Mortgage payments held back 'strategically', broker claims

UP TO a quarter of mortgage holders whose payments are in arrears are deliberately delaying payments to try to win concessions from lenders, it was claimed last night.

But the claim, by Karl Deeter of Irish Mortgage Brokers, was immediately challenged by the Free Legal Advice Centres. Its director, Noeline Blackwell, said that while some people were “undoubtedly abusing the system”, it was impossible to establish the true number.

Mr Deeter said there was increasing anecdotal evidence of mortgage holders “strategically” falling behind on their repayments in an attempt to gain a greater measure of forbearance from lenders.

He said the indications he had received from clients, bank debt collection teams and senior executives in the State’s largest financial institutions suggested that the problem of “strategic arrears” is far greater than the banks will publicly admit.

Speaking to The Irish Times, Mr Deeter said the level of mortgage arrears was increasing more quickly than was necessary because significant numbers of borrowers were operating under the belief “that they might get some kind of debt deal that is being caused by changes the Financial Regulator made”.

There have been changes to how often lenders can contact those in arrears, while under new personal insolvency legislation making its way through the Oireachtas banks are likely to be pressed to show more forbearance to people who can show they are in no position to pay mortgages.

Responding last night, Ms Blackwell said banks “ may well have suspicion about their own customers but ultimately that is just speculation”.

“We do not get anyone in to us telling us they are planning to strategically default on their mortgage debt and I very much doubt they are telling the banks that either,” she said.

Mr Deeter said the lowest estimate Irish Mortgage Brokers had suggested was that around 12 per cent of the total arrears were held by people who could afford to make repayments but had chosen not to in the hope of being the beneficiaries of some class of debt forgiveness.

“The figures are not being officially collated but the anecdotal evidence is very strong and is coming from several channels,” he said.

“The lowest number suggests that 12 per cent of mortgages which are in arrears don’t need to be. But the highest percentage that we’ve heard is that some collectors believe as many as one in four dont need to be in arrears.”

He said it was “a disgrace” that people were choosing not to pay their mortgages when they were in a position to do so and this increased the pressure on those who were in “genuine trouble, who aren’t in this situation by choice”.

Permanent TSB said yesterday the number of accounts more than 90 days in arrears stood at 20,816 in 2011, up from 12,200 cases in 2010.

AIB said 7.9 per cent, or more than €32 billion of its owner-occupier mortgages, were in arrears of more than 90 days at the end of last year, compared with 2.2 per cent a year earlier.