Mortgage arrears problem needs a new lease of life – Hayes

Mortgage arrears problem needs a new lease of life – Hayes

Central Bank needs to add its voice to finding solutions for non-performing mortgages

Brian Hayes MEP today (Friday) said that while banks have made good progress at resolving non-performing loans for SMEs in the last year, non-performing mortgages are still weighing heavily on Irish banks.


“Irish banks have reduced their overall non-performing loan ratio to 14% as of June 2016, from 19% in December 2015, as demonstrated by the latest European Banking Authority (EBA) figures.

“However, when we look more closely at the figures there is a different story for mortgage loans. While SME non-performing loans reduced by 54% since the start of 2015, non-performing mortgages have only reduced by 27%.

“The main reason for this is that banks and SMEs have been able to get on with restructuring debt but the process of restructuring mortgage debt has been subject to political and regulatory interventions that resulted from the crisis. It was absolutely right that we brought in legislation during the crisis to ensure that people’s rights were protected when they went into mortgage arrears. But policymakers must now acknowledge that solving the mortgage arrears problem needs a new lease of life.

“Ireland is one of the most highly indebted countries in Europe. We have the 6th highest rate of non-performing loans in the EU and we have the 8th highest level of public debt. This leaves Irish society vulnerable and exposed to any shocks to the financial system.

“Cleaning up the balance sheets of banks must be a priority for financial institutions, policymakers and regulators alike. I believe that all Irish banks should make a target of reducing their non-performing loan ratio to below 5% of assets by the end of 2018. They cannot do this alone.

“If we really want banks to reduce their non-performing loan books, policymakers need to help facilitate this by making the resolution process easier. The courts system presents many unnecessary obstacles to the resolution of mortgage arrears cases. The Mortgage Arrears Resolution Process is a necessary but complicated piece of legislation.

“What we need to do is build on our legal framework in order to distinguish between those who cannot pay or have no prospects of paying their mortgage and those who have actually a chance of resolving their mortgage debt. I believe the Central Bank has a role in this issue and should add their voice in looking for solutions to the issue.

“It is long-term arrears that are the real problem – almost 35,000 people are in mortgage arrears for more than 2 years, that’s 43% of all mortgages in arrears. For these cases, the mortgage holders want a solution and the banks want a solution. The government’s new Abhaile scheme which offers free legal and financial advice to mortgage holders is a massive help. We need to build on this and come up with an updated legislative framework on mortgage arrears.”

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