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Funds praised for embracing fast-track debt deals for older mortgage holders


Central Bank Deputy Governor Ed Sibley warned that more action is needed to resolve the mortgage arrears crisis. Photo: Tony Gavin

Central Bank Deputy Governor Ed Sibley warned that more action is needed to resolve the mortgage arrears crisis. Photo: Tony Gavin

Central Bank Deputy Governor Ed Sibley warned that more action is needed to resolve the mortgage arrears crisis. Photo: Tony Gavin

VULTURE funds that own distressed mortgages have been encouraged to follow the lead of two funds that are approving large numbers fast-track debt deals.

Many of the deals involve those who have been in arrears for a long time and are nearing retirement age.

Dungarvan-based personal insolvency practitioner Mitchell O’Brien said his firm, IRS Ireland, has developed a strong working relationship with both Start Mortgages and Mars Capital.

This has led to the funds and IRS developing what Mr O’Brien said were sustainable personal insolvency arrangement (PIA) solutions for long-term mortgage arrears cases.

The innovations that have been developed have been praised by Deputy Governor of the Central Bank Ed Silbey.

Mr Sibley made direct reference to an IRS case approved in the High Court for a middle-aged Tipperary woman, Esther Kirwan.

The innovation means that a personal insolvency arrangement with Start or Mars Capital can convert a capital and interest mortgage loan into a long-term, interest-only loan.

And the loan’s term can be arranged to continue to be paid beyond retirement, with some stretched to beyond the average life expectancy.

“This effectively reduces the cost of mortgage payments for a borrower for the rest of their lives, and in most cases sets mortgage payments at or below the cost of social housing rent (that would be the case in a Mortgage-To-Rent scenario).”

A personal insolvency arrangement (PIA) is a court-approved agreement with creditors that will write off some unsecured debt and restructure any remaining secured debt, while keeping the person in their home where possible.

“A side-effect of dealing with mortgage arrears in a PIA is that all other unsecured debts, judgment mortgages, legacy business debts, etc. will all be formally resolved and ultimately written-off,” Mr O’Brien said.

He said Start Mortgages and Mars Capital worked with him to develop PIA solutions for long-term arrears cases.

“We have solutions particularly for age-challenged (over age 55) and for income-challenged borrowers,” he said.

The tweaked PIAs can be used by people on social welfare income, ensuring borrowers stay in their homes.

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The cost of the process is covered by the Government’s Abháile scheme for borrowers in mortgage arrears.

He called on other funds that own distressed mortgages to support personal insolvency deals for those with long-term arrears.

The Central Bank recently revealed that one in eight mortgage accounts is in some form of financial distress.

This means that not all the repayments will have been made when the home loan reaches the end of its term, the Central Bank said.

The figure represents one of the starkest indictors yet of how intractable the mortgage arrears crisis is proving some 10 years after the financial collapse.

Mr Sibley demanded more action from banks and other lenders to resolve the long-running mortgage arrears issue when he revealed that 13pc, or 95,000, mortgage accounts are displaying some form of financial distress.

The stark figures came in a speech he made to the Banking and Payments Federation of Ireland, the lobby group for banks.

“More action is needed by lenders to resolve long-term mortgage arrears, to support distressed borrowers and improve the functioning of the mortgage market for all,”Mr Sibley said.

He said lenders need to do more to resolve long-term mortgage arrears.

However, full resolution cannot be delivered solely within the financial system, he added.

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