An open Letter to Minister Noonan on the Mortgage Arrears Crisis
Dear Minister Noonan,
Today you suggested that figures on house repossessions in the Irish Times were misleading. You argued that banks were merely using the courts to force people to engage with them. I fear we have learned nothing. A banking crisis and a government led on a merry dance into oblivion only a few short years ago as not taught us a single thing. Minister Noonan you are a very capable and experienced politician. To believe you are that naive is just beyond my comprehension.
Ireland has a serious problem with mortgage arrears. This is affecting the balance sheets of our banks. Every report on the economy raises the situation as a red flag and insists we must sort it out. Our economy will continue to struggle so long as this very real drag on the money flow continues. It is a serious bottleneck in our economy.
The main problem is this issue of customers and whether they can’t pay or won’t pay. This argument is a red herring. Now, the thing is the banks honestly believe it. Many at the top of Irish banks also believed they were solvent before the crisis. They truly believed the bank guarantee could work and everyone would walk away unscathed. They believed this because their own groupthink convinced them of one line of argument. The same is happening here. Banks remain convinced that the majority must be ‘forced’ to pay. That they are just being lazy. They have no way of knowing if this is true because people who are not ‘engaging’ are not giving them access to their financial situation. They just believe it is likely. Suppose for one moment they are wrong? What if the majority can’t pay? Believe me Minister, the banks will arrive with another crisis solution and you like others before you will then carry the political price of it.
Unlike what they tell you there is not a ‘range of options’ open to homeowners. There are only a couple. The main one being filling out endless forms every 6 months to go on interest only mortgage payments. There are options like split loan mortgages but no bank is clear on who gets these, what the criteria are or the process to getting one. All of these are temporary anyway but banks don’t really want to talk. The banks version of engagement is to write a standard computer printed letter full of mumbo jumbo. Then to follow this up with several phone calls asking ‘will you make a payment today?’ When you say ‘No’ they proceed to tell you that you are in arrears. They then ask you ‘Can you make a payment on the arrears today?’ When you say no, they inform you of the dangers of non payment.
That is not engagement. That is not a bank helping people or seeking solutions. That is the very thing that makes people scared of losing their home hide under a duvet and hope it all goes away. Today I asked an arrears support unit that received several meeting requests why they don’t meet customers I was told ‘It is our policy not to meet any customer unless they are in a long term solution.’
Think about that. We have thousands of families running scared and afraid of losing homes. As an economy this needs to be sorted out but the banks say they will not physically sit down with people unless it’s a case of having to do a long term restructuring. In other words we will keep the pressure up we will drive the issue to crisis and then we will only meet you if it proves impossible for us to do anything else.
Minister Noonan you need cash to flow in the economy again. This will not happen while we have this mortgage crisis. This is not about debt forgiveness or giving people a handout. This is about a government getting a proper idea of what the problem actually is before we go along with the banks again. YOU must tell them to do their job. They have branches, they have managers, and they can easily meet every customer who is in arrears within the next 12 months. Then we would have a real picture of the problems. We all know that no form or letter can cover every situation or take account of every issue that is why we need to meet people. Banks don’t want to do this because it takes resources. Instead of a small team of people in a central office, sending out letters and making calls, they would have to resource actual decision makers meeting people and offering many different solutions. Organisations like the Irish Mortgage Holders Organisation can really help people. They need the government to start listening to what they say though. The time has come to accept that the banks version of this story has seen it get progressively worse every year rather than reach a satisfactory conclusion. Figures are tossed about but with nothing to back them up. Nobody knows what qualifies for loans, what state some loans are in, what efforts are made, what qualifies as effort. Believe it or not we don’t even have a standard criteria or formula to tell customers as to what is a guideline for a ‘sustainable’ mortgage repayment based on income.
The situation cannot continue. It’s time to say enough. A government must decide to get some real figures and ask a few more questions of the banks. The sooner we get to the bottom of this mess the sooner the economy will benefit and we can all move on.
If people cannot pay now maybe a solution would be for the banks to take possession of the house but they must hold for say five years before they are allowed to sell it off. If in the meantime the people in arrears come up with the cash they can reposses the property.
Personally I think the last thing we need is more government intervention in the housing market. That’s precisely why it’s so dysfunctional.