Friday 17 November 2017

'Up to 3,000 additional families' eligible for 'mortgage-to-rent' scheme under new rules

(Stock photo)
(Stock photo)
Louise Kelly

Louise Kelly

New changes to the 'mortgage-to-rent' scheme is expected to allow thousands of additional struggling mortgage holders to become eligible to apply.

The amendments to the scheme, originally developed in 2011, have been announced by Minister for Housing Simon Coveney.

“I am pleased to be able to publish the review and set out a series of actions and amendments that will make Mortgage to Rent (MTR) quicker, more transparent, easier to navigate for borrowers and ultimately, more accessible to more households in mortgage distress," Minister Coveney said today.

"Crucially, the changes will also dramatically increase the numbers of households availing of the scheme,” Minister Coveney said today.

Several changes to the eligibility criteria of the scheme are being made which will mean more households in rural areas, in particular, will be eligible.

Furthermore, a more formal communication channel between the lenders and borrowers is being proposed; conveyancing, valuation and repairs process are all being refined; and a significant borrower, lender and local authority awareness raising and training programme are being initiated.

It is hoped that the expansion of the scheme will lead to more interest as the initiative has suffered from poor take-up thus far.

Only 217 homes have gone through the process since the introduction of the 'mortgage-to rent' scheme, with a further 365 reaching conclusion.

Up to now, the scheme has relied on single transactions by Approved Housing Bodies (AHBs) buying lenders properties that have been voluntarily surrendered by eligible borrowers.

Read more: 'I would advise any couple looking for a home to do this' - First-time buyers guide to dream home

Key changes

* Lenders will be required to formally communicate with borrowers as to why they are not suitable for the scheme.

* Flexibility will be provided in relation to the size of properties which qualify for the scheme. 

* New property valuation procedures will be put in place; the current valuation process is not operating as it should be.

* The process by which the necessary repairs to properties are costed will be revised to speed up the process of agreement between all parties.

* A key objective of the actions – and a measure of success – will be reduction in the average length of time for the completion of a transaction will reduce from between 12-18 months currently to less than 9 months.

* Increasing the visibility and familiarity of the scheme among borrowers is a critical objective.

* A Step by Step Guide for borrowers will be developed.

* The property price thresholds for eligibility under the scheme will be increased in line with the acquisition thresholds for social housing generally. The threshold for a house in Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow is being increased to €365,000 while the threshold for an apartment / townhouse in these areas is being increased to €310,000.  For the rest of the country, the threshold for a house is being increased to €280,000 and for an apartment / townhouse to €210,000.

* A significant change is that the application by the borrower for Social Housing Support will be made by the borrower to the local authority prior to submitting the MTR application to the Housing Agency.  This change means that the borrower will know from an early stage of SHS eligibility or not, and if not will need to focus attention on other options to deal with their debt.

Read more: First-time buyers turning to their parents for thousands of euro for house deposits

It is understood that the expansion of the scheme will initially be rolled out on a trial basis.

“I want to give mortgage-to-rent a shot in the arm by testing alternative funding models that can deliver volume," said Minister Coveney.

"The Housing Agency will work with a number of financial entities who have come forward with an interest in working with the MTR scheme to progress a minimum of 200 units based on these new arrangements.

"The objective is to see how we can structure the scheme to benefit a greater number of households. The new funding arrangements, increased flexibility and expanded scope in terms of eligible properties will enable us to do that'

David Hall, CEO, ICare Housing and Irish Mortgage Holders Organisation welcomed the changes to the mortgage to rent criteria.

"There are 35,000 families in mortgage arrears of greater than two years and many can't afford their mortgage and face repossession," he said.

"Given the current housing crisis, it is imperative that we try and keep these families in their homes.  Over the past seven months we have been working with many stakeholders to establish an approved housing body, Icare Housing, to buy these homes.

"Today's changes will mean we can now progress and seek applicants.  I estimate that it will allow an additional 3000 families be eligible for mortgage to rent."

A charity that specialises in finding solutions for people in mortgage arrears has also welcomed the planned expansion of the scheme.

The Phoenix Project, which has helped over 18,000 families in mortgage distress stay in their homes since the recession began, promised to work with the Government to provide long-term solutions to its clients.

“The mortgage arrears crisis is a bigger threat to the economy than Brexit. It threatens social cohesion and stability in Ireland -  where are you going to put 100,000 people if they lose their homes?” chairman John McGrath said.

While welcoming the Government’s proposal, the Phoenix Project said that the income and property price parameters should have been widened from €360,000 for a home to €425,000 and a €45,000 income cap in Dublin and a €35,000 cap in the rest of the country.

“There has been a surge in property prices, especially in the capital in recent years, and it is now very difficult to purchase a three-bedroom house in Dublin for under €400,000. The Phoenix Project feels that the parameters for this scheme should be extended both in in income and property price caps,” Mr McGrath said.

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