Welcome to our Personal Insolvency update.

This edition deals with the following which we hope is of interest to you:

1. Q&A YouTube Interview on Personal Insolvency and Bankruptcy – with David Sweeney of Sweeney Solicitors & myself;
2. How Poor Advice Can Cost You Your Home – Real Case Example;
3. What is Mortgage to Rent?
4. Abhaile Scheme – Free Financial & Legal Advice
5. Vulture Funds – Friend or Foe?
6. New Report on Resolving Non-Performing Loans in Ireland
7. ISI Statistics Q4 2017

We hope you will find the update useful and if you have any queries don't hesitate to contact the Personal Insolvency Department by email at info@quintas.ie or call 021 4641400.

Q&A Interview on Personal Insolvency and Bankruptcy – with David Sweeney of Sweeney Solicitors

This is a link to the full video on Youtube https://youtu.be/0zafH4hlJh4

HOW POOR ADVICE CAN COST YOU YOUR HOME – REAL CASE EXAMPLE

I met with a young mother recently who was referred to me by her solicitor. They had asked me to review a Letter of Offer for the Mortgage to Rent Scheme that she had received from a leading Irish bank. This young lady had fallen on hard times in recent years both personally and financially with the break up of her marriage. The balance outstanding on her home mortgage is € 180,000 including arrears of € 30,000.  She is on a variable interest rate of 4.25%. She may need to be included in the bank tracker review process. Which would affect this interest rate. The bank carried out an assessment of her current financial position and advised that the only solution to her debt situation was to participate in the Mortgage to Rent Scheme. Her application for Social Housing Support was successful and she had notified the County Council of this. An independent market valuation of her home was carried out valuing her home at €185,000. The bank requested that she sign a Voluntary Surrender Document and confirmed a sale price to a Housing Association be agreed on her home in the amount of €155,000. The bank advised that she seek financial and legal advice prior to signing the Letter of Offer for Mortgage to Rent Scheme and the voluntary surrender document. At no stage of her meetings and discussions with the bank and other 3^rd parties did anyone suggest that she should investigate whether the personal insolvency legislation could assist her in resolving this loan.

What would this proposed agreement mean for this young mother had she not have sought my advice, bearing in mind that he only wish is to remain in the family home with her two young children?

1. As the market value of her home is €185,000 and the outstanding debt inclusive of arrears is €180,000, her home is in positive equity of €5,000. According to economic forecasts and with the current shortage in housing, the value of her home will only increase thereby increasing the equity even further.
2. Voluntarily surrendering her home will mean that she will no longer own her home and would move from being a home owner to being a tenant, where her rent will be set outside of her control based on affordability.
3. The housing association is buying her home at a significant undervalue at €155,000. This means that after voluntarily surrendering her home she will still owe the bank €30,000 (gross). She will still be liable for the full amount of this residual mortgage debt.
4. She would be signing the proposed agreement with no indication of what rent she would be required to pay;
5. She would be signing the proposed agreement with no indication of what repayments she would have to make on the residual debt of €30,000.
6. She would generally have the option to buy back her home in 5 years if her situation improves, however, given that she is bringing up two small children by herself, there is no guarantee that her situation will improve in the medium term.
7. She had been on a tracker mortgage in relation to her family home and was taken off the tracker mortgage so this still needs to be investigated further.

It was shocking that the bank recommended this was the only option open to her and she would be moving from owning a house with positive equity to selling her home well below the market rent and thereby becoming fully liable for the residual debt of €30,000 (gross).

After meeting with this young mother and after securing a MABS voucher for her which meant that she was not out of pocket in meeting with me and for receiving advice from me in writing setting out her best options, she has decided not to sign the Letter of Offer for the Mortgage to Rent Scheme and she will not be voluntarily surrendering her home.

Instead she has asked us to assist her to negotiate a restructure for her with her bank by making an application for a protective certificate which will afford us the opportunity to make a proposal for a Personal Insolvency Arrangement. The proposal being to make affordable payments to the bank with the aim of keeping her in her family home. This proposal would also involve the organised transfer of the property and loan into her own name as her former partner no longer lives in the house nor does he contribute towards the mortgage repayment.

