Stepchange charity to act as bank go-between on mortgage arrears

UK charity will encourage homeowners to avoid court by engaging with lenders

Government sources say  a high proportion of cases where  people in mortgage arrears end up in court happen because borrowers are afraid to respond to their banks. File photograph: Yui Mok/PA Wire

Government sources say a high proportion of cases where people in mortgage arrears end up in court happen because borrowers are afraid to respond to their banks. File photograph: Yui Mok/PA Wire

 

A UK-based debt management charity will act as an intermediary between banks and people in mortgage distress under the Coalition’s mortgage arrears package to be unveiled later this week.

The British charity, called Stepchange, will be used to act as go-between for homeowners and banks to encourage people to engage with their lenders.

Government sources have said a high proportion of cases which see people go to court happen because borrowers are afraid to respond to their banks.

“A lot of cases get into trouble because there is no communication,” said one source, adding that better communication between mortgage holders and their lenders will prevent people ending up in court disputes.

The costs of operating the scheme would be borne by the banks, and a similar system for people with multiple debts, also run by Stepchange, was trialled by the Central Bank in late 2013 and 2014.

Eligibility rules

Separately, the Government will also widen eligibility rules for its mortgage-to-rent scheme, making it possible for more homeowners in the greater Dublin area to enter the scheme.

The mortgage-to-rent scheme, launched three years ago, was aimed at assisting up to 3,500 mortgage holders who face losing their homes - but only 88 householders have benefited from the scheme.

The initiative allows mortgage holders to surrender their homes to a not-for-profit housing association, which then rents it to the original owners.

The property must have a current market value of less than €220,000 in the greater Dublin area and €180,000 in the rest of the country. However, concerns have been raised that these value thresholds are too restrictive, particularly for those in or near the capital.

Sources disclosed that the greater Dublin area cap is likely to rise to nearer €350,000, although it is not yet known if the cap for the rest of the country will be changed.

Labour-backed proposal

Meanwhile, a Labour-backed proposal to reduce the period of bankruptcy from three years to one year remains alive despite the misgivings of the Department of Finance, according to Government sources.

The mortgage arrears package to be unveiled later this week will include a direction to the Oireachtas Finance Committee to examine the bankruptcy issue and report back to Government before the summer recess.

If the Finance Committee, chaired by Liam Twomey, agrees to reduce the length of the bankruptcy period, legislation would be introduced early in the autumn.