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'Mortgage to lease' plan may help families in severe debt


Ross Maguire of New Beginnings

Ross Maguire of New Beginnings

Ross Maguire of New Beginnings

A NEW 'mortgage-to-lease' scheme could help thousands of families in severe debt.

The plan will see €2bn in equity being made available to buy up the most indebted of mortgages from the banks at a steep discount, while enabling homeowners stay in their houses under a seven-year lease arrangement.

Depending on the size of the loans, up to 25,000 mortgage holders could benefit.

The scheme is a venture between debt resolution agency New Beginning and a specially created private equity fund based in Malta.

The banks currently have the distressed assets on their books without any hope of recovery, but who are reluctant to go down the time-consuming and expensive repossession route.

The scheme will offer the banks a sweetener in the form of a bond from the Maltese fund which pays a coupon - a regular interest payment - and can be openly traded on an EU stock exchange.

"In effect, they will be replacing a non-performing loan with a performing bond," explained one mortgage expert.

"This is because bonds are tradeable on the open market and can be used to secure new liquidity funding. In the meantime they get the coupon rate."

However, New Beginning's Ross Maguire (pictured inset) has refused to confirm the scheme.

"There's nothing to say at the moment. Any initiative undertaken by us will be announced in due course," he said.

But Fine Gael TD Regina Doherty said Finance Minister Michael Noonan would look at the proposal.

"The Government would welcome any real and assertive action being offered to assist people who have nobody else to assist them when they go into debt," she said.

Asked about the impact on taxpayers, she said: "We are the shareholders of many of these banks, therefore any write-down of debt must be taken in that context. We can't leave the taxpayer in a worse position.

"However, while it would result in an increase in tenants seeking rent allowance, this would be offset by families benefiting from the deals who wouldn't then end up on housing lists had their homes been repossessed in the normal course of events by the banks."

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The Government's ill-fated Mortgage-to-Rent (MTR) scheme, set up over two years ago via housing charities and local authorities, has been a disaster, with barely one in 10 of the anticipated deals being completed.

This was primarily because the banks weren't prepared to take the hit on having properties, even those regarded as highly distressed, taken off their books at a severe write-down and being rented back to their previous owners as tenants without any compensation.

The other objections included the use of too many agencies, including dozens of local authorities, restrictions in the income levels of the tenants and a cap on the property's value at €220,000 for a Dublin home.

This was considered far too low in light of the recent price rises.

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