14/05/2013 Spotlight


14/05/2013

Investigating stories affecting life in Northern Ireland. Ciaran Tracey examines the negative equity crash and the quiet deals the banks are doing to try to write it off.


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Transcript


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now, many of us are bust. Homes bought at the peak of lost more than

:00:10.:00:17.

50% of their value. The middle-class is bust.

:00:17.:00:23.

Five years ago, people here broke off �8 million in bankruptcies. In

:00:24.:00:31.

2012 it was closer to 1 billion. I don't want to go bankrupt.

:00:31.:00:34.

Record numbers are filing for insolvency and the rate here is

:00:34.:00:39.

writing faster than anywhere else in the UK.

:00:39.:00:43.

You've got just over �11,000 worth of debt and that will take you nine

:00:43.:00:50.

years to pay off. But not everyone is facing live in.

:00:50.:00:54.

They are finding the banks can shrink their debt.

:00:54.:01:00.

If you are running a bank, you are not going to be advertising it.

:01:00.:01:03.

Our finance minister says Northern Ireland's biggest bank is making it

:01:03.:01:07.

worse. Unless we are going to do something

:01:07.:01:11.

radical, we are going to be completely inadequate. The debts we

:01:11.:01:14.

have racked up are strangling our economy and there could be worse to

:01:14.:01:24.
:01:24.:01:44.

self-employed plumber, trying to make ends meet. He's got a big

:01:44.:01:49.

mortgage but little work. This year is slow. I'm pricing a lot

:01:49.:01:54.

of work but there are so many boys pressing against you and its

:01:54.:02:04.
:02:04.:02:04.

Like many people, Gary and his wife Louise bought a house at the height

:02:05.:02:14.
:02:15.:02:15.

of the boom in 2007. What is the job today? Power flush.They took out a

:02:15.:02:18.

massive interest only mortgage. That has become a problem because work is

:02:18.:02:24.

scarce. Everyone has been led to believe that you have to have a

:02:24.:02:27.

house and this didn't happen overnight. I think it is British

:02:27.:02:34.

culture. We were taught that you can't lose rix and water -- bricks

:02:34.:02:40.

and mortar. Gary's problems are to do with his mortgage problems. He

:02:40.:02:44.

hasn't wrapped up debts through credit cards or other loans. He is

:02:44.:02:48.

trapped. He can't sell his house because it is worth less than he

:02:48.:02:53.

paid for its mortgage. He is in negative equity. Just to put it in

:02:53.:02:57.

perspective for us, roughly how much did it cost when you bought it.

:02:57.:03:05.

has cost 240 and we took a mortgage for 190. So you have a mortgage for

:03:05.:03:15.

190. 190 plus arrears so we are not far off 200. What is the latest

:03:15.:03:20.

estimate of what the house is worth? One of the houses in the

:03:20.:03:27.

street sold for 115 recently. that is �75,000 negative equity.

:03:27.:03:31.

His problems began when his wife had to leave work after developing

:03:31.:03:40.

breast cancer and had to leave. It meant the family income was cut.

:03:40.:03:44.

thought, everyone told me we'd be OK and we would a payment break will

:03:44.:03:49.

stop it was in the contract. She was seven months out of work before she

:03:49.:03:55.

went back to work. They just said no because of the negative equity.

:03:55.:03:59.

loss of income coupled with the downturn in Gary's business has

:03:59.:04:02.

meant the family couldn't cope with the mortgage and they have given up

:04:02.:04:06.

even trying to make their monthly payments. You have gone into

:04:06.:04:14.

arrears? I am baked into arrears.It means the company that gave him the

:04:14.:04:18.

mortgage could repossess Gary's home but that wouldn't mean he would be

:04:18.:04:22.

free of the debt. If there was repossessed, he would still owe what

:04:22.:04:29.

was left on the mortgage she took out. Gary doesn't know what to do.

:04:29.:04:36.

It does get on top of you. Does. We are in the position to move and we

:04:36.:04:41.

have done it. We didn't know this would happen.

:04:41.:04:48.

Gary's situation is the story of Northern Ireland in 20 2013. Houses

:04:48.:04:52.

have plummeted in value. There is a lot of water and of the bridge since

:04:52.:04:58.

then. As prices have fallen further than anywhere else in the UK. Down

:04:58.:05:01.

over 50% from the peak. It has been up to charity workers to deal with

:05:01.:05:07.

the pain that it has caused. This is the man on the street, this

:05:07.:05:11.

is every third person you meet. Depending on what their

:05:11.:05:14.

circumstances are, what they were working at when things were good and

:05:14.:05:19.

there was a lot of money and a lot of jobs and overtime, people did

:05:19.:05:25.

chase the dream. With the collapse of the economy in recent times, in

:05:25.:05:31.

the recession, a lot of people are left very overcommitted.

