Dublin City Council provision of ‘subprime’ mortgages questioned

Doubts have been cast on Dublin City Council’s ability to provide “subprime mortgages” to its tenants seeking to buy their council houses because of the high level of existing loan arrears the council holds.

A new tenant-purchase scheme, due to come into effect next January, will allow local authority tenants to buy their houses at discounts of up to 60 per cent of the market value.

Eligible tenants can chose to buy using their own resources or can apply for a local authority loan.

Dr Daithí Downey, deputy director of the Dublin Region Homeless Executive, on Thursday told the council’s finance committee that it was likely the council “will be looked to as a provider of finance” for purchasers.

Financial difficulties

However, he said it was questionable whether the council “should continue to approve subprime mortgage finance”, given the financial difficulties such mortgages had caused for borrowers and the council.

The city council was the State’s largest provider of local authority mortgages under the last tenant purchase scheme, which was discontinued in 2012. Tenants had to be refused mortgages by three mainstream banks before they qualified for a council loan, making the mortgages “subprime”.

Figures up to the end of March show almost half of the city council’s 2,588 mortgage holders are in arrears totalling nearly €16 million, although Dr Downey said on Thursday this position was improving.

‘Unsustainable loans’

The council has categorised one in 10 of these debtors as having “unsustainable loans” unlikely ever to be repaid.

Of the 1,192 mortgage holders in arrears with the council, just over half have been behind on their payments for more than a year.

However, these 605 householders between them owe the vast bulk of the debts, at almost €14 million of the total €15.75 million arrears owed.

In 2007, the council collected 92 per cent of what it was due in housing loans. Last year it had a collection rate of less than 60 per cent.

In 2007, total arrears were just over €3 million, but in 2009 they had increased to almost €5.5 million. By 2012 they had topped €10 million.