Banks preparing for big payout

Suburbs such as Bexley (above) are unlikely to be rebuilt. Photo by <i>The New Zealand Herald</i>.
Suburbs such as Bexley (above) are unlikely to be rebuilt. Photo by <i>The New Zealand Herald</i>.
Banks are in negotiations with the Government about a full payout to Christchurch residents with no houses in which to live, but frustration levels about the delays are starting to rise quickly.

An Otago Daily Times investigation has revealed that banks are provisioning in their financial accounts for some Christchurch residents to walk away from their houses, their debt and their obligations, something that could see them bankrupt.

While that is happening, the banks are also negotiating with the Government about how a full payout will be made to those residents facing bleak futures.

The Government is likely to pick up a substantial part of the bill for residents, particularly those in eastern suburbs, which includes paying out the QV of the house, insurance claims - even if the house was under-insured - and other ongoing costs.

That payout is designed to allow those people to rebuild somewhere else, but already there is pressure on the Christchurch City Council to rethink its urban development.

But there are concerns that payouts might fall short, leaving some residents with few alternatives.

The ODT was told that the abandonment of suburbs like Bexley "was very real" and there were major parts of the city that could never be rebuilt.

Port Hills MP, Ruth Dyson said yesterday there was a growing level of frustration, but that she and other Christchurch-based Labour MPs were trying not to rev it up.

"This is a bipartisan exercise. It is not about us. We are talking about the future of our city."

But it was not easy. People were becoming exasperated as insurance companies "pushed the limit" with people. The insurers were either paying out the minimum or being obstructive, she said.

Ms Dyson had attended a meeting of the Mt Pleasant Residents' Association this week along with 200 other people. The chairwoman asked how many of those attending were living in their own home and only a quarter were.

Out of those attending, only one had received their payment from the Earthquake Commission (EQC), Ms Dyson said.

She criticised Prime Minister John Key for intimating on Monday that he knew which areas of Christchurch would be abandoned, but would not say.

"That's our lives, it is not an abstract thing. We are talking about people's homes. For him to know but not tell ... really?"

The Labour MPs were "onside" with Earthquake Recovery Minister Gerry Brownlee on the payouts, but the process was bad, she said.

She was confident the payouts would cover the relocation costs of affected residents.

However, Craigs Investment Partners broker Chris Timms said there was a risk that QV valuations had fallen and residents would be left with a shortfall. The mortgage on the property would be paid off straight to the bank, with the homeowner receiving the balance - if there was any.

If people had accrued other debt since the first earthquake in September, they would still have to repay that to the lender.

There were three options for those people still with debt after a payout, Mr Timms said.

They could either: work with the banks to clear the debt; declare themselves bankrupt; or head overseas in the belief they could never come back to New Zealand.

"It comes down to the individual, their own circumstances, what they are doing in the city and their employment prospects. Some people may consider the best option for them might be bankruptcy. Under the new rules, it is not as onerous as it used to be."

Mr Timms said one option was for the Government to take over the role of banks when dealing with Christchurch residents, similar to the former State Advances Corporation - the forerunner of Housing New Zealand.

The ODT emailed questions to Mr Brownlee but did not receive a response. The paper wanted to know how far along the Government was in talks with banks about a total payout for some of the worst-affected residents, and whether any negotiations had started with landowners about allowing for future residential development.

On Radio New Zealand, Mr Brownlee said the quakes had changed things, especially if some land in the city needed to be "retired".

"Those who are responsible for choosing land for residential use need to be certain that there is enough to ensure that land prices don't escalate and we don't see outrageous inflation," he said.

Areas expected to benefit from these machinations are land parcels near Christchurch airport and the Prestons subdivision.

Earlier this week, Mr Brownlee said that mounting calls for the Government to reveal the fate of Christchurch's suburbs were overly simplistic.

The Government would not release information on which areas could be rebuilt and which needed to be abandoned until decisions were made on what happened next.

Any decisions would have an impact on future insurance premiums, he said.

Ms Dyson said Mr Brownlee should not be so coy.

"He should be saying: 'Here is what we are looking at'."

Residents were not even being told about what GeoNet was finding, she said. They wanted and needed to know how much their land had risen and fallen and what that meant.

After the first earthquake, Labour MPs were receiving regular briefings at the Civil Defence headquarters in the Christchurch Art Gallery.

Now Cera (Canterbury Earthquake Recovery Authority) was operating, the MPs - Ms Dyson, Lianne Dalziel, Brendan Burns and Clayton Cosgrove - had been told to check the website for updates.

Mr Brownlee had agreed to once-a-week briefings on Tuesday nights, but only if Parliament was sitting, she said.

The Christchurch City Council and community boards were having regular meetings with Cera officials.

Asked why that was, Ms Dyson said the issue had now become political.

"It really is a bad call. I am worried about the spirit of our people. Some people were hit hard in February, after they escaped in September. But now we have been hit a third time, it is become very hard."

 

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