Government fails to act on mortgage crisis
The Defend Our Homes League which was established in July this year in response to the crisis people are facing in respect of repossessions and evictions. The initiative to establish the league was taken by the United Left Alliance, supported by the legal group New Beginning, Irish Homeowners Unite and also supported by a number of Independent TDs.
Joan Collins has paid a leading role in setting up the Defend Our Homes League. Responding to the report of the expert group on the mortgage crisis (the Keane report), Joan said in the Dail debate.
“The discussion document before the House has been warmly welcomed by the banks. Indeed, it could have been drafted by them. It does not call on them to do anything more than they are doing at present. In many instances, they are not even doing what is required of them. The so-called recommendations contained in this document are mere guidelines.
“The two main issues relating to the matter of mortgage arrears are keeping people in their homes and negative equity. Neither of these is properly dealt with in the document, which is completely dismissive in the context of negative equity and states that the write-down would be too expensive. I challenge that opinion and ask in whose interest is it too expensive.
The first point I made was related to keeping people in their homes. The report disgracefully accepts that repossessions will happen and that after a bank has taken possession of a person’s home, it may be possible for that person to rent the property from it, with the debt remaining as a heavy weight on his or her shoulders. That is an outrageous idea.
“The Government should ensure that if a debtor engages with a lender and is prepared to pay a reasonable amount of net income – this should be decided not by the banks but by an independent agency – there should be no question of a person losing his or her home. People could make interest-only payments or park the mortgage in order that interest does not accrue while there is a chance to pay down some of the principal.”
To find out more about the league go to mortgage crisis on top bar.
Debt write down needed to help mortgage holders
The idea of a mortgage write down has been dismissed by the government. A mortgage write down would solve the problem of negative equity facing large numbers of householders, especially those who bought at the height of the property boom. Put simply, it means if you bought a house valued at say €350,000, which is now only valued at €200,000, your mortgage would be written down to reflect today’s valuation.
The government has put forward two objections to this, both of which are wrong. Firstly they speak of the ‘moral hazard’ of what they refer to as ‘debt forgiveness’. This is a government which found no moral hazard in handing out €700 million to unsecured bond holders of Anglo Irish Bank this week. The people who bought houses at hugely inflated prices were forced into this situation by bankers, developers and Fianna fail led governments who deliberately created the property because it brought huge profits. The same banks and developers are bailed out at enormous costs but ordinary people just have to get on with it.
Secondly they claim it would cost too much. The Department of Finance estimates it would cost €14 billion, but economist Constantin Gurdgiev estimates that if a write was applied only to average family homes and apartments, leaving out buy to let mortgages and trophy homes, this figure could be reduced to around €7 billion, half of the cost the government is claiming. The banks have already been recapitalised with taxpayers money to cover this level of mortgage losses.
Apart from helping distressed home owners by reducing their mortgages and repayments , a write down on these lines would give people more money to spend, helping domestic economic demand to recover and help to create jobs.
It would not solve all the problems, such as for those who have lost jobs and now just can’t meet repayments. There must be an independent agency who can assess ability to pay and with the power to force banks to make agreements on that basis to keep people in their homes.
Clare Daly TD, United Left Alliance, says:
The mortgage problem will not be addressed by the measures proposed in the Keane report and the fact that the Irish Banking Federation was the only organisation to welcome it tells its own story. The report is more to do with the interests of the banks than those of homeowners. As others have stated, many of the groups working at the coalface providing assistance to homeowners believe their views and the valid submissions they made to the process have not been taken on board. The report has suffered greatly as a result and is simply not good enough.
Having initially indicated that the Keane report would provide a solution, the Government is now presenting it as some form of discussion document. The starting point must be to keep people in their homes. Apart from the obvious benefits to the individuals in question, the economic and social cost of any failure to keep people in their homes would be immense. We cannot have any more cases of banks repossessing family homes and seeking to sell them for a price below what the mortgage holder could have afforded to pay. Homeowners and their families have been moved out of their communities and forced into bankruptcy at a cost to the State of tens of thousands of euro in rent supplement and social welfare payments. Those days must be consigned to the past. People must be allowed to remain in their homes.
I fully support the need to have a general write-down of all properties in negative equity. People who purchased their homes between 2003 and 2007 paid an uneconomic price in a false market. They were scandalously ripped off because the houses were not worth the prices paid. For those people, their children or their grandchildren, carrying that debt for decades is unsustainable and will cripple this economy into the future.
DO YOU NEED LEGAL REPRESENTATION?
New Beginning is a recently formed group of business people, lawyers and concerned citizens coming together in an attempt to deal with the most pressing social, economic, legal and political issue facing Ireland today. If you have no legal representation, new Beginning will arrange for a Solicitor and Barrister to represent defendants in actions brought against them by lending institutions concerning the repossession of their family homes. Contact New Beginning at their website which you can find under Links on our Home page.
Submission to the inter-departmental group on mortgage arrears from the Defend our Homes League. 11-09-09
The Defend our Homes League came from an initial meeting at the Red Cow Hotel in Dublin this July. The meeting was organised by United Left Alliance TDs. Joan Collins, Joe Higgins, Seamus Healy, Clare Daly, and Richard Boyd Barrett; and supported by Catherine Murphy TD, Mick Wallace TD, Luke Flanagan TD, Maureen O’SullivanTD, Thomas Pringle TD, Finian McGrath TD, and John Halligan TD. The meeting was also supported by legal group New Beginning, and Irish Home Owners Unite.
