Banks given repossession green light by Coalition
Published 28/02/2013 | 05:00
THE Government is going to give banks the green light to push through repossessions -- of both homes and buy-to-let properties -- as part of a solution to mortgage arrears.
The Coalition will shortly have a new law ready to deal with a legal loophole preventing banks from repossessing homes.
Taoiseach Enda Kenny is also due to revamp a cabinet committee to closely hold the banks to account.
The banks will deal with distressed mortgages systematically in whatever way is appropriate, such as split mortgages, interest only, or debt writedowns -- but there will not be blanket writedowns of negative equity.
However, in the "vast majority" of cases, where borrowers have engaged with their lenders, they will continue to live in their houses.
Government sources say the vast majority of mortgage arrears cases will be dealt with through these "sustainable modifications", but there will "inevitably" be cases where repossessions are the only option.
The number of mortgages in arrears for more than three months stands at 86,000, or 11pc of all mortgages. However, another 50,000 are in arrears of up to 90 days and taking in restructured mortgages, opposition parties say one in five mortgages is in distress.
The buy-to-let sector has been particularly badly hit.
At the end of last year, close to 50,000 of the 150,000 investor mortgages were either in arrears or the mortgage holder had to make arrangements to reduce payments.
Taoiseach Enda Kenny last night described resolving the banking system and mortgage issue as the next big challenge facing the Government.
Mr Kenny said he would have a plan for dealing with the issue of distressed mortgages in a fortnight.
The Government has been under intense pressure from the EU-IMF bailout team to address the question of distressed mortgages.
The Coalition is not going to tell the banks how to deal with the cases or stand in the way of the chosen solution – just sort them out, even if that means repossession.
"Inevitably, I think it will result in a speeding-up of repossessions because the banks have not been repossessing at all over the last year. It is accepted there are a lot of cases out there where no modification is possible and a lot of cases where there was no engagement with the banks," a senior government source said.
"We're not going to tell them (the banks) how they should be dealing with the cases. That is not the role of government.
"The expectation is there are substantial modifications available to meet the vast majority of cases that involve staying in the same house. Nobody is expecting an overrun of the courts with repossessions."
The Government is in continual contact with the Central Bank on the development of the mortgage policy and there have been tensions recently over the lack of action by the banks on arrears.
The focus of the new plan will be on resolving the positions of borrowers in arrears who have been in discussions with the bank.
The Government is also drawing up a law to deal with a legal issue that has held up repossessions. Although technically about the buy-to-let market, it has caused uncertainty on dealing with residential arrears.
Legislation to deal with this will be published next month to bring certainty to the area.
The loophole is preventing banks seizing homes of borrowers in default following a High Court ruling in 2011 that drew possessions to a virtual halt.
Justice Elizabeth Dunne had found that a failure to change aspects of old laws before the Land and Conveyancing Law Reform Act 2009 was introduced meant that lenders could only repossess registered homes where borrowers had defaulted if they demanded full repayment before December 1, 2009.
Mr Kenny confirmed the first draft of the legislation will be published before Easter.
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