Friday 24 November 2017

An equitable mechanism for struggling mortgage owners

Gavin Duffy

THIS WEEK I want to propose my "6/5/4 Mortgage Rescue Bill". It is a piece of legislation that would set up a fair and equitable mechanism to help people who are struggling to pay their mortgage.

The problem with debt forgiveness is why should one tax payer who has made great sacrifices to "stay in terms" with their bank, that means has cut back on luxuries, nights out, holidays etc, to keep making their monthly payments, bail out another tax payer and start paying their defaulting neighbours' mortgages as well?

I have been a long time supporter of the bank bailout and was one of the first to call for the setting up of an agency like NAMA, warts and all. However back in 2008 I also said we needed, first and foremost, a State Mortgage Rescue Agency. If the State has bailed out the banks it also has to set up a mechanism to bail out or assist those who do not have the means in the foreseeable future to pay their mortgage.

And so my 6/5/4 proposal. 6/5/4 means the distressed mortgagee sells 1/6th, 1/5th or 1/4 of their home to the State. As an example, and I am rounding figures here to keep it simple, say someone has a debt of €200,000 on a twenty year mortgage.

Their interest and capital repayments are about €1,700 per month. They now choose to sell one sixth, one fifth or a quarter of their home to the State. Let's say they decide to sell 1/5th, that's 20%. So their debt is immediately reduced to €160,000. They can also opt for a moratorium on their capital payments for three years. So their monthly payments go from €1,700 to approximately €700 for the next three years. Eventually when the house is sold, say in fifteen years time, the home owner gets 80% of the proceeds and the State gets, in this case, 20% which should adequately cover the capital cost of the scheme.

Here are the exchequer costs. I estimate we are talking about approximately 100,000 mortgages. The annual cost in forgone interest payments to our now state owned or controlled banks is approximately €200 million per annum. Also the banks are now more attractive to investors and more likely to attract capital because their mortgage book is no longer diseased and looking terminal. It is NOT debt forgiveness it is a majority stake for the home owner in a shared ownership scheme. It is relatively a small price to pay to leave people in their own home, owning 75%, 80% or 85% of it and giving them every chance to survive this economic crash.


This week I launched an Age Friendly Business Programme in County Louth. The wee county is to be commended for taking the lead in developing products and services for those over 55 years of age.

The Dundalk Institute of Technology has developed a reputation as being a global player in the research and development of products and services for Seniors.

Instead of older people going into nursing homes, with technology and at a fraction of the cost, they can continue to live at home independently. But they are monitored. Their blood pressure and other vitals are automatically and remotely measured every day in line with their Doctor's prescribed maintenance programme for each individual.

Sensors in their home advise the monitoring centre if the person is moving about normally etc. And the economics make such sense. This type of monitoring costs about €50 per week whereas a nursing home can cost over €800 per week.

As someone who advises companies on marketing strategies I am very aware of how fixated they all are about youth culture and recruiting new young customers to their brands.

But here's an amazing statistic. 60% of Europe's disposable income is held by those over 55 years of age. So it makes business sense to wake up to the fact that providing improved customer care for Seniors is a smart move.

Well done to the Louth County Manager, Conn Murray, for being the driving force behind this initiative and the former IDA boss, Padraic White, who heads up the County's Economic Forum. . Other counties should follow the lead set by Louth.

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