FF publishes a bill to set up a Mortgage Resolution Office

Brendan Burgess

Brendan Burgess

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From Times Ireland


"Mr McGrath’s bill, which will be debated in the Dáil today, would set up a resolution office to deal with problematic mortgages associated with family homes. It would instruct the lender to find a sustainable solution. Separately, a bill has been published that would establish a not-for-profit entity to buy distressed mortgages."

I have not seen this bill.

I would be strongly opposed to it unless it gives this Mortgage Resolution Office the power to quickly order the repossession of abandoned homes, and homes from people who have not engaged and who are paying nothing.

If the Bill provides for that and comes up with a definition of what a sustainable mortgage is and it is allowed to impose that on the lender and the borrower, I would support it.

Brendan
 
Summary of Bill

A Mortgage Resolution Office will be set up within the Insolvency Service

A borrower who was in arrears before 1 January 2017 whose disposable income or assets are not enough to pay the mortgage may apply for an order

It applies to the family home only

The application will be sent by the MRO to the lender.

The lender will state whether the mortgage is sustainable or not.

If the lender thinks that the mortgage is not sustainable, the lender may make a proposal.

If the borrower or the MRO rejects the proposal, the MRO may order the following

a) Interest only for up to 4 years
b) An extension for up to 20 years
c) A payments holiday of up to one year
d) An adjustment to the mortgage rate itself
e) A write down of the principal in exhchange for "a share in the equity of the home"
f) That the borrower pays 66% of the interest for up to 5 years
g) That a split mortgage be provided where no interest would be paid on the warehoused part for up to 10 years
h) A write down in the principal of the mortgage
i) that the borrower and lender participate in the Mortgage to Rent Scheme
j) Any combination of the above or any other solution that the MRO considers fair

A lender cannot seek repayments or repossession of a property included in an MRO.
 
This is bonkers stuff

It is fundamentally flawed because it assumes that the lender is the source of the problem. Lenders have rescheduled 90% of home loans in arrears. Anyone who pays anything reasonable and engages with their lender gets a deal - often a very generous deal.

It does not deal with the main cause of the present arrears - Borrowers who just don't want to pay anything towards their mortgage, who refuse to engage, and who refuse to show up in court.

A Mortgage Resolution Office which has the power to grant an order for possession where people are paying nothing would have my support. And, yes, in some cases it would be able to impose solutions where the lenders have not been flexible in their rescheduling.

Some specific comments

There is no definition of what a sustainable mortgage is.

There is no discussion of what happens if a property is in positive equity

There is no reference to the efforts made by the borrower to pay their mortgage
 
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would not expect anything different from FF , they are now further left under martin than at any time since DEV
 
I have just circulated this note to journalists


Mortgage Resolution Bill will increase the level of arrears, not reduce them.



A comment by Brendan Burgess



· Number of mortgages rescheduled over the past 8 years: 120,000

· Number of family homes repossessed on foot of a court order over the past 8 years: 2,476

· The level of mortgage arrears has halved since the peak

· The number of court proceedings started by the lenders to repossess houses has fallen by 50% since the peak.

· Households in negative equity have fallen from over 300,000 to under 100,000



The vast majority of people who struggle with their mortgage engage with their lender and continue to pay what they can. The lenders are able to restructure 90% of these mortgages and most of the customers get back on track. To date, over 120,000 mortgages on family homes have been restructured.

But a significant minority of people act irresponsibly because they know that they can get away with it. They make no effort to pay and they refuse to engage with the lender. The lender has effectively no sanction other than to initiate proceedings. Even then, the legal process is so convoluted and so tilted against the lenders that it’s virtually impossible for them to gain an order for possession except where the property is abandoned or the borrower consents to the order. Over the past 8 years, a total of 2,476 family homes have been repossessed by court order. I repeat, in the same period, 120,000 mortgages were rescheduled.

The problem with the Fianna Fáil Mortgage Arrears Resolution (Family Home) Bill 2017 is that it is based on the false premise that the problem lies with uncooperative lenders and it absolves the borrowers from all blame.

This Bill will further reduce any incentive for struggling borrowers to pay their mortgage. They can refuse to do so now in the hope that this new quango will write down some of the debt while leaving them in their home.

The best way to reduce the arrears problem is to give the proposed Mortgage Resolution Office the power to grant a lender an order for possession of the family home where it deems that the borrower has not been paying a sustainable amount and/or engaging in the process. The realistic prospect of losing one’s home in the short-term would increase people’s engagement with their lenders. The earlier such engagement begins, the easier it is to reach a sustainable solution.

And, then by all means, address the small number of cases where take legal action against responsible borrowers in an effort to pressurise the into surrendering their home. The Mortgage Resolution Office can be given the power to order the capitalisation of old mortgage arrears and the restructuring of the mortgage in those few cases.



About the author

Brendan Burgess is the founder of the consumer website Askaboutmoney.com. He actively campaigns on many mortgage issues

· Mortgage Arrears

· The loss of tracker mortgages

· The very high mortgage rates in Ireland.

He was a member of the government’s Expert Group on Mortgage Arrears in 2010 , and in 2016, he published a report “What Really goes on in the Repossession Courts” with Séamus Coffey and Karl Deeter
 
This is the kind of government interference that keeps mortgage rates high here, both by increasing costs for existing banks, and keeping competition away. If we want real competition in the market we should be making it easier to repossess and sell homes that people are refusing to pay for.

The idea of putting people on internet only, or extending terms by 20 years are just keeping people for longer in debt that they simply can't afford.

Taking the emotional attachment to property out of it, the best solution for most customers genuinely in difficulty is to walk away from the home and get a fresh start.
 
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