This article was originally published by The Business Post.
Over the last number of years, there has been much focus on family homes that are in mortgage arrears. This is a major issue facing Ireland still and over 30,000 family home loan accounts remain in arrears of two years or more. Included in these are thousands of families dotted around rural Ireland and the farming community are worst affected.
For a farmer in mortgage arrears, it is not just the family home that is at risk: it also includes the family business, income and livelihood, often for a number of family members. Intertwined in this are generations of family history and heritage – nobody wants to be part of the generation that lost the family land.
These factors make resolving debt problems for the farming community complex, difficult and exceptionally emotional. It also means that one-size-fits-all solutions simply don’t work, yet banks have conveniently chosen to ignore this.
Boomtime lending focused on assets, not income, so agri-lending was very attractive to many banks. Many loans were given to farmers based on them selling perhaps a site or part of the farm. Given the massive drop in values, that now means the whole farm or more would have to be sold to cover the debt.
Farming is a local business, and banking used to be. Farmers thought they had a relationship with the local bank manager for the overdraft out of season, or the stock loan, or the loan for machinery. That has now gone and instead farmers are thrown into a central bank unit with no experience or knowledge of their specific circumstances. The opportunity to simply call into a known face in a branch for help in dealing with whatever issue arises has been replaced by a confusing cocktail of call centres, online forms and constantly changing names and voices.
As mainstream banks begin moving on their impaired loans, we will soon see farm-connected loans sold. As with residential loans, dealing with a bank is difficult enough, but dealing with a vulture fund is much worse. Whatever interest banks have in providing banking services to farmers as business customers, vulture funds have no knowledge of the sector and, frankly, zero interest.
Take the specific example of the old Agricultural Credit Corporation (ACC). Set up in 1927, it was one of the first creations of the Irish Free State. Established with a mandate to lend to and support the agricultural sector, it did so very successfully until 2002 when it became part of Rabobank. The rest, unfortunately, we all know. However, for a farmer in their 40s, 50s or 60s, the experience of 2002 – or 1992 – is long gone and they have been thrust from a business centre in Mullingar or Sligo or Drogheda to the call centre of a servicing agent which is not equipped to deal with the issues.
Those who have met and tried to negotiate with vulture funds and their agents and explained the challenges, the needs and the complicated structures involved in farming, know the lack of understanding shown to farmers.
As more loans are sold to vulture funds, farmers will be destroyed. This will affect the heart of rural Ireland and steps must be taken to avoid it.
Farmers have a number of unique issues:
- There are family homes that are on land that is being farmed, and that has been handed down from parents
- Some sons and daughters have built homes on this land
- The land is being farmed and is needed for an income.
I believe a set of specific restructuring solutions is required for farmers, such as:
- annual payments to take account of seasonality
- family members must be given first refusal to buy assets at market value
- family members should be allowed contribute to payments – this is not currently allowed as only those whose name the debt is in must show affordability.
Banks currently control much farm-related debt. Those borrowers who don’t engage and try to have their indebtedness resolved will, I fear, end up sooner rather than later having their loans sold to vulture funds. These people have only one goal, to take the assets and sell them to realise cash and profit.
Concerted, organised and professional action should be taken by affected farmers now. There is no point relying on the pontificating of Dublin 2, 4 or 6 vulture lovers.
The first step should be to send them a copy of The Field and let them know that life won’t be made easy. The government has form in facilitating the sale of loans to vulture funds. They need now to act with farming representative bodies to move to protect farmers. This will get ugly. If you are a farmer and have loans with a mainstream lender it would be an idea to seek independent help and engage with them while your loan is with them.
David Hall is chief executive of the Irish Mortgage Holders Organisation