State must grasp the loan arrears nettle
Taoiseach Enda Kenny recently promised a suite of new measures for those in trouble with mortgage arrears. Speculation is mounting that these are imminent.
As politicians enter election mode, the situation of voters in financial and mortgage distress comes into acute focus. Existing policies have failed tens of thousands of households. State policies are not coherent and have not succeeded in allowing people to restructure their mortgages fairly. They have not led to practical outcomes for those who are stone broke and insolvent. Above all, they leave many thousands of households at risk of losing their homes.
New measures are long overdue. The Government needs to grasp the nettle and do it right this time.
So let's look at what is rumoured to be under review.
1 An appeal or oversight mechanism
Throughout the crisis, the resolution of mortgage arrears has been blighted by the absence of independent oversight of lenders.
They have been allowed to propose any solution they wish or none at all. There can be no fair resolutions where already powerful, well-resourced lenders get wide discretion on how they deal with customers negotiating over the roof over their heads, when the lenders are accountable to no one. An independent appeal or oversight system is therefore crucial.
2 A reduction in voting rights for the main creditors
In most personal insolvency applications where people hope to retain their family home, the main creditor is the lender, which can approve or reject any application without question.
Any reduction in voting rights will be a welcome remedy to the present power imbalance.
3 An information campaign for borrowers
The Taoiseach indicated that Government hopes to raise borrower awareness. This must go beyond a mere information campaign.
People often know the information; what they need is help in applying it to their own situation. The Free Legal Advice Centres (FLAC) has long called for appropriate legal and financial advice and support for stressed, intimidated borrowers dealing with professional lenders.
4 A revised mortgage-to-rent scheme
On its launch in 2012, the mortgage-to-rent scheme looked like an innovative way to provide secure rented housing to people with unsustainable mortgages. However, what was a good idea to increase social housing stock and preserve family homes has been swallowed by bureaucracy and ambiguity. It badly needs improvement.
5 A mortgage interest support scheme
One policy decision that badly misfired was the abolition of the mortgage interest supplement in 2012-2013. That supplement helped people in debt to keep their mortgage going by supporting the interest element.
However the Government argued that scheme made it harder for people to get long-term restructures of their debt.
As with other aspects of the policy, Government expected that banks would take a softer line with borrowers if the supplement was gone. They didn't.
Now Government seems to recognise that some support could help people overcome difficulty and keep them in their homes.
Noeline Blackwell is director general of FLAC
Sunday Indo Business