Neo Financial Solutions

Unworkable nature of mortgage restructures leading to deepening of “non engaging” numbers

Figures recently released by Banks regarding the non engagement of some borrowers are a clear indictment on the banks, government and central bank’s unwillingness to address the problem with real and meaning full solutions.

Almost 50% of borrowers 1 year or more in arrears have not engaged with the banks on finding a resolution for their debt! This is a clear indication that people believe that they will not get any meaningful resolution of their debt problem.  They believe that doing what the banks have done for the past 5 years and ignoring the problem will be the best option for them.

If the government and central bank wish to have people engage they should provide real solutions not simply interest only extensions, repayment modifications, split mortgages or other fairy tale options! Borrowers see through these light weight options and have decided there is no point in engaging!

Banks themselves are ensuring that the non engaging numbers are kept high with their insistence that even if people do engage and surrender properties they are indicating that they will pursue the borrower to the grave and beyond for any shortfall! Why under these circumstances would anyone in trouble engage? And of course it is in the bank’s interest that these borrowers do not engage because if they do then there will be more repossession, voluntary surrenders and then the need to recognise even more losses.

However, all borrowers need to engage at least with an independent financial advisor to understand all of their options even if the options include voluntary surrender or bankruptcy. This will in effect put even more pressure on banks/government and central bank to come up with real solutions to a debt war that is raging on in the country for 6 years. The more people engage the greater the power of the people and force for real solutions will grow.

Real Solution Model

Real solutions provide real answers take for example the US. They had an almost identical property crash in 2006-2009 seeing home values fall by as much as 70%. Their mortgage arrears figures went from a national average of 1.8% to 5% by 2009. Then in 2009 they introduced a loan modification plan which included REAL solutions including loan write downs where loans were assessed for sustainability based on borrowers’ income and home values.  The result has been the engagement of customers and return of arrears level to the norm.

Yes there have been significant repossessions and bankruptcies in the US but the market has returned to a norm and the suffering has not spread like a cancer as in Ireland. The one significant thing in the US resolution process is that banks have been made to realise that they too have to take some responsibility in the crisis and their part is taking the losses. No endless pursuit to the grave and beyond for losses.


Paul C Carroll Accountant

+353 1 437 0908