If she would have accepted the poor recommendation from the bank or if she would have sought advice from a financial advisor who is not actively working as a PIP or with limited experience in debt resolution work or with poor judgment, she would have been making one of the biggest mistakes in her life through no fault of her own.

It is important to remember that if you get any kind of restructure arrangement or proposal from a creditor, particularly in regard to your family home or Buy – to – Let properties, ensure that you get the best advice that you can get. I have come across borrowers who have entered into restructure arrangements with banks without getting proper independent financial advice from an active PIP or a financial expert actively doing debt resolution work on a day-to-day basis. At the time of signing these arrangements borrowers were probably focused on the short term due to being under so much severe financial stress and strain; by signing these arrangements this would eliminate phone calls, demand letters, this numbing feeling of being harassed. However, they do not always see the bigger picture such as what is the net residual debt on the property and how it is to be paid.

WHAT IS MORTGAGE TO RENT?

The Mortgage to Rent scheme is a Government initiative to help homeowners who are at risk of losing their home. To qualify for the Mortgage to Rent scheme a borrower(s) must:

• Have completed the Mortgage Arrears Resolution Process (MARP) with the lender.
• Be eligible for Social Housing Support in the local authority area where the house is located.
• Not own any other property.
• Be living in a property that suits the borrower(s) needs.
• The property must be of a value no more than €365,000 for a house and €310,000 for an apartment or townhouse in the areas of Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway. The maximum values for the remainder of the country are €280,000 for a house and €215,000 for an apartment or townhouse.
• Net income must not exceed €25,000, €30,000 or €35,000 a year, depending on what part of the country the borrower(s) live in. There are additional allowances for children.
• Cannot have cash assets worth in excess of €20,000.
• Must have a long-term right to remain in Ireland.

How does it work?

• You must be eligible for the Mortgage to Rent scheme.
• You must be eligible for Social Housing Support with your local authority.
• Your home must be accepted by a housing association.
• You must voluntarily surrender possession of your home to your mortgage lender who immediately sells it to a housing association who will then rent it to you.
• You will no longer own your property but you can continue living in your home as a social housing tenant and have a tenancy agreement with the housing association.

Benefits of the scheme in certain cases:

• Peace of mind for you and your family to remain living in your home.
• You pay an income based affordable rent.
• The proceeds of the sale from your home to the housing association will go towards your mortgage debt.
• Option to buy back your home after a period of 5 years if your situation improves.
• The housing association will look after property maintenance issues as set out in your tenancy agreement.

 ABHAILE SCHEME – FREE FINANCIAL & LEGAL ADVICE

Abhaile is a service to help homeowners find a resolution to home mortgage arrears. It provides vouchers for free financial and legal advice, and the vouchers are available on application to MABS. The aim of Abhaile is to help mortgage holders in arrears to find the best solutions and keep them wherever possible, in their own home.

If you are a home owner with a mortgage and if your mortgage is in arrears I can do the following to assist you and this service does not cost you anything:

1. Make an application for a MABS voucher on your behalf where you are eligible for a voucher;

2. This MABS voucher will entitle you to the following:

   Face-to-face consultation with me;

• I will carry out a full review and assessment of your financial situation on completion of a Prescribed Financial Statement (PFS);
• I will explain to you all the available options and the best option for you to deal with your mortgage arrears;
• I will confirm the advice that I have given to you in writing.

If you are in mortgage arrears or know someone who is struggling with mortgage arrears on their home loan and if you would like to avail of free financial advice or know of someone who would like to avail of free advice please contact me and I will advise you of your options. Your contact details and financial details will be handled with the utmost confidentiality as we are aware of the sensitivity of each and every case.

VULTURE FUNDS – FRIEND or FOE?

It is hard to believe that it is over 10 years since the IMF landed in Ireland and we all came face-to-face with the fact that as a nation the game was up and we were broke.

No one has been left untouched from the death of the ‘Celtic Tiger’ and most people unfortunately are still dealing with the consequences of the crash.

It is also hard to believe that 10 years on, despite all the positive vibes about the economy and the recovery, this has not filtered down to the normal person on the street.

