Banks Working Actively to Address the Mortgage Arrears Problem

The Irish Banking Federation (IBF) members fully recognise the human impact of the mortgage arrears statistics published by the Central Bank of Ireland today.  Banks are committed to working with their customers to resolve the situation.

The statistics show that 10.2% of all private residential mortgages are in arrears of more than 90 days.  Unfortunately, this is not surprising as the statistics reflect the lag effect of the phenomenon seen in 2011 when a very substantial number of new customers evidenced difficulty in meeting their mortgage repayments; and it is a characteristic of this crisis that an increase in new mortgage arrears in one period will be followed some months later by a deterioration in the number of longer-term arrears.  However, it is notable that there has been a reduction in Q1 2012 in the rate at which new customers are going into arrears.

The deterioration in 2011 coincided with the continued economic pressures on customers, the introduction of restrictions on early bank engagement with customers, (such restrictions thankfully relaxed recently), and extensive public commentary around the feasibility or otherwise of some measure of debt forgiveness.  In the IBF’s view, these environmental circumstances had a material influence on the number of mortgage arrears which accumulated in 2011 with the knock-on consequences for a growing core of longer term arrears in 2012.  The still, un-remedied Justice Dunne judgement also undermined banks’ ability to resolve unsustainable situations, particularly residential investment property loans.  As well as the severe consequences for customers, the impact of this deterioration has had very negative effects on banks’ ability to fund themselves, and as a result of the disproportionate capital set aside for loans in arrears, to provide lending to new customers – be they personal or SME.  Banks are therefore very motivated to resolve the mortgages arrears crisis.

While most borrowers continue to meet their mortgage repayments, those borrowers facing difficulties are being assisted by their lenders based on individual banks’ recovery strategies and in a manner which reflects direction and guidance from the Central Bank of Ireland which focuses on determining the sustainability, on a case by case basis, of each individual mortgage.  The customer support measures currently in place and/or in the pipeline include the following:

  • Banks have allocated increased staffing (up to 3,000), IT support and other resources across the sector dedicated to working with customers who are experiencing financial difficulty
  • Banks are engaging with such customers at the earliest opportunity – the recent revision by the Central Bank of Ireland of what constitutes ‘unsolicited calls’ is of assistance in this regard
  • In consultation with the Central Bank of Ireland, and with reference to the recommendations of the Inter-Departmental Mortgage Arrears Working Group (the Keane Report), banks are currently finalising a new loan modification and resolution strategy (MARS) to assist customers over the medium to long term; they are also preparing new customer outreach programmes to encourage earlier customer contact with lenders.  These will be rolled out during 2012 and be fully evident in 2013.

A great deal is being done and will continue to be done by banks, day to day, week to week, to assist their distressed customers and this is evidenced by the almost 80,000 restructured mortgages now in place.  IBF continues to strongly encourage borrowers who are under pressure with their repayments to communicate with their lenders early in order to find a workable arrangement that will assist in the management of their financial difficulties.  Banks’ own websites provide useful information for customers, as does the website which is provided by the Citizens Information Board and MABS –

The fundamental position of the banking sector on the proposals for a personal insolvency regime remains that, should secured debt be included, it is done in a way which will mitigate against unintended consequences and minimise both the capital impact on banks’ balance sheets – capital largely funded by taxpayers – and customer impact with respect to repayment obligations.  IBF believes it would be untenable to ask the country’s taxpayers to accept banks’ compromising their ability to repay that capital and make an adequate return for the State.  IBF also believes that the MARS measures, if fully supported by all stakeholders, have the potential to assist genuine customers in reaching stability over time.  To this end, it is critical that any proposals with respect to secured credit are measured and balanced.  At a minimum they should, in IBF’s view:

  • ensure an appropriate distinction between a borrower with a sustainable mortgage loan and a borrower with an unsustainable mortgage loan
  • build on a record of prior ‘good faith’ evidenced engagement with the Mortgage Arrears Resolution Process by the borrower with the creditor, with proposals already put on the table by the creditor taken fully into account
  • distinguish between those who cannot pay and have no reasonable prospect of being able to, and those who could pay, but may not want to (particularly if their debts currently exceed the value of their property).  The latter non-payer should not be incentivised by a legal framework.

