crash the market up to now and still don't want to. The Central Bank is having to push them every inch of the way.
Even if this legislative amendment goes through in July it will be months before the first cases see the inside of a courthouse and longer again before the sheriff arrives to toss the occupiers out on the road.

The negative equity fallacy.
Being in negative equity doesn't stop you paying your mortgage.

If folk see that strategic default means losing the property and being pursued for the balance then it will reduce the amount of strategic default going on and leave us with the problem of people who genuinely cannot pay their mortgage.

Galego

Irish banks will only be desperately interested in repossessing assets the day they seriously need cash in their balance sheet. This is the main different between Spanish and Irish banks. Spanish banks were insolvent and had serious liquidity issues so they went on to re-possess at a rate of 600 houses per day till the Supreme Court stopped them. In the other hand, Irish banks were capitalised by tax payers and cash was injected in them. This cash was meant to be put back in the economy (lending, etc) but they chose not to take that route and instead kept it in the balance sheet to improve liquidity ratios.

It is not an easy situation for banks or Government. At this point I think that is clear that neither of them are interested in massive repossessions and these will be controlled carefully. I first see them going after those assets with equity yet in them. Decent houses in decent areas will be their top targets. These could be re-possessed and sell/let for a decent price for banks.

Fourhead

khards wrote: »

They will not fall if they lend people money to buy those houses that they are 'dumping on the market'

Isn't lending money to buy houses what has caused the problem in the first place?

stevedublin

Fourhead wrote: »

Isn't lending money to buy houses what has caused the problem in the first place?

No, it was excessive lending.

gaius c

Completing its tenth review of Ireland’s bailout programme, which also saw it release the final €950m of its loans, the IMF said there needed to be resolution on the 25% of loans that are currently non-performing.

The 90-day delinquency trend reached a new peak, rising to 18.1 per cent from 17.3 per cent over the same period while the percentage of loans in the 360-day plus category, which is used as a proxy for defaults, rose to 9.4 per cent from 8.5 per cent.

Of course it will keep rising as some people struggle to make repayments and others see no consequences whatsoever for opting out.

Galego

gaius c wrote: »

Completing its tenth review of Ireland’s bailout programme, which also saw it release the final €950m of its loans, the IMF said there needed to be resolution on the 25% of loans that are currently non-performing.

The 90-day delinquency trend reached a new peak, rising to 18.1 per cent from 17.3 per cent over the same period while the percentage of loans in the 360-day plus category, which is used as a proxy for defaults, rose to 9.4 per cent from 8.5 per cent.

Of course it will keep rising as some people struggle to make repayments and others see no consequences whatsoever for opting out.

And banks respond with more "kicking the can down the road" strategies.

IBRC will not charge interest on portion of split mortgages
http://www.rte.ie/news/business/2013/0618/457335-ibrc-split-mortgage-interest/

mitosis

stevedublin wrote: »

No, it was excessive lending.

Or, excessive borrowing.......

khards

Galego wrote: »

IBRC will not charge interest on portion of split mortgages
http://www.rte.ie/news/business/2013/0618/457335-ibrc-split-mortgage-interest/

People must be 4uck1ng idiors to take out a split mortgage! What happens is that you end up paying off the first mortgage and then at the end of it you still have a huge mortgage.

You are essentially paying a mortgage on a house that you will never own outright. I think the only explanation for it is that the speculators who borrowed to much in the first place believe that property prices will rise back to near where they were.

They are wrong - that once in a generation credit boom will not happen again during our lifetimes.

Galego

khards wrote: »

People must be 4uck1ng idiors to take out a split mortgage!

I see it the way around. They get to live in a property for less than what they would pay if they had to rent it. They'll be "4uck1ng idiors" to say no to this!