From an international perspective, very few Dutch homeowners fall behind in their mortgage payments. To a large extent, this is related to the responsible payment ethics in the Netherlands, but also to the efforts of mortgage lenders to prevent these arrears. Jan-Paul Hendriks (Novalink), Patricia van Barneveld (Hypocasso) and Will Keuren (the Homeownership Guarantee Fund in the Netherlands) talk about how they deal with arrears and preventive management. During these interviews, one thing immediately becomes clear: what really helps – and prevents anything worse – is personal contact!
The number of mortgage payment problems in the Netherlands is low*. As of 1 April 2017, the Central Credit Registration Office (BKR) listed 98,000 people who were behind in their mortgage payment. The responsible payment ethics of the Dutch are determined in part by their culture. But the low percentage of homeowners with mortgage payment problems is also the result of Dutch mortgage and bankruptcy law: a solid system of social security provisions. Another significant factor in preventing these arrears is preventive management.
The Dutch National Mortgage Guarantee (NHG) is one of the provisions in the system that contributes to the limitation of these late mortgage payments. A substantial percentage of Dutch mortgages is financed with the NHG: in 2016, 74% of the mortgages under the price ceiling (245,000 euros). This involved 118,700 households. With the NHG, the Homeownership Gurantee Fund (WEW) focuses on enabling as many people as possible to own, improve and remain in their own home – and to do so in a financially responsible way. The WEW’s guarantee contract also provides the mortgage lender with security should the homeowner become unable to meet his/her mortgage obligations due to an unfortunate life event. Should a life event such as a divorce result in a forced home sale, the returns on the sale might be less than the mortgage sum. In such a case, the mortgage lender can appeal to the WEW for the remaining debt.
Will Keuren is in charge of mortgage management at the WEW. ‘We’ve always been very much involved in preventive management for our clients,’ he says. ‘The WEW is very focused on making it possible for homeowners to remain in their homes. This is why our main tool is prevention: preventing or limiting payment problems. To do this, we use both our own and externally gathered data to create a risk assessment. We also developed a set of measures that we make available to the market/mortgage lenders. These include postponing payment or providing a haircut scheme, which involves a one-off partial repayment of the mortgage made by the WEW. We also offer coaching as one of our prevention measures: budget coaching to help our clients enhance their financial skills, and job coaching to support homeowners who have either lost their job or are being faced with this possibility. These are ways we help homeowners and also mortgage lenders to fulfil their legal obligations and to maintain a sustainable customer relationship.’
Various companies on the Dutch mortgage market are commissioned by mortgage lenders to engage in preventive management and arrears management. Two of these are Hypocasso and Novalink. Hypocasso, an independent subsidiary of Stater, specialises in preventive management. Director of Hypocasso, Patricia van Barneveld, explains: ‘We developed a model based on a number of factors that predict whether a client will run a high risk of payment problems. We approach these higher-risk people by means of a general letter telling about our services. We also offer easily accessible help for possible payment difficulties or unfortunate life events such as a divorce or the loss of employment. Needless to say, these letters are written simply and clearly with the target group in mind. In almost all cases, our service centre contacts these homeowners. This also applies to people who are actually late in making their mortgage payments. In approaching clients, Hypocasso makes use of insights from behavioural science. By rewarding clients for their efforts, they are more intrinsically motivated to engage in arranging payments. This also means that we always send a thank-you letter once the client has met his/her obligations of the arrangement. And we immediately make the client an offer of additional assistance: ‘should another problem crop up, please don’t hesitate to contact us’. Six months later, we send a message saying we are pleased that things are still going well for them. With this approach, we solve 90% of the payment problems within 30 days and 97% within 90 days.’
Managing Director of Novalink, Jan-Paul Hendriks, endorses this approach. ‘A personal approach to people with payment problems produces better results. We are commissioned by banks and other financial institutions to help people who are experiencing problems with repaying their mortgage. We do this by means of preventive management that involves making a risk assessment based on the client’s entire portfolio. Were there previous problems with lenders? Will someone be retiring soon? Does someone have highly unprofitable investment policies? If so, we will initiate contact with this client.’
‘When it comes to an actual late payment, the Netherlands has one of the lowest figures in the world,’ Hendriks continues. ‘The US and England, for example, have ten times this number*. Among our clients, it’s often a single incident. In the case of an actual late payment, our first step is a written contact to request payment now that it might be possible. If the arrears continue or accumulate, we call the person, discuss the situation and attempt to find a solution. In general, we favour having the homeowner remain in his/her home. If necessary, however, we’ll discuss whether it might not be better to move to less expensive accommodations. In this case, we can also assist in the sales process and the move.’