MABS and Mortgage Arrears Peoples Experience and Solutions Available Michael Culloty (Social Policy & Communications) MABS ndl Presentation to Housing Agency Conference 24/05/2016
Agenda Present Mortgage Arrears Situation Borrowers Experiences Effects of over-indebtedness Causes of Mortgage debt MABS as Gateway to Dedicated Mortgage Advice(DMA) What is a DMA Case MABS Court Mentor Service Mortgages The Future
Q4-2015 Mortgage Arrears Statistics 88,292 total Mortgages in Arrears - 8.3% 7,481 mortgages in Arrears of 181 days and over 11,745 mortgages in Arrears of 0f 361days and over 36,351 mortgages in arrears of 720 days and over
Psychological Effects of Debt Blame (self/ others) Conflict (partners) Constant tension and worry Denial Fear (of prison) Feeling helpless Frustration Guilt Hopelessness Isolation No end in sight No social life No-one to share anxieties with Pessimism Sense of going mad Shame Vulnerability Sleeplessness Stigma (neighbors) Stress and depression Suicidal tendencies
Psychological Effects of debt contd. I don t sleep. I haven t slept for 18 months. It s a huge worry. When you are under savage stress and strain, you don t see the wood from the trees. It s a real problem doing the basic arithmetic when you are under so much stress I m on anti depressants. I m on sleeping tablets. Anxiety panic attacks, I m not sleeping. That s going on now for about a year and a half. I don t go out any more. I sit at home. I m in my pyjamas at 5 o clock in the evening
Pathway into Mortgage Arrears MABS research on over 3,000 clients (2013) Systems Failures For Majority Key reason was reduction in Income - Unemployment Multiple Indebtedness Unsecured debt consolidated into Secured Sub prime loans ( noted in MABS as a serious casework concern over 10 years ago) Other reasons: Illness, martial breakdown, addiction, failed business etc.
MABS and Mortgage Debt Over 20 years dealing with debt, free independent, confidential In contact with over 45,000 people annually In every community and available face to face in 65 locations Operates a National Helpline 0761 07 2000 ( 9 am to 8pm) ( increase in caller with no money, no food, no accommodation) Experienced, skilled and qualified staff MABS Approved Intermediary Service for the DRN Insolvency option Now MABS As Gateway to Free Mortgage Debt Advice
MABS and Mortgage Debt There is nothing more traumatic than that of a family with children getting thrown out of their home - Horrible Wilbur Ross
MABS and Mortgage Debt In a time of despair the MABS Money Adviser helped me and by extension my young family- to overcome the obstacles that presented themselves. In direct contrast to the behaviour of the callous financial institutions her empathy, understanding and kindness should make your organisation proud
MABS and Mortgage Debt MABS deals with all kinds of debt for all kinds of people Almost 50% of people coming to MABS now have a mortgage 63% clients in receipt of social welfare Most frequent debt categories people approached MABS with in 2015: 1. Personal loans 2. Mortgages 3. Credit Cards 4. utilities
Mortgage Arrears Solutions Available Each lender has a suite of solutions on offer Most common are: Recapitalisation of Arrears Term Extension Split mortgages Interest rate reduction Mortgage to Rent Voluntary Sale /Voluntary surrender Equity ( Vulture ) funds have limited options
Government Initiative MABS as Gateway Government Initiative announced May 2015 greater role for MABS MABS as Gateway to mortgage Debt Advice and support has 4 strands I. New Dedicated Mortgage Arrears Advisors at selected locations nationwide II. Court Mentor Scheme to support clients attending repossession proceedings III. Free legal and Financial Advice Voucher scheme (announced January 2016) Joint Initiative, DoSP, DoJ, CIB, LAB and MABS) IV. MABS Public PIP and Bankruptcy Pilots MABS/ MABS Helpline - 0761 07 2000 All MABS and MABS Helpline as the Gateway to Debt Advice
What is the DMA Advisor Role? Case management of complex and urgent mortgage cases Review and analysis of alternative repayment options Identification and implementation of optimal mutually acceptable, affordable and sustainable solutions in consultation with all parties Implementation of strategies to achieve final resolutions for clients Advocacy negotiation with creditors Facilitation and education of clients to become more financially independent long term
What makes it a DMA case? Mortgage Deemed Unsustainable Client Deemed Not Cooperating Offered an Alternative Repayment Arrangement by their lender Entered into an Alternative Repayment Arrangement (ARA) but has failed to meet the repayments as agreed Clients who have explored insolvency options but are not suitable or have decided against/client aware of but unwilling to explore insolvency
What Makes it a DMA Case contd. Clients who are at any stage of the Pre-Legal or Legal process Complex cases, for example, vulnerable clients, separation cases, multi-banked clients, selfemployed, etc. Not in scope - Pre-arrears, Early arrears cases However, a decision based on timelines, complexity and caseload is made in each case.
