Property & Mortgages

Tuesday 22 July 2014

Coalition’s mortgage-to-rent scheme a ‘miserable failure’

Charlie Weston, Personal Finance Editor

Published 25/04/2014|01:39

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The country’s two biggest banks – AIB and Bank of Ireland – have only completed one transaction each
The country’s two biggest banks – AIB and Bank of Ireland – have only completed one transaction each

A scheme to help families at risk of losing their homes because they cannot pay their mortgages has been described as a “miserable failure”.

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The criticism of the state-backed mortgage-to-rent initiative was prompted by revelations that a tiny percentage of struggling homeowners who applied for it have had their cases approved.

Banks have proposed 2,337 families for mortgage-to-rent deals, but just 38 transactions have been completed.

The plan allows people who have had their income destroyed to have their home bought by a local authority or a housing charity and rent it back.

This means families can stay in the home even though they can no longer afford repayments on the mortgage they took out.

The country’s two biggest banks – AIB and Bank of Ireland – have only completed one transaction each.

Pepper, which bought the mortgages originally issued by GE Money, has had 24 mortgage-to-rent schemes approved.

Fianna Fail’s Michael McGrath said that the banks admitted to the Oireachtas Finance Committee earlier this month that they have sent letters to 30,000 homeowners threatening repossessions.

He said a properly functioning mortgage-to-rent scheme could save a large number of these people from being evicted.

“With thousands of repossession proceedings in the system, it is deeply concerning that the Government’s mortgage-to-rent scheme is failing miserably to provide a safety net for those in arrears facing |the prospect of losing their home.”


Mr McGrath said the Government needed to urgently review the scheme, remove the unnecessary bureaucracy and complexity inherent in it, and make it workable.

To be eligible, a homeowner’s mortgage must be unsustainable, the owner must agree to surrender their home, the property must be in negative equity and the homeowner must have an income low enough to make them eligible for social housing.

All the main banks told TDs and senators at the Oireachtas Finance Committee that the scheme was cumbersome and overly bureaucratic, with too many state agencies involved in each transaction.

Director of the Irish Mortgage Holders’ Organisation, David Hall, said there was a major issue over what happens to the balance still owed on the original mortgage once a mortgage-to-rent scheme is completed.

He said subprime lenders were prepared to write off the money still owed, but mainstream lenders were not.

Mr Hall said banks were finding it cheaper to repossess homes than put the scheme into operation.

And some transactions had collapsed over disputes about the value of homes being taken over by housing bodies. Banks felt they were being paid too little for the properties, Mr Hall said.

When it was launched, the Government set a target of 500 completed mortgage-to-rent deals over seven years.

In her Dail reply, the Junior Environment Minister, Jan O’Sullivan, said 464 cases are under negotiation.

Another 988 cases are in the initial stages of the process. She added that 847 cases are not progressing.

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