Nearly 8,200 Irish mortgage holders have had their homes repossessed since the crash, the governor of the Central Bank has revealed.
Philip Lane said most of the homes had been surrendered on a voluntary basis without lengthy legal proceedings.
The figure is small in the context of a 750,000-strong Irish mortgage market and in the context of a mortgage arrears problem that affected nearly 100,000 borrowers at its peak in 2013.
In a speech to the Institute for International and European Affairs (IIEA) in Dublin, Prof Lane that since the third quarter of 2009, 8,195 private-dwelling homes had been repossessed by banks or other entities.
Some 5,474 came through voluntary surrender while 2,700 came on foot of court orders.
“The cornerstone of a secure lending market is the ability to acquire the underlying collateral,” he said.
“Some level of repossessions should be considered normal in a functioning system.”
Prof Lane said the high volume of cases and extended timelines associated with repossession proceedings in Ireland indicated it was quite a challenge for banks to deliver on repossessions here.
His comments echo those of the OECD, which highlighted “judicial inefficiencies” relating to home repossession in its latest report on Ireland this week.
Vulture funds
The issue of non-performing loans (NPLs) has been brought back into the spotlight by Permanent TSB’s plan to sell 18,000 distressed mortgages to vulture funds nearly 10 years after the crash.
“What we’ve had in Ireland is quite a lot of effective management of short-term arrears, but a problem with long-term arrears,” Prof Lane said.
He noted that 16 per cent of mortgages on owner-occupier homes had been restructured since the crash, which equates to 120,000 homes, with 87 per cent now reclassified as performing loans.
The concern that it is impossible to restructure NPLs is misplaced, he said. However, he acknowledged that Ireland’s mortgage arrears problem is far from resolved with about 10 per cent of private-dwelling homes still in arrears and 7 per cent, equating to 30,000 cases, classified as being in “deep arrears” where the mortgage has not been paid in over two years.
Governor Lane declined to give a timeline for when the Central Bank thought these NPLs should finally be settled.
“More questions are asked if the ratio of NPLs to total assets goes above 5 per cent but how quickly a bank gets there is a matter for the leadership of the banks,” he said, while noting there was a favourable economic climate for banks to move forward on the issue.
In his speech to the IIEA, Prof Lane also said that while house prices were moving in line with economic fundamentals this did not preclude the possibility of a major reversal in property prices.
He said the current level of property price inflation at 12 per cent was consistent with the headline growth in the Irish economy and the rapid recovery in employment.
However, he warned there was still a risk of a correction in prices.
“Our analysis that house prices have moved broadly in line with fundamentals is fully consistent with a material risk of a reversal in house prices: buying a house is certainly not a one-way bet,” he said .
“In particular, international and domestic factors may trigger fundamentals-driven corrections in the housing market,” Prof Lane said.