The term Vulture Fund is not new as this was the method used by Nama, IBRC, Anglo, Bank of Scotland and National Irish bank (to name a few) who used the sale of their loans books to 3^rd parties to clear up their under performing loans.

These Vulture Funds or Investment Funds as they prefer to be called, have bought these bad loans from the main banks at a substantial discount and their only mission is to recover as much as possible from the debts they have bought. Given that both PTSB and Ulster bank announced this year that they will sell circa 25,000 loans to Vulture Funds; this is already a hot topic in 2018 with demonstrators gathered outside the Ideal Homes Exhibition at the RDS on Saturday 21^st April 2018 to protest the event's main sponsors Permanent TSB..

I think that no more than the IMF 10 years ago the advent of Vulture Funds entering our financial system is a wake up call that the years of kicking the can down the road by the Irish banks is now over.

Unlike the main Irish banks these vulture funds are not concerned with the negative publicity of pursuing these debts through any means possible. This could be through debt collection agencies, legal proceedings, home repossessions and general harassment from their arrears support teams.

The Vulture Funds business model is short term, they have no interest in having a long term arrangement or relationship with their new customer. They just want cash!!!

Where does this leave the hundred thousand plus home owners who are in fear of losing their homes…….it leaves them in a tough spot.

Despite the fact that debt solutions were introduced by the Government in 2012 through the personal insolvency legislation less then 2,000 people have availed of the legislation.

The main reason in my experience is that they don’t understand that this solution applies to them and that it can help them. There is a lot of misinformation (I call it pub talk) about the legislation but from my hands on experience there is no other method to resolving your debt than by getting Court protection to save your home through a Personal Insolvency Arrangement (PIA) or a Debt Settlement Arrangement (DSA).

The good news is that 90% of those that avail of the personal insolvency legislation through a PIA retain their family home and at the end of the process they end up with a sustainable mortgage and their other debts are written down as part of the process.

The personal insolvency legislation is the only method to protect yourself from your creditors and to protect your family home.

These arrangements are working and we have put 100’s of people through the process in the last number of years. In some cases they have already exited the process and they are out the other side and they have started to finally move on with their lives.

There is not a specific profile of an insolvent person as each case is different. For example the problem could be a split loan on a family home that can never be paid, a property portfolio that will never recover, debts or judgements due to a business failure, revenue debts or residual debt left after the sale of a property or development site etc etc.

In my experience most people I meet know they are in trouble they just don’t know how to solve that problem.

I am one of less than 30 active PIPs in Ireland who specialise in the Personal Insolvency Legislation. I would recommend that you contact an active PIP to see how the personal insolvency legislation can help you to resolve your debt problems. The first question I would ask your PIP is how many cases they manage and how many cases they have gotten approved.

If you are struggling to manage your debts and you want to know how to get help then please click on this link www.backontrack.ie Alternatively please send me an email setting out your situation to mark.ryan@quintas.ie and I will get back to you with a plan on how to solve your debt problem.

NEW REPORT ON RESOLVING NON-PERFORMING LOANS IN IRELAND

A new report penned by senior figures in the Central Bank of Ireland titled Resolving Non-Performing Loans in Ireland: 2010-2018 suggests that progress has been made in tackling the issue of long-term mortgage arrears, but admits thousands of people in long-term mortgage arrears are failing to engage with their lenders. Being in long-term arrears is defined as being more than 2 years behind on repayments. Someone in this situation could have resumed payments but still has failed to clear more than 720 days of payments.

The Report revealed the following statistics:

• As at the end of December, 28,946 family home loans have been in arrears for at least 2 years, which represents 60% of all loans in distress for greater than 90 days.
• Of that figure, 44% (about 12,700 at June 2017) have been in arrears for more than five years. This is a 10% increase on the same figure seen one year previously.
• As at the end of 2016, 61% of borrowers in mortgage arrears for greater than 720 days had engaged with their lender with a view to putting a sustainable solution to their distressed loan in place.
• The remaining 39% who have not engaged are in worsening situations according to the Report. This means 4 out of 10 borrowers who are more than 2 years behind on their mortgage have not engaged with their bank.

