Arrears plan sparks fears freeloaders could cash in

THE new scheme aimed at keeping financially distressed borrowers in their homes has sparked a fierce debate.

The initiative, details of which were first revealed in the Irish Independent, has been launched by AIB, and iCare Housing, which is part of David Hall’s Irish Mortgage Holders Organisation.

It will allow those who can’t pay their mortgage to stay in their homes as renters.

Housing Minister Eoghan Murphy welcomed what he said was a move by iCare Housing to make the Government’s recently reformed mortgage-to-rent scheme work for a large number of households in mortgage arrears.

But consumer campaigner Brendan Burgess has slammed the scheme.

He said responsible borrowers would feel aggrieved, and many will.

A kick in the teeth for responsible mortgage holders, and the taxpayer generally, is how he described it.

His view is that those who don’t pay should lose their homes. In other countries, people who have not paid their mortgages would have their homes repossessed and sold to someone able to pay.

“What about responsible borrowers who have made huge sacrifices to keep up with their mortgages?

“They have cancelled their health insurance and their holidays. They have taken up a second job or worked overtime. They may have got rid of their car. They may have borrowed money from their parents. And they may well still be in negative equity in a house which they would have expected to trade up from some years ago. What is their reward?” he asked.

Mr Hall denied suggestions that strategic defaults would benefit from the scheme.

“It is not a free-for-all, and it is not one that is designed for anyone who wants to try to pull a stroke. They’ll have come to the wrong place. It cannot be done,” he insisted.

Mr Hall’s initiative will allow people who have no hope of being able to get out of arrears on AIB, EBS or Haven mortgages to sell their home to the lender, which will sell it to iCare.

It will then be rented back to them, with rental amounts based on what they can pay.

The new initiative certainly helps AIB outsource a thorny problem to someone who has the trust of mortgage holders in distress. Mr Hall has a track record of working with them through his Irish Mortgage Holders Organisation.

It offers a solution for those families who genuinely can’t pay, and avoids widespread repossessions, which would just add to the everlengthening social housing list.

AIB’s head of financial solutions Jim O’Keeffe said the initiative was “primarily about keeping our mortgage customers who are in difficulty in their homes wherever possible”.

However, People could use the scheme to strategically default on their debts.

They’d get to stay in the house of their choosing, having paid nothing for many years. Undoubtedly, some freeloaders will gain.

But the alternative is equally unpalatable – repossessing the homes and adding the names of those losing their homes to the housing list.

Children would have to move schools, with families probably living in hotels.

There are no easy answers on this one.