Our aim is to organise home owners on a national basis to keep people in their homes, to stop repossessions and to prevent evictions. We believe that this has to be the priority of government policy.
We reject any notion that there is a so called ‘moral hazard’ in assisting home owners who were forced into buying family homes at hugely inflated prices as a result of a property bubble brought about by the greed of bankers and developers with the assistance of previous governments. There is no moral hazard in assisting those who have lost their jobs or businesses or otherwise are experiencing a sharp drop in income as a result of the economic crisis whose severity is in large part due to the collapse of the property bubble.
A recent Central Bank report shows the scale of the crisis that is developing for many home owners. There are 777,321 mortgages on private residential properties in the Republic, with a total value of 115 billion euro. Of these 55,763 are over 90 days in arrears or 7.2% of the total.
In addition 69,837 mortgages have been restructured, of which 39,395 are not in arrears. This means that around 100,000 mortgages( including restructured and now back in arrears) are in trouble to some degree and the trend is upwards.
The state owned banks, AIB, TSB, EBS and nationwide hold about 70billion of the overall mortgage market of 143 billion. BOI has a further 28 billion, Ulster Bank 22billion and Bank of Scotland 10billion.
We believe that there are essentially four groups who need urgent action on their behalf by the government. Those who are in arrears and need short to medium term assistance until their financial circumstances improve, those who wish to surrender their mortgages and become tenants, those in negative equity, and those who have had their homes repossessed but still have substantial and unpayable debts.
In terms of the first group we support the idea of a state agency -maybe MABS or something similar-acting as an independent assessor of peoples’ ability to pay. We are absolutely opposed to any ‘solution’ based on the banks making these decisions. This agency should have the power to recommend either interest only payments, reduced payments with an extension of the mortgage, or regular payment below interest only if necessary.
Secondly there must be an option for those who no longer wish to be saddled with huge debt to surrender their mortgage and have any negative equity written off. They should also have the option of remaining in their home as tenants with the rent set at ability to pay. Alternatively they may seek social housing elsewhere and should be entitled to do so.
This option may involve 5 to 10% of those in difficulties, about 5,000 to 10,000 people, and the cost of the debt write off would be within the default calculations already factored into the recapitalisation of the banks.
Those who have already lost their homes should also have any outstanding balance of debt written off.
Finally there is the problem of negative equity. The ESRI report by D. Duffy in October 2009 suggested that in a worst case scenario there could be around 175,000 first time buyers in negative equity, amounting to an estimated 13 billion euros. If the banks had been nationalised at the start of this crisis, and reorganised and recapitalised at a fraction of the 100 billion thrown at them so far, a write down of mortgages to relate to actual house values today, or a write down to 120% or so of the market value, would have been entirely feasible. This would help those in negative equity and also provide a stimulus for the domestic economy as people would have more to spend. We believe that the government should ensure work is undertaken to determine the cost of such a write down over the course of the next months.
We also believe Subprime lenders should be taken out of housing market. Their loan books should be taken over by state. The high Interest rates they have been charging should be reduced to lowest current level. In addition there should be a state clampdown on loan shark money lenders such as Moneyvillage.
We also are for a general interest rate freeze. free legal aid for home owners before the courts and for suitable NAMA properties to be made available to dramatically increase social housing stock.
Joan Collins TD and Clare Daly TD on behalf of the Defend Our Homes League.
The land league-the Irish peoples’ proud history of struggle for justice.
A depression in the economies of the United States and Europe, known as the ‘long depression’, it lasted from 1873 to 1896, hit Ireland particularly badly. Internationally there was a sharp fall in agricultural prices. Irish farmer, especially in the west of Ireland, found themselves in great diffulty paying the high rents they had agreed in the previous boom period. Sound familiar?
Rack renting landlords responded with evictions. A number of local tenant’s organisations sprang up to fight the landlords and their bailiffs and in 1879 the National Land league came into being at a meeting in Mayo. The MP Charles Stuart Parnell was elected as president and Michael Davitt as one of its three national secretaries.
The land league’s aims were for a reduction of rack rents and ownership of the land for those who worked it. They organised tenant farmers around the country to resist evictions, boycott sales of repossessed farms and to demand reform of the land laws. I 1881 they called a national rent strike for which the leaders were jailed.
A period known as the ‘land war’ lasted from 1882 to 1892 with the Land league fighting for what they called the ‘three Fs’, fair rent, fixity of tenure and free sales, organising mass action to stop evictions and sales of repossessed properties. Over time landlords were forced to reduce rents.
The first target was a member of the Roman Catholic Church hierarchy, Canon Ulick Burke of Knock, who eventually reduced his rents by 25%. The league forced the British government to eventually introduce serious land reform in Ireland and to establish the land commission to oversee the distribution of land to tenant farmers.
Let’s dispense with all this nonsense that we’re not Greeks. We are a people with a proud tradition of fighting for our rights and for justice; we just need to get back to it.