The Ryan Review

The Central Bank issued an excellent report on the state of Long Term Mortgage Arrears (LTMA), examining the 29,000 cases which stubbornly remain in arrears over two years. The findings show that the average loan is €206,000, at 90pc loan-to-value with €66,000 owing in outstanding arrears. The 2+year category is the largest component of the remaining LTMAs, so why on earth are they all simply not scooped up and flogged off (to Vultures or otherwise)? They are terminal basket cases, completely incapable of being serviced by their owners, after all. The answer, as with so many things, can be found by following the money. The report looked at the ‘Cure’ and ‘Exit’ approaches taken on these loans. Cures happen when borrowers engage with lenders (the completion of a Standard Financial Statement, which is mandatory since 2013 is twice as likely to see success in reducing arrears, than a case without one). Exits tend to be when they don’t, resulting in the voluntary or forced sale of property. The reasons banks don’t go full tilt at them is because they’re engaged a game of ‘who blinks first’. Repos are very expensive — more so in Ireland than anywhere else. It puts banks off, especially if the property’s in negative equity. But a large number engage in what the report calls a ‘wait and see’ approach, as house prices rise, the books look better anyway. There’s method in their madness, in other words.