What repossessions data tells us about how banks operate?

Debate has taken place about the figures surrounding repossessions as discussion over the topic has grown over the last few days.

So what do we know? The bottom line is that , up to the end of last year, close to 4,000 houses had been repossessed, though only about a quarter of these were the result of banks enforcing court actions.

Data is published by the Court Service on court actions relating to repossessions and by the Central Bank, in its role as regulator of the banking sector.

Both point to a big rise in court action by banks in the last year and a half.

As the Irish Times reported on Monday, at the start of the year there were more than 7,000 civil bills issued by banks for repossession.

These court actions are at different stages.

Some will reach a deal before the court hearing. In other cases, even after a repossession order is granted, it does not always mean that it is acted upon by the bank immediately, or in some cases at all.

But the rise in court actions means more repossessions are on the way.

It is also important to realise that, whatever happens in court, there is a higher number of so-called voluntary surrenders of houses by borrowers to banks.

So let’s dive into the data.

We will concentrate on what are officially called “private dwelling houses”, in other words owner occupiers, as opposed to buy-to-let investors.

UCC economist Seamus Coffey keeps a total in his blog from Central Bank figures from the third quarter of 2009 to the third quarter of last year.

Updating this for figures just published, shows that just over 1,100 homes have been repossessed over the period by the banks from owner occupiers as a result of enforcing court orders.

This figure seems low in the context of the rise in court actions and the scale of the problem. There are two qualifiers. The first is that, as the rate of court actions only started to climb in mid 2013, a lot are still in the works.

Coffey calculates that just under half of all actions result in a repossession order being granted.

Also it appears that some have been concluded and an order granted, but that the bank has not moved to actually repossess.

In total, just under 2,800 repossession orders were granted between mid-2009 and the third quarter of last year.

We can reasonably expect the court-forced repossession total to rise rapidly as cases come to a conclusion and the banks act. Critics of the banks say they have been holding off taking repossession actions and enforcing them as prices have risen.

The banks themselves say that court action is the only way to get some borrowers to engage in meaningful negotiations and that orders are not necessarily enforced.

The figures in the months ahead will tell a lot.

The actual number of houses repossessed is a lot higher than the 1,100, because a lot of people have surrendered their property without a court order being granted - so called “voluntary surrenders.”

The figures show over 2,750 of these since mid-2009. Adding these to the court enforced total gets us close to 4,000 in terms of owner occupier repossessions which had taken place by the end of last year.

There is no data, as far as I know, for another category, which might be termed “forced sales”, where the borrower agrees to sell the home to a third-party and repay the proceeds to the banks.

However, this would increase significantly further the total numbers forced to move out of their family home due to mortgage debt.

The new personal insolvency rules will help some borrowers as, where possible, they try to protect the family home in cases of a personal insolvency arrangement or even bankruptcy, even though there is controversy about the role given to the banks in some cases.

However the amount of court actions being taken indicates repossessions will rise significantly nonetheless.