Originally published in The Irish Times, 03/05/2017
David Hall isn’t everyone’s cup of tea. In his role with the Irish Mortgage Holders’ Organisation, he has irritated a lot of bankers, regulators and politicians with his loudhailer approach to negotiations on loan arrears.
He can sometimes push the argument too far – and some wonder why he does this unpaid work. For a long time it was presumed that his work for the IMHO was a dry run at a career in politics.
He stood as an independent in a byelection for the Dublin West constituency in 2014, getting 3,800 first-preference vote. He didn’t win the seat and he chose not to run in last year’s general election.
Whatever his critics might say, there’s no doubting that Hall and the IMHO have helped thousands of Irish mortgage holders in recent years to deal with the stresses and strains of dealing with their loan arrears and the prospect of losing their homes.
He also persuaded AIB and KBC to pay for joint ventures with the IMHO to allow arrears customers use the organisation as a go-between in their negotiations with the bank.
Separately, he did good work last year as interim chief executive of Console, the suicide charity at the centre of a scandal over financial irregularities.
However, all of this will be overshadowed if he achieves his goal of establishing an entity that would buy distressed mortgage loans off the banks, and possibly from the so-called vulture funds, with a view to allowing the families who are in arrears with their payments to remain in their homes.
It’s a complex undertaking and one that has been in gestation for the best part of a year. Hall has so far declined to provide the precise details but it would seem that there would be two sides to the coin.
One would involve people that are eligible for social housing agreeing to have their home purchased by Hall’s approved housing body.
It would then be rented back to them at an agreed rate that would be met, in full or large part, by the State or local authorities. The tenants would have an option to buy the house back in the future if their circumstances improved and other conditions were met.
With no social housing being built, there is a huge cost to the State if these people become homeless. So this might be a workable solution to what is undoubtedly a ticking bomb waiting to go off.
The other would involve Hall’s body – called I Care Housing – negotiating to buy loans at a haircut from a bank and then restructuring them for the borrower at a level that was affordable.
This would have the twin benefit of allowing the banks to purge their books of some of their problem residential loans, for which they have already taken substantial provisions. And it would get the European Central Bank off their backs.
The rate of non-performing loans in Ireland remains elevated – 14.2 per cent last September versus a European average of 5.4 per cent – in spite of portfolio sales, disposals and other actions taken in recent years.
The ECB wants them to finally stop kicking the can down the road and deal with the issue in a meaningful way.
Minister for Housing Simon Coveney is thought to be looped into these discussions, and Hall is expected to unveil his plan in the coming four to six weeks.
Deals with banks
My understanding is that he’s had advanced discussions with most of the banks here, and some of the private equity owners of loans. The view is that AIB, which is 99.9 per cent State-owned, could be one of the first to cut a deal.
This would fit nicely with the timetable for AIB’s stock market share sale by the Government.
However, the road ahead for Hall is filled with potholes.
The plan, if fully executed, would require more than €1 billion in financing. Hall is believed to be exploring every potential avenue for funds, including the State’s Housing Finance Agency, the European Investment Bank, pension funds and financial institutions.
The cost of funds is ultra-low right now but the multiyear nature of this project means it is far from risk-free.
Hundreds if not thousands of homeowners would also have to consent to relinquishing ownership of their homes to become tenants of Hall’s entity. Easier said than done.
And Hall will surely only want borrowers who are guaranteed to repay their loans. His title as the people’s champion would be lost with the first forced house repossession to secure I Care Housing’s collateral.
Hall’s legacy as a debtor advocate will be cemented if he successfully pulls this off. And he is to be commended for his vision and drive in putting a plan together to tackle what is undoubtedly a blight on our society.
But he needs to skilfully manage the whole process to avoid simply inheriting all of the banks’ problems. Otherwise, he could end up tearing out what little hair he has left.