:05:31.:05:34.

Gerard shares his workplace with citizens advice, which has seen

:05:34.:05:38.

rises in people seeking help for debts. This is one of Northern

:05:38.:05:43.

Ireland's debt hotspots. The number of people coming through its doors

:05:43.:05:46.

have quadrupled over the last four years.

:05:46.:05:52.

Probably the biggest amount of debt back then would have been 3000 or

:05:52.:05:57.

�4000. We would have seen debt rise from the average amount of debt

:05:57.:06:00.

could be �100,000 per person. Especially if you see people with

:06:00.:06:06.

maybe two cars, a home and perhaps a second home they are renting out. We

:06:06.:06:13.

have found where many have gone from thousand pounds income a week to

:06:13.:06:18.

just a couple of hundred pounds. What is your reaction to people

:06:18.:06:24.

saying they are �100 in debt? Typically, it doesn't raise and

:06:24.:06:29.

eyebrow. They are recommending in many cases

:06:29.:06:34.

that people declare themselves insolvent. Over 3200 people declared

:06:34.:06:44.
:06:44.:06:46.

themselves officially broke last access to the figures that show the

:06:46.:06:52.

true extent of this problem. In the last two years, just under �1.7

:06:52.:06:56.

billion has been written off in personal bankruptcies in Northern

:06:56.:07:04.

Ireland. There are a handful of big visual losses in there but to put it

:07:04.:07:09.

in perspective, the figure 2008 was �8 million will stop for years

:07:09.:07:13.

later, it was almost one billion and at the heart of it is property gone

:07:13.:07:20.

badly wrong. Across the border, a colossal amount of property debt is

:07:20.:07:24.

being shouldered by ordinary borrowers. Is the story of

:07:24.:07:30.

Ireland's economic collapse. But even in that context, one leading

:07:30.:07:33.

economist there says the debt weighing on people in the Ireland is

:07:33.:07:41.

shocking. The scale of the personal debt problem in Northern Ireland is

:07:41.:07:46.

surprising. It is �1 billion of write-offs. It is without a shadow

:07:46.:07:52.

of a doubt the single biggest financial issue facing the North.

:07:52.:07:58.

How do you deal with the fact that you have almost �1 billion already

:07:58.:08:04.

of debt written off? This is out of control.

:08:04.:08:07.

It was a lending and spending spree that got us here but now properties

:08:07.:08:11.

bought at the height of the market are worth nothing like they were.

:08:11.:08:16.

Northern Ireland has seen the value of some homes cut in half.

:08:17.:08:20.

The middle-class is bust and by that I mean it is the same in the North

:08:20.:08:24.

as well, if you look at the balance sheet the middle-class. On one side,

:08:24.:08:29.

the assets are houses which have collapsed in value and the liability

:08:29.:08:35.

side of the debts of which remain fixed. And that is the personal

:08:35.:08:40.

insolvency nightmare here. As with many in Northern Ireland, it

:08:40.:08:45.

is a nightmare which Gary knows only too well. It has bought into the

:08:45.:08:49.

brink bankruptcy. He is trying to negotiate with his mortgage provider

:08:49.:08:54.

but said it is no use. Just before Christmas I realise I

:08:54.:08:59.

had to do something done about this stop I type 2% to negotiate with me

:08:59.:09:07.

but I am dealing with a call centre and they are just reading a script.

:09:07.:09:10.

They can only answer using the script.

:09:10.:09:15.

There are few answers. Financial advisers tell him to get himself

:09:15.:09:21.

insolvent but he still doesn't want to do it.

:09:21.:09:28.

Three financial advisers told me to walk away. What does that mean? Hand

:09:28.:09:32.

the keys in and start again. I want to still do a deal. I want to keep

:09:32.:09:36.

the house. I don't want to go bankrupt. That is the last thing I

:09:36.:09:41.

want to do. For the majority, bankruptcy is a

:09:41.:09:45.

life changing event. Being insolvent ribbons people's ability should

:09:45.:09:50.

borrow and fewer people can spend. That hits the economy. It is a debt

:09:50.:09:55.

spiral and is wobbly our finance minister. -- worrying our finance

:09:55.:10:01.

minister. It depresses the economy further and

:10:01.:10:04.

the more you do that the more people lose their jobs and are more likely

:10:04.:10:09.

to become in solvent and the less money is spent so businesses find it

:10:09.:10:13.

more difficult. And that is what is happening.

