On the question of distressed mortgages
THE Government is close to finalising a new initiative which will address the most distressed mortgages in the country. Approximately 34,000 mortgages are in arrears of two years or more. Recent changes to the Mortgage to Rent Scheme allow for the bulk buying of mortgages to be rented back to those in significant arrears. It is understood that up to three parties are interested in purchasing a portion of these mortgages.
They include Arizun, a US-based equity fund, a Merrion Capital backed consortium and ICare, which is headed up by David Hall of New Beginnings. It is likely that additional parties will enter the fray as the process is rolled out, especially with the potential number of properties in question.
The debt would be wiped out and the occupiers would rent the property over a 20-year period with the option to buy the property back at a future date. They might also benefit through a share of the future uplift in value of the property.
From the Government’s perspective, a large sale like this offers tangible benefits, far and away the biggest one being the ability of people to stay in the family home on a longterm basis, without the threat of eviction or repossession, on the proviso that they continue to pay the agreed rent. It also would eliminate the challenge the Government faces in rehousing those whose homes may have been repossessed.
A crucial element is the rent that would be charged. It is too early to estimate the likely rent levels and how they would compare with market rents. But obviously, they would have to be affordable for it to work. Could they be supported through government monies or subsidies?
With the recent announcement that the Government is considering the initiative, it’s likely we’ll see it rolled out over the next 12 months. It is difficult to see much of a downside for the occupier, the Government and the landlord alike. As always, though, the devil will be in the detail.
In a separate development this week, the Independent Alliance launched a bill that aims to keep people in their homes and avoid repossessions. The bill allows courts to consider the social impact of repossession on homeowners and their dependents.
It would appear that people in Ireland who are in the most precarious positions in relation to their mortgage are now being provided with options, which ultimately will allow them to look to the future and not to the past.