Proposal for Government to fund split mortgages
The Government should sponsor split mortgages, consumer group the Irish Mortgage Holders Organisation (IMHO) has advised.
The group has submitted three new ideas to the Department of Finance that it says could help decrease the number of home repossessions by lenders.
It estimated that 25,000 family homes will be repossessed unless a new solution is found to solve distressed mortgages.
The group is led by consumer champion David Hall.
One of its ideas proposes that the Government pays part of people's split mortgages, to encourage banks to offer these kinds of products. Split mortgages allow borrowers to ignore part of their mortgage, with no interest charged on it, until the underlying asset is sold. It can lower the cost of monthly mortgage payments substantially while keeping people in their homes.
Paying part of a split mortgage would be more affordable for the state than paying rent supplement or social housing, IMHO said.
The organisation also advises the setting up of a new property company to buy homes from distressed mortgage holders and lease them back.
Called "BankLease", the company could be funded either by banks themselves, or by investors, or by government.
The home's former owners would become long-term tenants based on a lease agreement, with a government body such as the Approved Housing Board acting as middleman. The tenants would pay rent to the Approved Housing Board which would in turn pay BankLease, based on the discounted price it bought the homes for.
IMHO also wants the approval process for Personal Insolvency Arrangements, which were rolled out by the government in 2012, relaxed. The rules require creditors representing at least 65pc of a person's debt to give their approval.
IMHO said solutions currently being offered to solve distressed mortgages are failing to stem the tide of repossession actions coming before the courts.
Long-term mortgage arrears have reached crisis point, its submission to the Department of Finance said.
"While some short term arrears and easy picking have been resolved the main event of those in long term arrears is increasing and now at crisis point."