FF make proposal on ‘arrears crisis’ in sub-prime mortgages

Fianna Fáil has said the Government's failure to deal with the "spiralling arrears crisis" in the sub-prime mortgage market is "disastrous" as the owners of such loans are amongst "the most aggressive in the market" at seeking court ordered repossessions.

New figures provided by the Central Bank indicate that 20,338 mortgage accounts issued by sub-prime lenders were in arrears of more than 90 days at the end of September 2015. This compares to 19,935 at the end of December 2014.

The sector now accounts for 22.5 per cent of all residential mortgages in arrears more than 90 days compared to 15.5 per cent a year previously.

In recent years, there have been several loan books sold in Ireland. There are 7,461 mortgages now in the hands of non-bank lenders and vulture funds.

GE Money disposed of its subprime mortgages to Pepper in 2012. Among the other buyers of mortgage books was US private equity fund Tanager who bought 2,000 distressed home loans from Bank of Scotland Ireland.

Permanent TSB sold around 2,200 home loans to Mars Capital while the IBRC liquidation also saw loans originally issued by Irish Nationwide sold off to various vulture funds.

Fianna Fáil finance spokesman Michael McGrath said the situation in relation to mortgages issued by sub-prime lenders was “absolutely disastrous”.

“While the mortgage arrears crisis generally has shown some signs of easing, the trend in relation to these mortgages has been steadily deteriorating in the face of complete indifference from the Government,” he said.

“It is clear from court reports that sub-prime lenders account for a disproportionate level of legal action being initiated in many Circuit Courts. The fact that 61 per cent of the outstanding balance on these mortgages are in arrears is of huge concern.

“In many ways, this is not surprising given the very high interest rates and income multiples associated with these loans.

“Most of the originators of these loans have now sold them on. In my view there is a clear need for a specific response to the problems of this sector including clear targets for resolution measures.”

He said Fianna Fáil was putting forward three proposals to tackle the issue.

Firstly, he said the party was calling for an extension of the Mortgage Arrears Resolution Targets, which currently only apply to the six main banks operating in the State.

He also called for the establishment of a dedicated mortgage to rent scheme targeting this group of loans, and for the Central Bank to be obliged to publish a specific report on how current owners of these loans are complying with the Code of Conduct on Mortgage Arrears.

“Significant fines should be imposed in cases where breaches of the Code take place,” said Mr McGrath.

“This issue is now reaching a crisis point and unless action is taken we will be facing a massive social problem.”