Hundreds face losing homes ahead of 'risky' loans test case
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Almost 500 families and business owners are facing repossession of their homes and commercial premises.
Figures obtained by the Irish Independent reveal that the number of repossession summonses issued in the High Court has more than trebled in three years as borrowers get into financial difficulties and can no longer meet their mortgage repayments.
News of the steep rise in repossession summonses comes as a landmark test case challenging the alleged "unconscionable" contracts, "reckless lending" and predatory tactics employed by subprime lenders and mortgage brokers is being considered to protect vulnerable borrowers facing repossession.
Last year, 465 repossession summonses were issued in the High Court compared with just 134 in 2004 and 220 such cases in 2000.
Up to 200 indebted borrowers, some of whom are tied into 40-year mortgage deals, are losing their properties each year as they struggle to meet "priority" household bills such as food, heating and electricity.
Penalties
Trapped by variable, "personalised" interest rates -- that can range between 6.5pc and 9.85pc -- debtors are also being hit with excessive administration charges and penalties on default of their loans that plunge them into further debt.
Although many homeowners are selling their homes to discharge their debt, judges have warned that the current economic climate is making it difficult to sell property. Mortgage debts are also being exacerbated by "draconian" legal fees as homeowners fight repossession for mortgage arrears as little as €2,000.
Community lawyers have warned that reckless lending by credit agencies and Ireland's unregulated subprime mortgage market has forced people to borrow at rates they simply cannot afford, leading to increased repossessions.
The Free Legal Advice Centre has said that the "open field" enjoyed by some unregulated lenders has fuelled the country's repossession rates. It has called on the Government to force subprime lenders to justify their interest rates and charges.
"We are dealing with a fundamental contradiction here," said Paul Joyce, FLAC's senior policy researcher on consumer credit law.
"If onerous interest rates are imposed because a borrower is deemed a higher risk, there is an implicit acknowledgment that the chances of that person defaulting are greater. It follows from this that lenders should be under a greater burden to assess whether that borrower has the ability to repay. The assessment of ability to repay is at best, cursory and at worst, non-existent."
Aggressive
The Government is set to regulate subprime lenders, home reversion and equity release agencies within weeks, as fears mount that some lenders may have deliberately targeted borrowers who were asset rich but cash poor.
The Money Advice and Budgeting Service has also expressed concern that lenders, both subprime and mainstream, are becoming increasingly aggressive in chasing mortgage defaulters and are not providing at-risk customers with alternative debt repayment plans.
In some cases coming before the High Court, borrowers are defaulting within the first month of their mortgage term, leading to serious concerns about assessments of their ability to pay.
"Sometimes, we feel that some of the creditors who go that [repossession] route are more interested in the asset than they are in helping the person in difficulty," said Michael Culloty of MABS.
"The creditors must take some responsibility for the situation and not to be running to the court so quickly."
From this Friday, all unregulated lending agencies must apply for regulation by the Irish Financial Services Regulation Authority (IFSRA).
The introduction of the Markets in Financial Instruments and Miscellaneous Provisions Act is designed to curb inappropriate lending and protect vulnerable homeowners. Under the Act, all lenders will be subject to the Consumer Protection Code.
- Shane Hickey and Dearbhail McDonald
