ANALYSIS:Some of the measures proposed by Fianna Fáil on mortgage debt would take the pressure off homeowners in the short term – but do not solve the problem and could cost more in the long run, writes CONOR POPE
“WE MUST protect the family home” was the emotive phrase that kept coming up at the Fianna Fáil press conference held to unveil proposals aimed at saving people in mortgage arrears from bank repossession, and addressing the State’s personal debt crisis.
The party has four proposals which focus on mortgages, the regulation of debt management services, the reform of the mortgage interest supplement scheme and the adoption of proposals on personal debt suggested by the Law Reform Commission last year.
There is much that is sound in the package, and many vulnerable people need protection from lenders who gave out ill-advised (some might say plain stupid) loans during the boom.
A cynic could, however, be forgiven for asking where these “concrete, realistic and positive solutions” (as Micheál Martin described them) were 12 months ago when his party had a chance to implement them.
In fact a cynic did ask, and was greeted with a degree of bluster that basically said: “That was then. This is now.”
Where we are now is not a good place. According to figures from the Central Bank, almost 50,000 residential mortgages are in arrears, and the list of homes repossessed by mortgage lenders has risen to nearly 700.
Among the proposals are those which would give the courts alternatives to granting a repossession order, including extending the period of a mortgage by as much as 20 years, introduction of interest-free periods of up to four years, payment holidays and adjustments to interest rates.
Such measures would certainly take the pressure off some homeowners in the short term, but don’t actually solve the problem and could cost more in the long run. Ultimately, with payment holidays and longer term mortgages, mortgage holders end up paying more in interest and the pain of payment is extended.
Sometimes people want to surrender their homes and start afresh, but they can’t.
The legal system here means that if a person sends the keys to a property in negative equity back to a bank – jingle mail, as it’s called in the US – they will be left owing the remainder of the mortgage less the price the house achieves on the market.
In the current situation this can run to hundreds of thousands of euro, for even modest properties.
The matter was not addressed yesterday and the party said it was reluctant to propose changes in case they put already struggling banks in a deeper bind, which would have the knock-on effect of damaging an all but fatally wounded mortgage market.
Martin expressed the hope the proposals would get cross-party backing and quickly make their way onto the statute books. It seems unlikely.