Mortgage crisis hits city council with 43pc in red

Niall O'Connor

A QUARTER of homeowners who got a mortgage through Dublin City Council are at least three months in arrears.

And a shocking 43pc of all customers accounts are in the red, meaning the council is chasing customers for potentially tens of millions, the Herald has learned.

Figures released by the Central Bank yesterday showed that 8.1pc of private mortgages are in arrears. But the problem appears to be much more serious with council customers.

There are now deep concerns among senior council officials that the size of its loan book is uncontrollable.

And informed sources have revealed that the cash-strapped council may need to be recapitalised by central Government in light of these revelations.

The Herald can today lift the lid on the extensive loans owed to the city council. We can reveal that:

•More than a quarter of all customer accounts are three months or more in the red.

•Just under 14pc of accounts are in arrears of 12 months or more.

•100pc mortgages were being handed out at a time when commercial institutions felt the practice carried too much risk.

•The council is trying to cope with 99 loans (just 3pc of its loan book) which are more than €20,000 in the red each -- a potential sum of over €2m.

And we can further reveal that the Housing Finance Agency (HFA) -- which provides the loans on behalf of the council -- took to offering interest- free options for up to two years to those in financial difficulty.

The agency has also agreed to "capitalise" customers' arrears "where there are high arrears and the borrower has been paying consistently for over one year".

Council documents obtained by the Herald show that in June of this year, 43pc of all loans were in arrears. The council has seven staff working in its dedicated arrears unit. The documents reveal that all customers who slip into arrears are immediately advised to contact the Money Advice Bureau Service (MABS) before further warning letters are sent out.

Our revelations have today caused deep unrest among city representatives, with several admitting they had no idea of the scale of the arrears.

Fianna Fail councillor Paul McAuliffe said the Department of the Environment has not granted the council the adequate powers to be able to assist people in restructuring loans.

"I've had a lot of people come to me who are stuck in shared ownership mortgages and who want to restructure their loans.

"The council loans team are doing their best to help people in arrears but the Department of Environment just has not given the council the power to resolve the problems of many borrowers."