But in 2015, her partner, who drives a motorbike for work, was in a serious accident when another driver performed a dangerous U-turn. “He crashed straight into him.
He had multiple broken bones and was very seriously injured.”
Without sick pay, Mary – working part-time – was the only earner.
The accident happened in autumn.
Should they face foreclosure, or forbearance? What can they pay, and what should they pay? And what is the reality of living with debt, in the shadow of repossession – and how real is the threat of losing your home?
Scale of the problem
Dealing with a non-performing mortgage on a family home, and the accompanying prospect of repossession by a lender, is a daily reality for 64,510 borrowers, according to the latest statistics from the Central Bank of Ireland.
The problem of toxic debt is still front and centre for Irish banks, who are a major outlier compared to their European peers. At the end of 2017, just under 11.
5 per cent of Irish loans were classified as non-performing, compared with an EU average of less than 4 per cent.
One factor limiting repossessions is the glacial nature of putting these cases through the courts
Dr Padraic Kenna of NUI Galway recently edited a comparative study of evictions across Europe. He believes discussion of strategic default is “a diversion”.
There has been significant progress tackling the size of underperforming mortgage loans in recent years. Statistics from the Central Bank show that the level of family–home mortgages in arrears of 90 days or more peaked at 12.
9 per cent in September 2013 and has steadily declined to its current level of 6.2 per cent since then.
When it comes to owner-occupied mortgages, the majority of the improvement has been through adopting what the Central Bank call “cures” – split mortgages, term extensions, or “arrears capitalisation”, where unpaid amounts are added to the total figure owed.
However, this downward march has not solved all problems.
Around €2.4 billion is owed by this cohort, weighing down on the balance sheets of Irish lenders – as well as the householders who owe it.
“For us the problematic category is someone in arrears for two years or more. They’re chronic, many have been in arrears for more than five years,” says Paul Joyce, a senior policy analyst with the Free Legal Aid Centre (Flac).
“If you’re 720 days plus, you’re gonzo; it’s not happening. You should be foreclosed and resold.
It’s a completely untenable situation. There is a point where you have to say ‘this is insurmountable.
Joyce disagrees. “You hear people saying it’s time to get on with it – I fundamentally don’t agree,” he says.
Whatever the right course of action, logic would suggest that a country with such a vast pool of underperforming mortgages would see high levels of repossessions as lenders move to enforce their security – the much-talked-about “tsunami” of repossessions.
But again, Central Bank data suggests that repossessions are not very high.
Since March 2012, proceedings have been issued in thousands of cases, but only a little over 8,000 properties have actually been taken into possession.
One factor limiting repossessions is the glacial nature of putting these cases through the courts.
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Perhaps more than anyone, David Hall has risen to national prominence over the issue of toxic debt.
As founder of the Irish Mortgage Holders Organisation, he has been predicting a tsunami of repossessions for longer, and more loudly, than anyone else. He says the courts have been holding back the tide.
“That’s the only thing that’s keeping people in their homes, not the Government [but] court reluctance to execute repossession orders,” says Hall.
Since its inception, the ISI has instituted less than 8,000 debt solutions
In his recent study of the Irish mortgage market, NUIG’s Padraic Kenna said he found that “the big bulk of cases are stuck in the courts system, and they’re being sent round and around and looking for adjournments”.
He estimates that there could be up to 20,000 mortgage holders in this legal limbo. Paul Joyce of Flac says county registrars, who handle civil bills for repossession, practise a sort of ad-hoc forbearance, acting as an intermediary between borrowers and lenders.
“The general approach is to see what’s being paid . .
. whether the borrower has availed of assistance, and trying to see whether a payment arrangement can be put in place to satisfy the lender,” he says.
In a 2017 report by Competition and Consumer Protection Commission, one lender said that it takes between 18 and 72 months to repossess a home in Ireland, compared with nine-12 months in the UK, and six months in Northern Ireland and Denmark.
A number of State schemes have also stemmed the flow.
In recent years, the Government undertook a protracted reform of the mortgage-to-rent system, which sees borrowers give up ownership of their homes and become social-housing tenants in the same property.
Paul Cunningham, who heads up that company – Home for Life – estimates that when the numbers in long-term arrears are combined with those in temporary forbearance arrangements, there could be up to 50,000 borrowers in difficulty.
There are options beyond mortgage-to-rent, he points out, such as personal insolvency and bankruptcy, part of a wide suite of tools administered by the Insolvency Service of Ireland. However, since its inception, the ISI has instituted less than 8,000 debt solutions.
State schemes, it seems, have been effective to a point. But they require time – and time may be something that Irish banks are running out of.
This could have consequences for those who owe them money.
Irish banks are under increasing pressure from the European Central Bank to get their non-performing debts in line with European norms, according to Goodbody Stockbrokers analyst Eamonn Hughes.
