New arrears plan to cause a surge in repossessions
THERE will be a "significant" increase in the number of repossessions as the Government's new plan for troubled mortgage holders kicks in, homeowners have been warned.
Central Bank deputy governor Matthew Elderfield said that even families who were engaging with their lenders may end up losing their homes. And Finance Minister Michael Noonan said legislation would be in place by the end of the month to restore the rights of lenders to take homes and buy-to-lets away from those who are not meeting their payments.
He said it was essential that banks have the option of repossessing homes, otherwise the mortgage market would not function properly.
Mr Noonan insisted that repossessions would only be a last resort after all the other options had been exhausted. And he said most of these repossessions were expected to happen in the buy-to-let sector.
But he agreed with comments of the secretary general of his department, John Moran, who was heavily criticised after he said that taxpayers could not be expected to support people who were living in homes that are beyond their means.
Mr Noonan added: "We cannot have 100,000 families with a level of debt which is repressing them in their personal lives."
Mr Noonan and Mr Elderfield outlined plans to force the main banks to offer people in mortgage arrears long-term deals or face financial penalties.
New targets will see six banks forced to offer deals to lower mortgage payments in an attempt to keep most people in their homes.
AIB/EBS, Bank of Ireland/ICS, Ulster Bank, Permanent TSB, KBC Bank and ACC will have to have offered half of their customers who are in arrears mortgage deals by the end of this year.
These banks account for most of the country's mortgages.
Mr Elderfield warned that those who do not co-operate with lenders who offer new deals will face repossessions.
"It is an unpalatable fact in light of the severity of the crisis that repossessions must be expected to rise significantly," he said.
"It is important to recognise that even for customers who co-operate with their bank and are therefore assessed for solutions in the mortgage arrears resolution process, it may not be possible to reach agreement and the position may be too far gone."
He said that arrears could keep rising, despite the massive attempt to finally tackle the mortgage arrears problem.
The offers will be aimed at those who are three months in arrears, and will involve both residential and buy-to-let mortgages.
Banks that do not co-operate will be told to put extra capital aside – an amount equal to what the bank would get if the home was repossessed, and the cost of repossessing the property.
Asked if banks were being told to write off debt, Mr Elderfield said banks could choose to wipe away some of the value of homeowners' mortgages, but the Central Bank was not demanding this.
He said debt forgiveness and debt write-offs could be appropriate for some consumers, and the Central Bank would like to see that it was not being required by regulators.