New scheme aims to keep distressed borrowers in their homes

A new scheme aimed at keeping distressed borrowers in their homes has been launched by AIB, the Irish Mortgage Holders' Organisation (IMHO) and iCare Housing.

David Hall was behind the establishment of iCare Housing, a not-for-profit approved housing body set up for the purpose of providing and managing social rented housing for customers who are eligible for the "mortgage to rent" scheme.

“Having been involved in advocating and helping people in mortgage arrears for the last seven years, this is the most significant solution I have been involved in,” Mr Hall said.

“For people who are in trouble with their mortgage I would encourage them to contact us – solutions exist that allow families get their lives back and allow them stay in their home.”

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The scheme has been widely welcomed as a novel way to stem the tide of families falling into homelessness but it has come in for criticism from consumer body askaboutmoney.com.

The website’s founder Brendan Burgess described it as a “kick in the teeth” for families who have made sacrifices to pay their own bills.

He told Newstalk Breakfast: “You have probably cancelled your holidays, you have probably cancelled your health insurance and you are paying AIB and the other banks in Ireland one of the highest mortgage rates in Ireland.

“Because not only are you paying your own mortgage, you are paying the mortgage for people who don’t pay their mortgages.

“This really is a kick in the teeth.”

Financial advice

Under the new arrangement, AIB, EBS and Haven customers can contact their lender or avail of free financial advisory services from the IMHO.

If a customer’s mortgage debt is deemed unsustainable following an affordability assessment completed by the bank, the mortgage-to-rent solution may be suitable.

If a customer is eligible for, and completes, the mortgage-to-rent process:

– Ownership of the customer’s home transfers to iCare Housing

– The customer becomes a long-term tenant of iCare Housing

– Any remaining residual mortgage debt, following property sale, is fully written off

The customer has the option to buy back their home, at any time, at the price that iCare Housing paid for the property, including any discounts negotiated between iCare Housing and the bank.

Jim O’Keeffe, AIB’s head of financial solutions, said the initiative was “primarily about keeping our mortgage customers who are in difficulty in their homes wherever possible”.

“We have made good progress in reducing our non-performing loans from circa €29 billion three years ago to circa €7.8 billion at half year 2017, including 40,000 mortgage customers with solutions in place.

Way forward

“We remain very aware that there are still customers who have very limited ability to meet their mortgage payments, and this enhanced mortgage-to-rent initiative is being provided to extend our range of solutions to support customers in this position. As always, I would encourage any customer who is in difficulty with their mortgage to engage with us to find a suitable way forward.”

David Hall, who is CEO of the IMHO and iCare, said it was a “hugely significant day for those who have been struggling with unsustainable mortgage debt for the last number of years”.

“For AIB, EBS and Haven customers an option now exists, for those who qualify for mortgage to rent , to remain in their homes, have their residual mortgage debt written off and have the option to buy their home back in the future for a price that is discounted from today’s market value.”