Homes now in positive equity risk repossession
BANKS are more likely to repossess houses where it is worth more than the mortgage, homeowners have been warned.
And these people who are in "positive equity" are less likely to be offered a solution to deal with arrears, according to a powerful Dail committee.
Half of those in arrears are in a situation where the house or apartment is worth more than the mortgage on it, the Oireachtas Finance Committee said.
Some 93,100 homeowner mortgage accounts are in arrears for three months or more. The committee has issued a report saying banks are less likely to offer a deal to those with positive equity who are in arrears.
This is because a voluntary sale of the property will not mean the bank loses out, as there will be no balance still owed on the mortgage.
In a major report on arrears, the Finance Committee, chaired by Labour's Ciaran Lynch, found homes in positive equity were at risk of repossession.
"The recent recovery in house prices may make these houses more likely to be repossessed than houses in negative equity."
This meant there was a need for regulators to put new protections in place to ensure those with positive equity, who are also behind on their repayments, are not picked on to have their homes repossessed.
Bank of Ireland came in for criticism in the Finance Committee report into mortgage arrears.
The bank charges interest when it puts some of a mortgage principal to one side for those unable to meet the full repayments. This made the split mortgage expensive.
"The committee recommends Bank of Ireland adopt the position taken by all the other financial institutions in regard to split mortgage products."
The committee also said banks should not be allowed to send legal letters to people who are behind on their payments and claim that this action is a "sustainable solution" under Central Bank rules.
The committee was told this year that 30,000 family homeowners had received legal letters. The banks have been allowed to count these legal letters as offers to consumers.
The committee said "legal letters should not be regarded as satisfactory solutions". Banks should also be forced set out in writing what alternative they are offering to repossession.
And banks were told to test if borrowers who are in arrears, who are offered a solution by their bank, could cope with higher interest rates.
Where a home is voluntarily given up the remaining mortgage debt should be written off, it said.