This article was originally published by The Business Post.
But each of these has failed to tackle the tsunami of repossessions now facing thousands of Irish families. The mortgage-to-rent programme is an excellent concept, but executed horrifically. Both banks and advocates have agreed that this has utterly failed.
The reduction in bankruptcy from 12 years to three years is an optical illusion as, usually, an income attachment order is added for a further two years after the three year bankruptcy term.
The Central Bank mortgage arrears targets were ill-concieved, which resulted in banks focusing on targets from their regulator with no meaningful impact on those most in arrears. This has caused a delay in addressing the inevitable.
Finally, to great fanfare and cheerleading, the Insolvency Service of Ireland was established in 2013. Last week, the Insolvency Service published its figures for “deals” done. When analysed, it showed that half (448) were not deals but bankruptcies and a further 230 were arrangements relating to debts below €20,000. This leaves 270 relating to unsecured debt and properties of which 200 involved properties.
It has gone beyond a blame game now because the situation is so serious. We need thinking outside the box to assist families to stay, where possible, in their homes and communities and best protect the state.
There are a few categories of people who are in debt. There are those who have a minor glitch and will with some help resolve their issue. There are those who have significant debts both secured and unsecured and who will need an insolvency arrangement, but the banks are not engaging. Then there is a category of people who have been abandoned by the system – the 37,848 people in mortgage arrears of more than two years.
This category presents a clear and present danger to the families themselves, to the social housing system, but also to the political system.
The category ahead of this is those in arrears of more than one year, a further 21,500 people. By any analysis this leaves a minimum of 25,000 families in line for repossession.
So how do we prevent as many of these repossessions as possible, and kick-start the process of resolving the debt for those in the middle category who have employment but can’t service the levels of debt they have?
The insolvency system needs to be simplified and the veto the banks have must be removed or diluted. This may present legal challenges but it can be achieved.
Where someone has made an application/proposal as part of a personal insolvency arrangement but the bank has rejected it – even though it shows a greater return for the bank than bankruptcy – then the debtor should be allowed a one or three-year bankruptcy term.
There are many other operational issues that need addressing such as the charging of Vat, but until the minds of the banks are focused, these are a distraction.
Those facing repossession have few options available to them and are faced with a horrible time ahead.
Mortgage to rent was designed for this category of person as an option of last resort to prevent repossession and save the state having to house the family. The banks were allowed control this process and those managing it sought advice from the same banks, hence its failure.
We need leadership from the environment minister Alan Kelly. He needs to take this by the scruff of the neck and redesign it to achieve benefits to the families, the lenders and the state. What’s the point in adding to the huge housing waiting lists?
David Hall is director of the Irish Mortgage Holders Organisation