Law change urged over buy-to-let properties
THE TROIKA is pressing the Government to change the law to make it easier for lenders to seize buy-to-let properties where owners are not servicing their debts, it has been reported.
The Government is considering changing the law to close a loophole that prevents the banks from foreclosing in most cases, according to a report by Bloomberg based on interviews with unidentified sources.
The same report quoted the IMF mission chief for Ireland, Craig Beaumont, as saying that a well-functioning repossession framework was “important to maintain debt service discipline and to underpin the willingness of banks to lend, which is crucial for Ireland’s recovery”.
Last year, a judgment in the High Court highlighted the fact that a law introduced in 2009 had the unintended effect of restricting a measure available up to then for the repossession of homes to cases where the loans at issue were taken out after December 1st, 2009.
A spokeswoman for the Department of Justice and Equality said the “complex and related issues raised in this case” continued to be the subject of discussions within the department and with the Office of the Attorney General.
“Moreover, the judgment has been appealed by the lending institutions to the Supreme Court.”
A spokesman for the Irish Banking Federation said it and its members remained concerned at “the absence to date of any official remedy arising from the judgment which has created an unintended legal impediment to banks’ ability to enforce security on residential property”.
He said the legal flaw highlighted by the judgment was impeding the progress of necessary measures to repossess and sell property in situations where all remediation measures had failed and the mortgage was deemed unsustainable.
“These concerns have been communicated to the relevant government departments.”
Last week, a report from Davy said it believed arrears on buy-to- let mortgages were running at more than twice the rate of the owner-occupier category.
It said a quarter of buy-to-let mortgages at the Government-guaranteed banks had missed three or more monthly repayments at the end of last year.
The firm expects buy-to-let arrears to rise to 38.4 per cent and, based on an expected 60 per cent peak-to-trough decline in property prices, delinquent buy- to-let loans will total between €6 billion and €7 billion, or close to 40,000 buy-to-let properties.
The Central Bank plans to publish details of arrears on buy-to-let mortgages for the first time in November. The figures will appear alongside regularly published arrears figures on owner-occupier mortgages in the next set of figures on the performance of mortgages in the third quarter of 2012.
Some banks have appointed rent receivers to properties to collect rent directly in an effort to stop borrowers from diverting the money away from the banks, a move which housing charity Threshold has warned could be illegal.