Comment: How the new mortgage to rent scheme will work

Comment: How the new mortgage to rent scheme will work

This article was originally published by The Business Post.

This week just gone was an important and positive week for people and families who can’t pay their mortgage, have had no hope of a resolution and faced homelessness. The joint initiative between iCare, AIB/EBS and Haven Mortgages changes this.

On Friday, we started meeting eligible families, we met mothers and fathers with young children terrified of what the future holds for them and it has now been possible to give them not just hope, but a credible plan to restart their lives.

We are all aware of the mortgage arrears crisis that still looms. Certainly, there have been deals done for those who have money to contribute to a deal. However, those who say no risk of repossession exists for thousands of families unable to restructure their mortgage are simply wrong.

Since 2013, the Irish Mortgage Holders Organisation has done deals for 8,000 people who were in debt. Some 90 per cent have stayed in their homes. In recent years, it became clear that a significant percentage of people who were contacting us simply had no money. They could not contribute any money to restructure their mortgage or contribute to an insolvency arrangement.

We were acutely aware that a solution was needed for those contacting us that had no money. There are 32,500 mortgages in arrears of more than two years each, with average arrears of €75,000. It’s unclear how many can’t pay and have unsustainable mortgages, but based on the numbers who contact us, we estimate it is at least 50 per cent.

These are people who through no fault of their own lost their job or have had reduced hours following the crash. Some are sick, have faced family or marital breakdown, suffer with mental health issues or have developed a physical disability.

No meaningful solution has been provided to these people and the policy of welcoming vultures with open arms isn’t a solution that provides these people with a dignified solution.

This week we announced an initiative between AIB/EBS and Haven Mortgages, the Irish Mortgage Holders Organisation and iCare Housing.

This follows 15 months of extensive negotiations and project teams working collectively to ensure we can help as many families stay in their home.

Separately we applied for and received credit approval for funds to purchase homes. It is important to note that while we have a deal with AIB/EBS and Haven around an enhanced mortgage to rent product, we have funds to purchase homes from any lender and not exclusively from AIB/EBS and Haven.

We have already commenced discussions with other lenders to roll out the enhanced mortgage-to-rent scheme further. iCare Housing is a regulated, not-for-profit approved housing body, while the Irish Mortgage Holders, whose role it is to provide advice and practical advice to families, is a registered charity. No aspect of this project is rooted in seeking commercial profit or any other vulture-type activities. Any surplus or reserved funds that are accumulated in iCare must be spent on further social housing activities – not dividend payments to shareholders, pension funds or other vulture funds.

So, how does iCare work:

  • If borrowers are in court facing repossession, we are encouraging them to contact us, complete the financial paperwork, which we will help them with, and we go talk to the bank. When we do this, any existing legal proceedings will be adjourned.
  • Borrowers must be eligible for social housing and their home must not exceed valuation thresholds (€280,000 outside Dublin and €365,000 in Dublin).
  • iCare Housing will purchase their home at a discounted price from AIB/EBS and Haven.
  • The borrowers will sign a 30-year lease and now become a tenant of iCare Housing.
  • The borrower’s mortgage debt is fully written off.
  • The bank will inform the borrower in writing of the discounted price iCare Housing will pay for their home, and the figure is also contained in the borrower’s lease agreement.
  • The price option will not change, irrespective of what value the house reaches.

Many people were smashed by this recession, which was not of their making. They have struggled under a cloud for years unable to move on. This initiative allows just that. iCare will mind their home while they get back on their feet again. They will have the protection of being a tenant of a specialist housing body. It’s now time to start acting and stop promising to help those in long-term arrears.

There are over 90,000 people on the social housing list, over 8,000 people homeless and in emergency accommodation, and hundreds sleeping rough.

This initiative will prevent more families entering this crisis and will go some way to prevent a worsening of the housing crisis.

Having met people and families who are out of options and knowing this will help them stay in their home, it is a good week for those eligible for mortgage to rent. I am proud of the effort put in by multiple people and organisations and the support we have received for this to be launched.

David Hall is chief executive of IMHO & iCare Housing