Subprime lenders left out of 'debt rescue' bid
Composition of mortgage-aid group criticised
Published 26/02/2010 | 05:00
AN expert group set up to recommend rescue plans for heavily indebted homeowners was criticised last night for failing to include subprime lenders.
The group includes representatives from the main banks, the financial regulator Matthew Elderfield, and a range of others with expertise on mortgages.
But there is no one from the subprime lenders -- who represent just 2pc of the mortgages issued in the market, but around 40pc of the repossession cases coming before the courts.
Meanwhile, financial adviser Karl Deeter of Irish Mortgage Brokers warned that if the group proposed that banks write off some of the debts of those who can't pay, it would cost other mortgage holders money in the form of higher borrowing costs.
Large-scale debt write-offs on mortgages would also force banks to seek more funding from taxpayers, he added.
Information from the Financial Regulator indicates that more than one in five of those in arrears for three months or more got their mortgage from a subprime lender -- compared to 3pc of those who borrowed from a mainstream lender.
Mortgage expert Frank Conway of Irish Mortgage Corporation said subprime lenders were a huge part of the problem of mortgage arrears and needed to be part of the expert panel.
And spokesman for the Irish Banking Federation, whose members do not include subprime lenders, also said any rescue scheme should apply to people who got their mortgage from a subprime lender.
Finance Minister Brian Lenihan last night said the level of indebtedness in Ireland had not yet reached crisis levels by international standards.
"In fact last year, there was a very small number of repossessions in the guaranteed banks," he said.
He added that the total number of repossessions, including subprime lenders "was small by international standards".
"It is important that we have a dedicated strategy. The purpose of this committee is to put us in a position to deal with any difficulties that may emerge." he added.
Energy Minister Eamon Ryan said some people, including small business owners who gave personal guarantees, were now getting caught "through no fault of their own.
"We want them back on their own two feet, working again," he said, adding that the group will examine the issue of solvency and bankruptcy -- currently regulated by "arcane" rules.
The group has been told to look at options, including banks lowering the interest rate charged on mortgages for those in trouble, extending the term of loans, and possibly taking equity in homes.