:10:13.:10:19.

Advice worker Rosemary McDonald is finding increasing number of small

:10:19.:10:25.

businesses going to the wall. These are people who might own the

:10:25.:10:29.

local newsagents, a cafe, a small restaurant. They are the hardware

:10:29.:10:35.

shop owners. The ideology is a after a year we are all right. These

:10:35.:10:38.

people were never set up the game because they have been so battered

:10:38.:10:43.

into the ground and they will not set up again.

:10:43.:10:46.

Banks are now coming under scrutiny for the role they are playing in the

:10:46.:10:49.

debts nightmare. There is concern that heavily indebted banks are

:10:49.:10:53.

calling in what is into them at a time when they are supposed to be

:10:53.:10:56.

lending will stop our finance minister believes Northern

:10:56.:11:00.

Ireland's display is especially aggressive in trying to balance its

:11:00.:11:06.

books. In some circumstances, in order to

:11:06.:11:12.

try and repair the balance sheet, they were going after those

:11:12.:11:15.

companies who were most likely to be able to work their way out of debt

:11:15.:11:21.

if they were given time and saying, we want it from you now. There is an

:11:21.:11:25.

asset which is earning you money at present. So it and get rid of it. If

:11:25.:11:31.

us the money for it. Ulster bank says it can't lend

:11:31.:11:36.

indefinitely to businesses which it believes aren't viable. However, our

:11:36.:11:41.

finance minister has a radical suggestion for Ulster bank. He wants

:11:41.:11:46.

it to be broken up and its bad debt - off to stop it squeezing hard up

:11:46.:11:56.
:11:56.:12:00.

clients for cash. They do have bad property loans. If you want to have

:12:00.:12:04.

a being able to operate as a viable bank then you have got to somehow

:12:04.:12:08.

separate out these bad property loans which strike their profits

:12:08.:12:17.

down every year. It is a radical solution. Unless we do something

:12:17.:12:20.

fairly radical we are going to stumble along with a banking system

:12:20.:12:30.
:12:30.:12:30.

which is totally inadequate. Given the importance of Ulster Bank to the

:12:30.:12:37.

economy, that is going to curtail economic growth in the private

:12:37.:12:46.

sector very badly in the future. future is a long way off for the

:12:46.:12:49.

many people struggling with debt in Northern Ireland. They want rid of

:12:49.:12:59.
:12:59.:13:01.

it. The cleanest break is often to just go bankrupt.

:13:01.:13:10.

Good morning. This person works for a charity

:13:10.:13:17.

which shows people what to do when they get over their heads in debt.

:13:18.:13:23.

There is not a typical person. she has agreed to bring us on a

:13:23.:13:26.

visit to a client who has racked up a serious amount of debt, not

:13:26.:13:32.

through property, but through credit cards and payday loans and has

:13:32.:13:40.

decided to declare herself insolvent.

:13:40.:13:50.
:13:50.:13:51.

I had to give everything up. I have had to sell things. I had to pawn my

:13:51.:14:01.
:14:01.:14:01.

camera. How much did you get for it? �50. You had to pawn your camera to

:14:01.:14:11.
:14:11.:14:16.

buy food? Yes, but you have to eat. Her situation means she must hear

:14:16.:14:22.

stark advice. You have got �11,000 worth of debt. That will take you

:14:22.:14:27.

nine years to pay off. We do not believe that is a realistic time to

:14:27.:14:34.

live on a tight budget. Our advice is contained in this letter. We

:14:34.:14:42.

suggest our debt relief order. Uptake of debt relief orders is

:14:42.:14:47.

rocketing. It is a new kind of mini bankruptcy. There are strict

:14:47.:14:57.
:14:57.:15:00.

conditions. It is for people who get off under �15,000. It is quite a

:15:00.:15:10.

quick way to become debt free. It works very well. This person says

:15:10.:15:17.

her debt relief order means she can pick up her life the past it. - -

:15:17.:15:27.
:15:27.:15:32.

free from past debt will stop - -. can start living again. I will feel

:15:32.:15:42.
:15:42.:15:51.

better about myself. I hear, and a meal. I do not want at things. - - a

:15:52.:16:01.

haircut. But these arrangements are not suitable for bigger debts such

:16:01.:16:06.

as mortgages. This adviser says he has never been easier. He aims to

:16:06.:16:16.
:16:16.:16:17.

keep people out of bankruptcy. typical client will have �30,000 or

:16:17.:16:23.

