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Central Bank’s arrears figure ‘overstated by a huge amount’

The Central Bank has been producing data that “grossly” overstates mortgage arrears, calling into question a raft of home repossessions.

Statisticians in the bank have admitted there is a problem, and are set to change how they calculate missed payments.

They have been accused of producing “grossly exaggerated” mortgage arrears figures.

It means that the official figures overstate the amounts of money people actually owe.

The issue stems from the way vulture funds treat arrears data.

Experts say the revelation could have huge implications for people facing repossession of their homes.

People may lose their homes if a judge is told their arrears are higher than they actually are, experts warned.

Inflating of the figures does not appear to have an impact on the numbers of homeowners behind on payments, but does exaggerate the amount they owe.

Founder of the website Brendan Burgess discovered the problem, which he said throws the entire system for measuring arrears into doubt.

Earlier this month, the Central Bank produced figures showing almost 5,000 residential mortgages owed to vultures were in arrears for more than two years. The arrears owed total some €834m.

But the Central Bank has now admitted that its quarterly publications on arrears are “not providing the full picture of the underlying arrears on the loan”.

“They are admitting their figures are overstated. In fact, they are grossly exaggerated,” Mr Burgess said.

The problem stems from the fact the Central Bank is following controversial calculations of arrears used by vulture funds.

This involves counting an entire loan as being in arrears if it is called in by the lender.

Mr Burgess gave an example of someone who has a mortgage of €100,000, but they are €10,000 in arrears.

If the vulture fund decides to call in the loan, it treats the entire loan as being arrears.

This means the amount of arrears effectively balloons overnight from €10,000 to €110,000.

“This is not what the ordinary woman in the street understands by arrears,” he said.

Mr Burgess added: “The Central Bank figures show that the total arrears for customers over two years in arrears amounted to €1.9bn. It’s hard to know the correct figure, but I would say it’s overstated by about €500m – a huge amount.”

The revelations come after Start Mortgages and vulture fund Tanager were recently forced to admit they were making mistakes in how they calculate arrears owed by mortgage holders.

The Central Bank admitted there is a problem.

It said it would be changing its calculation methods used for arrears of unregulated loan owners, or vulture funds.

It now believes “that recording loans fully in arrears due to full loan demand is not providing a full picture of the underlying arrears on the loan”.

“The consistent treatment recording of arrears across all loan owners is a priority and we will be clarifying the treatment and requesting revision where appropriate,” a spokeswoman said.

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