Analysis: Repossession numbers are set to rise significantly

The latest figures from the Central Bank on how banks are meeting targets on resolving mortgage arrears show just how difficult this process will be and how repossession numbers are set to rise significantly. The government is currently working on a revised plan to deal with all this – and the figures show why. A big political issue will be the string of cases now due to come before the courts, with all the attendant publicity this will attract and the threat it will bring to the families involved.

The six banks covered by the targets – AIB, Bank of Ireland, Permanent TSB,Ulster Bank, ACC and KBC – now have to report regularly on the amount of proposed and concluded solutions with borrowers in arrears. In total almost 31,000 homeowners are threatened with losing ownership of their home, when the total of proposed and concluded solutions put forward by the banks are added together. Of this number, 17,000 are listed as concluded deals where losing ownership is seen as the solution

Some caution is needed here in interpreting what a “ solution” is. It means the banks have met their regulatory requirements in terms of making an offer to the borrower and, where possible, negotiating it. It does not mean, even in the case of a “ concluded” deal, that the homeowner has actually lost ownership via a repossession or a forced sale. However in most of these cases legal proceedings would have been issued, or are planned.

Banking sources say that a significant portion of the homeowners threatened now with repossession are ones who have not engaged in talks with the banks. The hope is that this legal action will get many of these borrowers to engage and that in many cases solutions other than repossession can be found.

Nonetheless, it is clear that unless something is done, the actual number of repossessions will rise, and rise sharply. Almost 40 per cent of the “solutions” proposed by the banks to borrowers involve the threat of losing ownership. Even if actual repossessions only happen in a minority of cases, this will put political pressure on the government , as court cases grow in number across the country and there is an inevitable rise in repossessions.

Figures to date suggest that the actual number of repossessions so far is low. Separate data to the end of last year showed that around 4,000 repossessions had taken place from homeowners, though a significant additional number would have agreed to sell their home to a third party and thus also lost ownership.

It is impossible to tell how many of the threatened repossessions or forced sales in the mortgage target figures could turn into reality and how many might be averted. But all the evidence from the number of cases heading to court and the pace at which this is being dealt with are that numbers are set to rise.

There are a few obvious things the government will do. It will try to iron out kinks in the insolvency rules, though in many cases there are not of great use to those who main debt is a mortgage. It will push the banks to offer more solutions, such as split mortgages and even mortgage to rent schemes, where ownership is lost but the family can remain renting in their home. There will be political pressure for banks to accept that such a high level of threatened repossessions is not acceptable as a solution to the problem, though the banks will counter that the non-engagement of many borrowers leaves them with little option in many cases.

Also there will remain a significant number of cases where income has fallen to such an extent that none of the solutions work and that the family cannot even afford a rent for the property they now live in. How to deal with these cases is also an issue the government is considering, along with whether anything can be done to stop a flood of cases coming before the courts.