Banks may buy back homes from struggling customers
BANKS and building societies may be forced to buy homes from people struggling to meet their mortgage payments and rent them back to them.
This is one of the options that will be considered as part of the new Programme for Government.
The Greens have secured agreement that this and other schemes will be looked at to rescue indebted homeowners.
Under the proposal, lenders would be forced to buy back a home from mortgage holders who find themselves in arrears over a number of months.
The bank or building society would be forced to write off a large chunk of the original mortgage.
The lender would then have to lease the home back to the resident at a much lower rate than the original mortgage repayments.
Even though the banks would be forced to write down some of the original mortgage, homeowners would still owe money to the lender.
But under the scheme, the new rental payments would come off what is still owed on the mortgage.
Communications Minister Eamon Ryan told the Irish Independent this was just one option now being considered under what he said was "my NAMA" arrangements for consumers.
The details had yet to be worked out, he said.
Other options set to be explored as part of the Programme for Government include those introduced by US President Barrack Obama to stave off repossessions.
A spokesman for Mr Ryan said the Green Party was looking closely at a US initiative where lenders are subsidised by the government to reduce monthly repayments for those in default.
Homeowners forced to use more than 40pc of their monthly income to meet mortgage repayments would see the monthly repayments reduced to around 30pc of their monthly income.
Lenders would be forced to take a hit, but there would be up to €1,000 a month put into the scheme by the state, the spokeswoman added.
Options
Other options being looked at include measures to reduce the interest on mortgages, banks being forced to take equity in the home, and longer mortgage terms.
Already this year more than 138 homes have been repossessed, and around 14,000 people are in arrears.
In a report last week the Economic and Social Research Institute said that as many as 35,000 people could end up defaulting on their mortgages next year if house prices continue to plunge.
Chief executive of the Irish Banking Federation Pat Farrell said banks would be open to discussing any proposals to help homeowners in financial trouble.
But he added that only those who were willing to pay something, rather than those who won't pay, should be helped out.
- Charlie Weston Personal Finance Editor
Irish Independent
