Experts divided over controversial plan to 'bail out' debtors
A row has erupted over a controversial new proposal that would see taxpayers' money used to top up the mortgages of families in deep arrears and facing repossession.
The proposal, which was made in a submission by the Irish Mortgage Holders Organisation (IMHO) and is currently being considered by the Department of Finance, would actually save the State €100m a year by the time the costs of providing emergency accommodation and rent allowance to evicted families are taken into account.
The process would involve affordability tests being carried out by a certified, licensed and independent third party to determine what someone can pay towards their mortgage.
After examining income, expenditure, living expenses and debts a "certificate of affordability" would be drawn up confirming how much the homeowner can afford to pay and a local authority payment would fill the gap.
The certificate would be valid for up to two years.
IMHO CEO David Hall told the Sunday Independent: "We're saying add the money from rent allowance they will get when they are thrown out, put it on top of their existing mortgage and leave them in their house - that solves a number of problems."
Mr Hall estimates that at least 25,000 family homes will be repossessed over the next two years. "One solution is not going to fix everything, this requires a number of radical solutions working in parallel."
The controversial plan was heavily criticised as another "bailout for the banks" by Fianna Fail finance spokesman Michael McGrath in last week's Sunday Independent.
But Mr Hall insists the move would not "let the banks off the hook".
He added: "The banks have to park a part of the debt and will have no claim until such a time as a debtor decides to sell the property."
However, Karl Deeter, compliance manager at Irish Mortgage Brokers (IMB), rejected Mr Hall's analysis and questioned the accuracy of figures contained in the IMHO submission.
"We support well-thought-out policy interventions which are numerically sound and based on facts. For that reason, we cannot support the IMHO suggestion in its present guise," Mr Deeter told the Sunday Independent.
"Simply crying 'vested interest' is the weakest logical argument possible, it's also without foundation in an empirical sense."
Mr Deeter said there are many other sides to the mortgage arrears crisis that are "overlooked" in the proposal. These include: renters, people on housing waiting lists, standard variable rate holders and first-time buyers. And he believes the best way to resolve this issue is to have "a carrot and stick approach".
"Banks should be able to repossess easier than they do," he said, revealing that IMB have documented over 300 cases where people didn't show up for their own court dates and often make no payments for years. This should end, equally, encouragement of insolvency solutions is vital as are appropriate and well-thought-out welfare interventions. Simply throwing public money at a problem is the worst choice of all."
Mortgage advisory agency New Beginning was also critical of the proposal. "We must be careful to ensure that the taxpayer is not asked to bail out the banks again. They have been fully capitalised at great expense to the Irish people already," said spokesman Simon Downey.