Sunday 24 September 2017

Relief for homeowners in new mortgage-to-rent plan

Photo: Thinkstock
Photo: Thinkstock

Charlie Weston Personal Finance Editor

THE Government will announce today that 60 homeowners have been approved for a new mortgage-to-rent scheme, in which they give up ownership of their homes and rent them back.

The houses are being bought by housing charity Cluid, with funding from the State, at the current market value.

The balance owed on the mortgages is written off but the deals are only for those on low incomes -- those who would qualify for social housing -- and the value of the house must be under €220,000.

AIB, GE Money and Start Mortgages are taking part in the scheme. Other banks are set to take up the scheme, including Ulster Bank and Bank of Ireland.

Housing Minister Jan O'Sullivan's announcement will be a relief to some homeowners, who are burdened with mortgages they have no hope of repaying.

The scheme could eventually help as many as 10,000 families with unsustainable mortgages and who are in imminent danger of losing their homes.

Families that avail of the scheme will never have to admit to anyone that they have lost ownership of their property. Their children will be able to keep attending the same schools and neighbours will not know what has happened.

Under the plan, homeowners who are deep in arrears, give up their house or apartment to the bank that holds the mortgage.

The home is then sold to Cluid at its current market value rather than the value of the original mortgage.

This means there is still a balance owed, as the original mortgage is likely to be higher than the current market price. The lender has to absorb the loss.

Families on the scheme then become tenants of Cluid, with the rent set at a level based on their income. This is similar to how rents are set for local authority housing. Local authorities are also set to get involved in buying-up some of the houses under the scheme and renting them back.

Those on the scheme must have tried to resolve their mortgage difficulties through the official mortgage arrears resolution process (MARP). The mortgage has to be deemed unsustainable under the MARP process, which outlines rules on how lenders and borrowers in arrears engage with each other.

GE Money, now called Pepper, was behind the first mortgage-to-rent deal at the start of this year. The family involved, which was days away from being evicted, now rents the home from Cluid. GE Money wrote off close to €140,000 on the deal.

Ms O'Sullivan has agreement from AIB/EBS to pilot between 10 and 20 mortgage-to-rent cases.

Another 40 homeowners, who have loans from sub-prime lenders Start and GE Money, will also participate in the scheme.

Irish Independent

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