�40,000 of debt. We will look at the income and the expenditure. We will

:16:23.:16:27.

look to see if they have something available to offer to creditors,

:16:28.:16:37.
:16:38.:16:38.

should it be �200 per month. They pay at over five years. That is used

:16:38.:16:42.

in full and final settlement of their debt. I have come to meet one

:16:42.:16:45.

person who says he found life like this and tolerable. - -

:16:45.:16:55.
:16:55.:16:59.

intolerable. He was advised to take the IVA route. He wants to remain

:16:59.:17:06.

anonymous. It sounded good at the time. After I year it was very

:17:06.:17:10.

difficult to maintain the payments every month with the constant Big

:17:10.:17:18.

Brother approach. Some of the questions went down to what you

:17:18.:17:22.

spent on your lunch on a daily basis, what it costs to capture

:17:22.:17:30.

here. - - what it costs to cut your ear. What pocket money you give to

:17:30.:17:37.

your children. He said the payments were so demanding that he could not

:17:37.:17:41.

afford them. They fell into arrears. As a consequence he was made

:17:41.:17:48.

bankrupt a few weeks ago - the thing he tried to avoid. I spent two and a

:17:48.:17:54.

half years in insolvency, culminating in bankruptcy. I would

:17:54.:17:57.

never want to relive those years again. I have been declared

:17:57.:18:06.

bankrupt. At this minute in time I feel more comfortable with my life.

:18:06.:18:13.

I can take it forward. Other than the terrible stigma of having to

:18:13.:18:20.

admit you are bankrupt. To sit in front of you anonymously shows that

:18:20.:18:26.

the stigma is very real. Talking about the scale of your debts is not

:18:26.:18:30.

just a stigma for people like him. Our politicians have been keeping

:18:30.:18:40.
:18:40.:18:43.

quiet about the billion pounds black hole we have discovered.

:18:43.:18:48.

In the south this is the daily talk. In the north you could swear that

:18:48.:18:58.
:18:58.:18:59.

none of this is happening. Why would I inject into the economy of

:18:59.:19:05.

Northern Ireland further uncertainty and further alarm Western Mark my

:19:05.:19:13.

job is to build confidence in the economy. If you destroy confidence

:19:13.:19:18.

you destroy the willingness of people to spend. You destroy their

:19:18.:19:22.

willingness to invest. You destroy their willingness to start new

:19:22.:19:26.

businesses. You make the situation worse. I want to make the situation

:19:26.:19:32.

better. How do you deal with the problem is big? Official insolvency

:19:32.:19:36.

is designed to happen element of Hannah spent, but with the scale of

:19:36.:19:40.

the debt now in the system some say that approach has to be put aside

:19:40.:19:45.

and instead lenders should be showing what is called debt

:19:45.:19:49.

forgiveness. You have to have debt forgiveness. The idea that you went

:19:49.:19:56.

me money and you do no credit checks and the reason you are lending the

:19:56.:20:01.

money is because the man over there bulb went if you do not, and I go

:20:01.:20:06.

off, and I come back in a few years time and say I lost my job and the

:20:06.:20:12.

house is worth 50% less, the notion that you expect to get paid back in

:20:12.:20:17.

full is ludicrous. Sammy Wilson agrees to an extent. As our soaring

:20:17.:20:21.

debt levels show ordinary people have little hope of being back what

:20:21.:20:26.

they all in full. It turns out he has even told banks in Northern

:20:26.:20:31.

Ireland he wants to see debt forgiveness. That is an issue that

:20:31.:20:38.

they were not madly keen on as I am sure you will understand. Who steps

:20:38.:20:48.
:20:48.:20:49.

do you forgive? - - whose debts. But it is an issue we must increasingly

:20:49.:20:53.

look at. Debt forgiveness means sidestepping penalties caused by

:20:53.:21:03.
:21:03.:21:06.

insolvency. This is something anchors refer to as our rates down.

:21:06.:21:16.
:21:16.:21:23.

I cannot pay it. You went too much money. Let us do a deal. End of.

:21:23.:21:27.

At the moment who gives debt forgiveness? We asked the big banks.

:21:27.:21:31.

Each of them said they were willing to work with customers in trouble,

:21:31.:21:38.

but after that information was then. One bank said it is not right down

:21:38.:21:44.

any debts. Two other banks said in exceptional circumstances they do.

:21:44.:21:50.

The others would not give a direct answer. We found out that those

:21:50.:21:53.

other banks are doing it, but it is done quietly and behind closed

:21:53.:21:58.

doors. There does appear to be a discrepancy in the way banks deal

:21:58.:22:07.

with it. In some cases people are being left alone. Others who do not

:22:07.:22:15.

all as much but have got a viable business are being tortured.