Depending on who you ask, vulture funds are either the most mercenary financial institutions in history, or a benign force clearing legacy debts from the Irish market
During 2018, the banks, led by Permanent TSB and AIB, made huge strides to bring down their levels of non-performing debt. But the regulator, the Single Supervisory Mechanism in Frankfurt, remains concerned, according to Hughes.
The ECB is concerned about what damage these distressed loans could do to the banks
“Ultimately, the regulator in our view is requiring banks to clean up as soon as possible in case the economic cycle rolls over or interest rates go up,” he says. While the banks have been able to bring down their non-performing loan levels by focusing on selling off loans not linked to family homes, they may be running out of room for manoeuvre and could push ahead with such sales soon.
“Everything is on the table,” says Hughes.
Successful moves by Permanent TSB, which saw it sell some family–home loans, may open the door to what has traditionally been a sticky political issue: the sale of family–home loans to private equity firms, more commonly known as vulture funds, by majority State-owned banks such as AIB and PTSB.
“The fact that Permanent [TSB] went ahead and did it, and for want of a better word got away with it, would indicate that there isn’t the resistance they thought there would be,” according to Ross Maguire, founder of debt advisory firm New Beginnings. “I do believe there will be more loan sales.
Fear of vultures
Depending on who you ask, vulture funds are either the most mercenary financial institutions in history, or a benign force clearing legacy debts from the Irish market. Sources who work for and with the funds say that their fearsome reputation is undeserved.
Another says the suggestion that funds will quickly move to repossess is “totally bogus.
It’s either from people who are being disingenuous or don’t understand it”. “Only in extremis will they go for a repossession because they know how long it takes and how much it costs.
Maguire says funds are more likely to restructure a loan and enjoy the reliable new income stream than sell. “The reality is that they’re not interested in your house, they’re interested in fixing your loan.
Others, like David Hall, warn that a cohort of those in mortgage arrears, who are not eligible for social housing but cannot afford the private rental market or to restructure their homes, will lose their homes to vulture funds. “And they will become homeless.
Hall rejects the idea that he has been proven wrong by the low rate of repossession. “History will judge who’s right.
I’ll sleep very solidly at night and won’t take great pleasure in saying in a couple of years ‘I told you so.’”
“There’s a real inequality of arms between someone who owes €250,000 on their loans, has been making payments, and a fund.”
Research from the Central Bank suggests that there is “no material difference in the number of properties being taken into possession by unregulated loan owners compared to regulated lenders”.
This must be balanced, however, against what vulture funds have bought recently. Research from EY tracking loan purchases by the funds shows that the majority of what they have purchased in the past few years is commercial real estate or business debt.
In short, the available evidence suggests funds may not be as avaricious as they’ve been portrayed.
But it’s hard to predict exactly how the secretive funds (several of whom declined to speak to The Irish Times for this article) would deal with a new large-scale influx of mortgage debt, if the banks do sell up.
What is clear is that any move to repossess family homes – whether by a fund or a bank – could prove to be politically explosive, as shown by KBC’s move to repossess a farm in Strokestown, Co Roscommon, before Christmas.
In the current environment, it doesn’t have to be a tsunami to be a problem for banks, their employees, and policymakers.
Long term solutions
One such person is John Moran, former secretary general at Michael Noonan’s Department of Finance during the most severe years of recession. He was brought in as an outsider, who had learned his trade in the private sector, to shake up a department as it sought to address its own role in the economic collapse.
For Moran, the problem of distressed debt will not simply resolve itself. “There are some problems that get better with time.
I don’t think this is one of them. In 2011, it was going to get better because unemployment was going to go down and salaries recover, but we’re as good on all those parameters as we can be,” he says.
Many of the factors outlined above – pressure on banks, a sclerotic courts system and public opposition to repossessions – restrict Ireland’s room for manoeuvre in solving the problem. Meanwhile, due to the weight of non-performing loans on Irish banks’ balance sheets, mortgages are becoming more expensive, argues Moran.
“Why I am particularly worried is if you can’t solve that residual legacy [of] distressed mortgages, then everyone taking out a new mortgage is paying more, and in that event, the economy is essentially losing a huge amount of money each year.”
One solution, he argues, is to seek investors that can buy the mortgages from the Irish banks, but tolerate a much lower level of repayment – perhaps as low as interest-only payments – and have no immediate interest in repossessing a home.
“For societal reasons, it makes sense for many people in this cohort to stay in their existing homes for another period of time – maybe not forever, and not for free.
However, this proved to be a false dawn.
After taking ill, scans revealed that Mary had multiple blood clots in her lungs. She was hospitalised for a month, unable to work.
When she was released, she went on unpaid maternity leave.
Mary says she tries not to read the newspapers because of the distress they cause her.
I’m trying not to think too much about it, but it is in the back of my mind, and I’m going through counselling,” she says.