Government to act on mortgage arrears

The Government is preparing a new campaign to tackle the mortgage arrears crisis as it pushes to settle the problem before the election.

Officials are working to expand the mortgage-to-rent scheme by making it easier for borrowers who cannot make loan repayments to switch from owning their home to renting the home as social tenants.

They are also discussing steps to allow borrowers in mortgage distress to appeal settlements from Insolvency Service of Ireland (ISI) to an independent panel.

Encouraged by lower unemployment and increased consumer confidence, the Coalition has resolved to fight the election on economic grounds.

However, the failure to make more headway to settle the mortgage issue is seen within Government as a “chink” in its political narrative of deepening recovery.

Central Bank data shows the number of mortgages in arrears dropped in the final three months of 2014, the sixth successive quarterly decline. The figures showed, however, the number of mortgage accounts in arrears for two years or more was still rising. Some 110,366 residential mortgage accounts, 14.5 per cent of the total, were in arrears at the end of 2014.

The arrears question has come under renewed scrutiny at the Economic Management Council, the powerful Cabinet subcommittee at which Taoiseach Enda Kenny settles policy direction with Tánaiste Joan Burton and Ministers Michael Noonan and Brendan Howlin.

Arrears debacle

The arrears problem was also raised at meetings this week of the Fine Gael and Labour parliamentary parties.

An overhaul of the mortgage-to-rent scheme, which would allow more distressed borrowers to participate, is under examination in the Department of the Environment .

Participants no longer own their home or have any financial interest in it but they can remain in residence. The scheme’s attraction is that participants are not threatened with the loss of their home.

However, the take-up of the initiative is acknowledged in Government circles to be very low. At present, the scheme is confined to people whose homes have a market value of less than €220,000 in the Dublin area and less than €180,000 in the rest of the State. The property must be in negative equity to qualify.

To boost participation, the valuation caps are likely to be increased in the coming weeks. However, the extent of the increase has not yet been settled. Fine Gael TD Patrick O’Donovan, who has questioned the mortgage-to-rent scheme, pressed the Minister for Finance on the low valuation thresholds this week.

While Labour TDs have supported a proposal from party deputy Willie Penrose to reduce the bankruptcy period from three years, official sources stress that people availing of such changes would still lose their homes.

In Limerick yesterday, Mr Noonan raised the prospect of changes to the ISI. “If we had to legislate to make change it would take some time, but there are things we can do through regulation which we think will improve the uptake.”

Saying the Coalition was “very conscious of the issue”, he emphasised that it was “the policy of the Government not to have homes repossessed”.

The ISI changes are under discussion within the Department of Justice. In cases where distressed borrowers or their lenders dispute settlement terms proposed by the ISI, an independent review panel would assess the ISI terms and make recommendations back to the ISI.

Such recommendations would be published, but with personal information redacted.