Court Mentor MABS advice staff now attend all possession hearings nationwide there is usually ( space permitting) a MABS stand in Court A friendly face who understands what's going on Court Mentor is a point of referral into MABS /ISI Services Can fast-track to DMA if case is urgent Role now established and working very well
Outcomes The family home (PDH), arrears are 10k, total outstanding - almost 300k (29 years remaining.) The mortgage on PDH was with the legal department and they were on the verge of issuing a civil bill through their solicitors client suicidal due to nature of job Initial lender response This is not our problem and MABS should have their own protocols regarding potential suicide cases. Following escalation - a senior individual in the legal department, who gave 2 months to put a case together an ARA has now been put in place The wife had a mortgage on the property she owned before they were married. MABS assisted them with a Voluntary Sale of second property. Sale price 99,000.00 Residual balance 121,000.00 MABS negotiated a deal on the Residual debt, a once off payment or 21,000.00 paid anytime within 7 years. - Secondary debts also addressed
Outcomes Mary has 2 children, she got into mortgage arrears following separation from her husband and income reduction. Legal proceedings were in the advanced stage and client was referred to MABS in the Registrar s Court. When Mary came to MABS she owed 200k on her mortgage and was almost 30k in arrears. An SFS was completed for the lender. There were no secondary debts. MABS established that Mary could afford 550pm. The lender put an arrangement of 550 per month in place for a 6 month trial which Mary paid every month for 6 months. The lender has now offered a long-term ARA based on the amount Mary can afford; the mortgage term has been extended, an amount of her mortgage has been warehoused and an amount of her mortgage has also been written-off. Mary has accepted the ARA. The case was struck out of court.
How do MABS measure success? I. Client Engagement some clients coming after 5 years of ignoring difficulty II. Sustainable arrangements everyone has to be realistic III. MTR if possible IV. Insolvency if appropriate V. Where home must be sold minimising residual debt VI. Where home must be sold preventing homelessness. Unfortunately there has been a lot of misinformation and some bad third party advice and not every situation will have a positive out come for the client MABS role is to achieve a resolution that is acceptable to all parties and, where that is not possible, to minimise the adverse impacts on the client
Mortgages the future Bring about cultural change in the industry which places the consumer at its centre increased oversight in this regard Lending limits Appropriate loan-to-value(ltv) and loan-to-income (LTI) levels Introduce the concept of Irresponsible lending in the Consumer Protection Code Ensure that borrowers fully understand the terms and conditions and the risks involved Availability of good generic financial information, education and advice beginning with money management education in our schools Improve the security of tenure in the rental sector
Big Messages MABS is the Gateway to Debt Advice The DMA MABS is a new, added-value service available for free from MABS If you can t talk to your lender talk to MABS Tell everyone you know about it they may have a problem and haven t yet found a solution Call the MABS Helpline 0761 07 2000 Monday to Friday 9am to 8pm