Whilst the amount of late-stage arrears is decreasing, a significant number of cases remain, and appear to be getting worse. The Central Bank’s approach now is to make non-performing loans its primary focus. While the new report highlights the protections offered to consumers under the Credit Servicing Act and its own Code of Conduct on Mortgage Arrears, the message is clear - if you’re struggling with a mortgage the best solution is to tackle the problem head-on rather than failing to engage.

87% of those loans which have been restructured following engagement with the lender are now performing according to the new report. So, while the situation appears to be improving for those who engage, things are gradually spiralling further out of control for those in long-term distress, with the average length and balances of such arrears increasing.

120,000 mortgages have been restructured in recent years. Meanwhile, since the height of the crash in 2009, 8,195 homes have been surrendered by their owners, mostly voluntarily. 2,722 homes were repossessed following a Court order during that time.

Up to 10,000 customers in mortgage arrears are at risk of losing their family home. Research shows that many of those in longer term arrears have ended up deeper and deeper in debt as they are failing to confront the issue and engage with their lender. In repossession proceedings home owners are in a stronger position where they attend Court and most importantly make monthly payments towards their home loan mortgage based on their affordability. The message of the Courts on numerous occasions is that borrowers need to make some type of payment based on affordability and no payment whatsoever is unacceptable. A non – home owning working tenant must pay rent to his or her landlord just like a person trying to survive on social welfare must pay something towards his or her rent, whether he or she is on social housing or in private rented accommodation. The message here is that engagement is essential in order to tackle debt issues.

If you are in arrears on your family home I can apply for a MABS voucher on your behalf, meet with you face-to-face and advice you of the best course of action in writing. As a Personal Insolvency Practitioner (PIP) my end goal is to keep you in your home where possible.

This is a link to the Report  – https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/resolving-non-performing-loans-in-ireland-2018-(donnery-fitzpatrick-greaney-mccann-and-o'keeffe).pdf?sfvrsn=6

ISI STATISTICS Q4 2017

The ISI published its statistical report covering the fourth quarter of 2017 (Q4).

Key statistics for Quarter 4 2017 (Compared to Q3)

• 15% decrease in new applications to 946;
• 14% increase in Protective Certificates to 581;
• 42% increase In debt solutions to 310;
• 143% increase in bankruptcy cases to 163 (Large increase reflects impact of Court recess during Q3).

  Key Statistics for the full year 2017 (compared to 2016)

• 39% increase in applications to 4,626 - driven primarily by the Abhaile Scheme;
• 23% increase in Protective Certificates to 2,198 - a lead indicator of debtors who will, in time, enter into an Arrangement;
• 13% decrease in arrangements to 1,115 – with Personal Insolvency Arrangements, dealing with mortgage debt, up 5% to 733;
• 10% decrease in bankruptcy cases to 473.

  Key statistics since the launch of the ISI

• ISI dealing with debt of over €9.7 billion;  
• ISI has helped over 5,900 people (2,175 Personal Insolvency Arrangements, 678 Debt Settlement Arrangements, 1,177 Debt Relief Notices and  1,926 bankruptcies).

  Commenting on the statistical report, Mr. Lorcan O’Connor, Director of the ISI, said

“While there are some fluctuations within the statistics, the overall trend continues to point towards more people seeking to avail of the solutions available through the ISI that return insolvent debtors to solvency.  It is encouraging to see more people availing of the Personal Insolvency Arrangement solution – the solution designed to keep people in their homes.  In over 90% of such cases, Personal Insolvency Practitioners have delivered permanent solutions that keep the debtor in their home while also returning them to solvency…………..Mr. O’Connor encouraged anyone with serious debt issues to consult a Personal Insolvency Practitioner “.

This is a link to the ISI Statistics Q4 2017 – http://isi.gov.ie/en/ISI/Q4%20Statistics%20Report%20Final.pdf/Files/Q4%20Statistics%20Report%20Final.pdf

 Yours sincerely:

 Mark Ryan, CPA,

Personal Insolvency Practitioner (PIP),

Director, Quintas

Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.

Mark Ryan has been operating as a PIP since the inception of the Personal Insolvency legislation in 2012. With years of experience in negotiating debt restructures, personal insolvency arrangements and dealing with bankruptcy applications our team can advise you on the best course of action.