:22:15.:22:23.

Ironically they are the ones who can test whether the storms. Without a

:22:23.:22:28.

clear system for testing debt forgiveness it is all about who you

:22:28.:22:33.

know. There are people who now claim they can get it for you. It seems to

:22:33.:22:38.

be a sensational thing to say that banks are writing off debts. For

:22:38.:22:44.

hundreds of years banks have been writing off debts. If you are in the

:22:44.:22:48.

moneylending game it comes with the territory. If you are running a bank

:22:48.:22:52.

you will not be advertising that that is what you are doing. So many

:22:52.:22:56.

people are in difficulty in Northern Ireland that this company is doing

:22:56.:23:02.

business arranging quiet get deals with Hanks. In the Dublin office he

:23:02.:23:12.
:23:12.:23:15.

is working with our rogue trader who has now joined him cutting deals.

:23:15.:23:19.

In 1995 this man was jailed for causing the spectacular collapse of

:23:19.:23:24.

a bank. He is now based in the Republic and says it is time for the

:23:24.:23:28.

banks to get real. At some stage banks know that these loans are

:23:28.:23:38.
:23:38.:23:39.

never going to be repaid. The amount that was lent is just preposterous.

:23:39.:23:42.

They are never going to be able to recover that sum of money. Something

:23:42.:23:52.
:23:52.:23:56.

has to be done. But involves an element of right down.

:23:56.:24:06.
:24:06.:24:07.

- - of write down will stop - -. These clients are getting debt

:24:07.:24:14.

forgiveness and the rest are not. That is probably true. If you are

:24:14.:24:20.

willing to communicate with the bank in a meaningful manner, and it has

:24:20.:24:25.

to be professional, there is no point walking into a bank and asking

:24:25.:24:33.

for everything. Back in the home that has caused so much trouble with

:24:33.:24:39.

his lender, Gary does not have so much choice.

:24:39.:24:44.

All the debt we have is because of this. All of this is a massive

:24:45.:24:54.
:24:55.:25:07.

debts. Yes.How does that feel? love the house. It is hard. Gary

:25:07.:25:13.

says he is disappointed that banks and lenders seem to have one

:25:13.:25:18.

approach for some and a different one for others like him stop if I

:25:18.:25:22.

had a deal like that in the next few months it would relieve so much

:25:22.:25:26.

pressure. Is it right that some get these deals and some don't? It is

:25:26.:25:32.

not right. They can't pick and choose who they are going to help.

:25:32.:25:39.

That is not right. This stalemate people like Gary find themselves in

:25:39.:25:44.

underscores the need for a system of yet forgiveness. - - debt

:25:44.:25:50.

forgiveness. You need to have an overarching

:25:50.:25:56.

system which speaks to the smaller people, the people who got into

:25:56.:26:01.

negative equity because they were trying to do the right thing. The

:26:01.:26:07.

people with 10,000, they are the economy. They make the economy work.

:26:07.:26:13.

But it is exactly those all who may be in for one more shock. News last

:26:13.:26:16.

week that there had been a slight increase in house prices here was

:26:16.:26:21.

greeted as a sign that horrors might be starting the journey out of

:26:21.:26:31.
:26:31.:26:35.

negative equity. - - that borrowers might be starting.

:26:35.:26:39.

They have six years to pursue that. I suspect what they are doing is

:26:39.:26:45.

waiting to see if and how the circumstances of the client will

:26:45.:26:49.

improve in order that they may be a chance that they may get some of the

:26:49.:26:56.

money back. This insolvency worker agrees. He says he has seen the

:26:56.:27:00.

unfortunate consequence of recovery before. There will be an increase in

:27:00.:27:05.

insolvencies. It will be six months after we see the recovery. That is

:27:05.:27:15.
:27:15.:27:17.

because predators begin taking action at that stage. Hopefully not.

:27:17.:27:22.

For those who have already felt the full force of insolvency, what they

:27:22.:27:27.

have lost and married, they say they have gained in wisdom it is not

:27:27.:27:34.

worth worrying about it. Do not worry about the stigma. You have to

:27:34.:27:41.

start living again. You cannot be like me and to shut yourself away.

:27:41.:27:46.

People say that he has lost his car. But once you have crossed that

:27:46.:27:53.

bridge life moves on. Like so many with debt problems in Northern

:27:53.:27:59.

Ireland Gary is living more in hope than expectation. I still hope to

:27:59.:28:09.
:28:09.:28:12.

Ciaran Tracey investigates Northern Ireland's personal debt crisis, examining the negative equity crash and the quiet deals the banks are doing to try to write it off.


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