AS MANY as 10,000 people could see ownership of their homes transferred to local authorities as part of measures to tackle the mounting mortgage debt problem.
The Inter-Departmental Working Group on Mortgage Arrears, which published its widely anticipated report yesterday, has proposed the introduction of two “mortgage to rent” social housing schemes. These would mean approved housing agencies taking ownership of homes in specific circumstances or the leasing of houses by banks to local authorities, which would in turn rent them to former owners.
While people may surrender their homes to the new agencies, they will still owe any shortfall between the current value and their mortgage to their lender. This will remain the case until the introduction of personal insolvency legislation which is to be fast-tracked by the Department of Justice.
The report stressed that reform of the bankruptcy and personal insolvency law was fundamental and stated that without it the mortgage problem would not be resolved.
Minister for Finance Michael Noonan rejected suggestions that there was nothing in the report for the “squeezed middle” – people who do not qualify for social housing but still struggle to make ends meet. He said all mortgage-holders in difficulty would benefit from the measures proposed in the report.
“If you can sort out the impaired mortgage situation then you put an immediate floor on the market and everyone will start to see the advantage of that,” he said.
The banking division of the Department of Finance would begin discussions with the banks to ensure speedy implementation of the measures set out in the report, he added.
Minister of State for Housing Willie Penrose will unveil two pilot mortgage-to-rent schemes next week.
Mr Noonan said the schemes would remove the threat of repossession and eviction from many people with unsustainable mortgages and would allow them to remain in their communities while relinquishing mortgage debt.
Fianna Fáil leader Micheál Martin accused the Coalition of reneging on a commitment to offer greater mortgage interest relief to those who bought at the top of the boom. Sinn Féin’s Pearse Doherty described the report recommendations as “short on detail and short on solutions”.
The report was drafted by a group chaired by Declan Keane from the Department of Finance. It stressed that there would be no blanket debt or negative equity forgiveness. Defending the decision not to implement a blanket forgiveness scheme, the report states it would cost some €14 billion to clear negative equity in Irish mortgage portfolios, while tackling those home loans taken out between 2006 and 2008 would cost in the region of €10 billion.
The report noted that among the solutions banks would need to advance to address mortgage over-indebtedness include trade-down, split mortgages and sale by agreement.
It also proposes a more specialised mortgage advice service.