LENDERS have sent threatening letters to thousands of distressed mortgage holders whose homes are still in positive equity, telling them they must sell up to pay off their arrears.
The letters – some of which have been seen by the Sunday Independent – show that the banks have embarked on a strategy of targeting struggling homeowners whose houses are still worth more than their mortgages.
One letter sent by a well-known legal firm on behalf of Bank of Ireland Mortgage Bank to a couple with two children gives them only seven days from receipt of the correspondence to settle €25,000 mortgage arrears.
It warns them that repossession proceedings will be initiated if they do not come up with the cash within the week. The letter also warns that they will be liable for any additional legal bills.
The couple in question have a mortgage of around €300,000, with payments of €1,552 a month. But they claim they can afford to pay back only €1,050 a month
It is understood the couple were in negotiations with the bank when they received the letter, which ominously stated: "Should you not be in a position to discharge the arrears due and owing to our client, kindly confirm in writing that you are arranging to vacate the property and hand over possession of the property to our client."
The letter does not set out details of any appeal mechanism.
A second letter to another couple, customers of EBS, sent by the lender's Arrears Support Unit, warns them that the mortgage on their home, which is also in positive equity, is no longer sustainable.
It tells them that the only course of action available to them is the "voluntary surrender" of their property, where: "EBS takes full ownership of the property; 'trading down' – ie, selling your property and buying a cheaper one – or 'voluntary sale' where the property is sold and the EBS mortgage and any associated charges cleared in full."
However, EBS does inform the borrowers, a married couple in their 50s who are both
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working, that their case falls under the Mortgage Arrears Resolution Process and that they have a right to appeal.
The Sunday Independent understands that the couple in question have a mortgage of €240,000, which is in arrears. Their full repayment should be €2,600 a month, but they can afford to pay back only €1,600.
Homeowners' group New Beginnings said "thousands" of similar letters have been sent to distressed mortgage holders.
The group's Ross Maguire, SC, told the Sunday Independent: "What the banks are doing is just going through their books, deciding what people's mortgages are – in their view – unsustainable, and sending that letter. That letter means they can then turn around to the Central Bank and say, 'We have offered a long-term solution'. It's an easy way to meet their targets.
"It's a fait accompli. They are offering two solutions. Either you sell, or we repossess and we sell it for you.
"For most people, receiving this letter means extreme stress. Ordinary people are not au fait with what's going on. The stress is immense. They see it as almost like a repossession. They are terrified.
"My advice to these people who get these letters is this: There is always an appeals mechanism. You always have a certain amount of time, say 21 days, in which you can write back to the banks and say, 'I am unhappy with this'."
State-funded debt advice agency the Money Advice and Budgeting Service (Mabs) last night urged lenders to show some "basic humanity" to distressed mortgage holders.
"They are receiving letters just stating that the only option is assisted sale without any explanation why other options to the mortgage difficulty are not suitable," Mabs spokesman Michael Culloty told the Sunday Independent.
"Not giving any explanation is, in fact, wrong under the new code of mortgage arrears, Section 40, which states that lenders have to document why they are not offering you other solutions.
"In terms of human justice, you would think that people whose family home is at stake would be given the reasons why the other options were not suitable for them. That is just basic humanity. One would hope that the Central Bank would be more robust in dealing with this conduct.
"Going for the low-hanging fruit – properties in positive equity – is something that will have to be watched by the Government and the Central Bank. Supervision is more important than it ever was. One would hope the Central Bank would be very robust."