IBF has and will continue to engage constructively with policy makers and key stakeholders in helping in the delivery of a legislative framework that appropriately balances the needs of lenders and borrowers.

Contact: Felix O’Regan, Director Public Affairs, Irish Banking Federation, tel. 6715311

Note: The Irish Banking Federation (IBF) is the principal voice of the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.


Mortgage Market Activity Reflects Seasonal Trends and Economic Environment

  • 2,630 mortgages issued in Q1 2012, value of €450 million
  • Traditional Q1 weakness reflected in data
  • Home purchasers account for three out of four mortgages

The IBF/PwC Mortgage Market Profile published today shows that 2,630 new mortgages to the value of €450 million were issued during the first quarter of 2012.

While the volume of new lending is down 19.3% in Q1 2012 compared to Q1 2011, this is the lowest rate of year-on-year decline since the first quarter of 2007.

The data also shows that new lending in Q1 2012 is down 31.8% on the previous quarter.  While the seasonal pattern of mortgage lending typically results in a lower level of lending in the first quarter of the year compared to other quarters, this reduction in activity also reflects the broader macroeconomic environment.

The key home purchaser segments of the market, First Time Buyers and Mover Purchasers, continue to dominate this smaller market.  Together they now account for nearly 80% (79.2%) of new mortgages issued.  Or put another way, over 84% of all mortgage credit now goes to the home formation segments of the market.

Commenting on the latest data, Pat Farrell, IBF Chief Executive, stated:

“We have consistently pointed to the need for close examination of activity over a series of quarters before calling any sign of recovery in the mortgage market.  In this regard the reduction in Q1 activity reflecting traditional seasonal factors – while following as it does three successive quarters of growth – cautions against any definitive view on market direction at this juncture.  However, it is interesting to note that, at 4.7%, the year-on-year reduction in activity in the all-important home purchaser segments of the market is considerably less than the 19.3% reduction in overall market activity.”

The IBF/PwC Mortgage Market Profile can be viewed on the web here.

Note: The Irish Banking Federation (IBF) is the principal voice of the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

IBF Breakfast Briefing on EU Stability Treaty – Address by IBF President John Reynolds

The Minister for European Affairs, Lucinda Creighton, T.D., will present to us this morning a very comprehensive and cogent case for voting ‘Yes’ in the referendum on the 31st of this month.

John Reynolds Stability Treaty May 2012

IBF President John Reynolds

Confidence and stability are prerequisites for economic growth.  For financial services these factors are crucially important.  We now know to our cost – and to the cost of the country as a whole -the significance of undermining these factors.  And, with the support of Government and taxpayers, our sector is working strenuously and making significant progress in restoring that confidence and stability.

Thus, we in the financial services sector are well placed to appreciate the critical importance of a ‘Yes’ vote to:

(a)Maintaining investor confidence;

(b)Restoring national financial stability and growth; and

(c)Preserving our position as a key location of choice for global multinationals.

Group Stability Treaty May 2012

Dara Deering, Chair, Irish Mortgage Council; Tom Young, Chair, FIBI; Pat Farrell, Chief Executive, IBF; Minister of State for European Affairs Lucinda Creighton TD

We have clearly witnessed how growing investor confidence and improved access to affordable funding are central to rebuilding the domestic banking sector and restoring national financial stability.  As it restructures and reshapes, the finance sector will and must continue to be a key driver of economic recovery.

The international financial services sector provides direct employment to 33,000 people, accounts for 16% of total corporation tax receipts and 13% of our total exports.

Put simply, a ‘Yes’ vote on the 31 May provides the best prospect for further confidence and further stability as the basis for future growth.

Collectively through the IBF we are actively supporting the Business for Ireland initiative – a group of over 70 business and professional organisations working in support of a ‘Yes’ vote.

This initiative has produced some fine information material and this has already been brought to the attention of IBF-member institutions with view to their circulating it internally to staff.

For more information on the Fiscal Stability Treaty, please click here.