Thousands of debtors' properties frozen by lenders
BANKS and other lenders have frozen the properties and homes of thousands of debtors, preventing them from selling their houses unless they pay their debts.
The Irish Independent has learnt that 4,159 properties have been frozen by means of a judgment mortgage this year alone, more than double the amount of judgment mortgages registered in 2007.
Unsecured personal debt can be 'converted' into mortgage debt through the court process of a judgment mortgage. Any debt that gives rise to a judgment mortgage can ultimately result in the forced sale of homes or land by the lender to recover what is owed.
Debt advisers have become alarmed at the increased use by lenders of judgment mortgages to recover unsecured debt such as that from credit cards and personal loans.
In the last five years, almost 14,000 judgment mortgages have been registered against residential properties and land according to the Property Registration Authority, and more than 600 commercial properties have also been frozen by creditors, including banks, during the same period according to the Companies Registration office.
Last year there was a 72pc rise in judgment mortgage affidavits and certificates dealt with by the courts.
Applications for judgment mortgages in the Circuit Court increased by 53pc in 2009 compared to 2008 (2,396 applications in 2009, compared to 1,571 in 2008), and in the High Court increased by 65pc in 2009 compared to 2008 (1,058 applications in 2009, compared to 643 in 2008).
Although judgment mortgages rank after an existing mortgage, they can lead to the forced sale of homes and land and can be a precursor to bankruptcy. And even if a debtor has no mortgage on their home, it could be in danger of repossession if they have other debts that creditors can freeze by securing a judgment mortgage against it.
Once a judgment has been obtained, the creditor can apply in court to have a judgment mortgage registered on the deeds of the debtor's property, effectively freezing it and preventing any dealings with that property unless the debt is discharged.
Last night, the Labour Party's spokesman on housing, Ciaran Lynch, said that the surge in judgment mortgages shattered the myth that it was only those who were unemployed who were at risk of losing their homes and called for a comprehensive new legal framework to help debtors.
"People are hanging on by a thread," said Mr Lynch who last year moved a private members' motion calling for a two-year moratorium on family home repossessions by all banks covered by NAMA and for the provision of a mediation service to assist debtors in difficulty to come to an arrangement with lenders.
"The vast majority of families, even if couples have managed to hold on to their jobs, have seen significant drops in income in the last 18 months. We need a new legal framework to help people in difficulty," he said.