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Trending in Lending: The Irish mortgage market

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Trending in Lending: The Irish mortgage market

 In a series of articles, experts at Titlesolv - a leading provider of title insurance and indemnity solutions - explore another element of risk for the lending community: the quandary facing mortgage lenders to the Irish market.

The housing market crash in Ireland created an unprecedented quandary for mortgage lenders.  In February of this year it was widely stated in the Irish press that an expected 26,000 homes would become vacant in 2014, which was swiftly followed by speculation that in excess of 100,000 home repossessions were anticipated in 2014.  
The issue at hand for mortgage lenders was that having been vilified for relaxed lending criteria and over-inflated property valuations, how could they in good faith then seek to realise any income from repossessions precipitated by their own wrong doing? The state of the market was such that without repossessions there could be no follow-on originations. 
In theory, this quandary placed mortgage lenders in the ultimate advantageous position: they could still their hands on repossessions due to societal pressures, whilst concentrating on rebuilding their balance sheets and the transfer or sale of non-performing loans to NAMA and other investors. A number of developments in the lending sector served to fortify the hold position of the mortgage lenders when it came to their back books.
The first element of support for this ‘wait and see’ approach would have been their reliance on the Mortgage Arrears Resolutions Process (MARP), which was implemented in July 2013. Under MARP rules, the lender must not apply to the courts to commence the legal proceedings for repossession until every reasonable effort has been made to agree an alternative arrangement and a specified time period has elapsed.
Following the MARP procedure meant that only a small percentage of the expected repossessions did actually proceed. Moreover, the mortgage lenders could concentrate on private loan portfolio sales to third-party investors who specialise in generating profits from arbitrage on re-performing loans. 
Beyond procedural mechanisms, the law has also worked in the lenders’ favour, although admittedly they would not concede on this viewpoint. The amendment to the Land and Conveyancing Law Reform Bill, which introduced a stay of repossession proceedings if a Personal Insolvency Practitioner could agree a debt servicing plan, would have pre-empted a significant number of repossessions. 
With repossessions kept to a minimum and loan sales more of a feature, all that remains to jump start the originations process and a return to a normalised lending market is an injection of available capital into residential development.
At the moment, there are reasons to be encouraged on this front, with the Bank of Ireland announcing in August that it has made €250 million available for developers and with NAMA announcing the potential to deliver 22,000 new housing units over the coming years.  Introspection, re-performance and measured growth appear to be the order of the day for the Irish mortgage lender and with that comes a degree of cautious optimism. 
Titlesolv is a trading name of London & European Title Insurance Services Limited registered in England & Wales, authorised and regulated by the Financial Conduct Authority.
Attributed to Reema Mannah, Senior Underwriter & Solicitor at Titlesolv

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