Monday 18 December 2017

38pc of repackaged Start loans are three months or more in arrears

Charlie Weston Personal Finance Editor

FOUR out of 10 mortgages from subprime lender Start and repackaged and sold on to investors are three months or more in arrears, ratings agency Fitch said yesterday.

On average, no repayments have been made for more than a year.

The mortgages are part of a batch packaged together and sold to investors. Fitch downgraded the mortgage investments.

The figures put into to stark focus the pressures on households that took out high-cost mortgages during the boom.

Subprime lenders offer mortgages to people refused by mainstream lenders because they have a poor credit history or an irregular income stream.

These lenders typically charge interest rates of 7pc, almost double what other lenders charge.

The revelation that so many of Start's clients are in arrears comes a day after the International Monetary Fund advised the Government to put in place a limited rescue package for heavily indebted households.

Fitch Ratings said 38pc of mortgages originated by Start and bundled together and sold on to investors, in a vehicle called Lansdowne 1, are three months or more in arrears.

On average, no repayments had been made for 14 months.

The ratings agency said 41pc of Start mortgages in Lansdowne 2 are three months or more in arrears. No repayments have been made for 15 months, Fitch said in a research note issued yesterday.

A Fitch researcher confirmed that the arrears level for Start was double the average for British subprime lenders.

Subprime lenders like Start are responsible for some four out of 10 court actions to repossess homes.

Just last Monday the High Court was told that borrowers who were charged annual percentage rates in excess of 7pc and 8pc by Start defaulted on their loans within weeks.


In another case, a Donegal couple who took out a €200,000 loan with Start in May 2005 defaulted in August of the same year. The High Court was told the property -- a family home -- is now abandoned.

In a statement, Start acknowledged that "delinquency levels are higher than anticipated".

"However, we believe that the flexibility and forbearance we have shown to many of our customers who are genuinely struggling to meet their mortgage repayment will give them the breathing space to get back on their feet and ultimately benefit all concerned," it added.

In contrast to Start, a note issued by Fitch on loans repackaged by prime lender Ulster Bank shows that 2.4pc of them are in arrears of three months or more. However, this is up from 0.95pc of the Ulster Bank-originated mortgages that were in arrears in December 2008.

Fitch said it expects house prices to decline by 45pc from peak to trough.

Yesterday, housing charity Respond said that arguments about moral hazard could not be used as a reason not to assist those in danger of losing their home.

Respond said some form of debt forgiveness for those in arrears and facing repossession needed to be examined.

The housing charity said it made the call following recent comments by the Financial Regulator Matthew Elderfield, NAMA chairman Frank Daly and Justice Minister Dermot Ahern that there could be no 'NAMA for the people'.

Irish Independent

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