Responsible borrowers will benefit from Vulture Funds
Brendan Burgess summary of submission to Oireachtas Finance Committee 21st March 2018
What the Oireachtas Finance Committee should recommend
Ø Prioritise the great majority of borrowers who are responsible, many of whom have to make great personal sacrifices to pay their mortgage – They should be paying a much lower mortgage rate.
Ø Prevent lenders from taking legal action where the borrower is paying at least the interest on the mortgage
Ø Allow the lenders to fast track repossession against the minority of borrowers who have been paying nothing for some time. Their mortgages are being paid for by the responsible majority.
Ø If we don’t allow the lenders to repossess the homes of those who won’t pay their mortgage, then we should not complain if those lenders sell those loans to vulture funds.
Ø Reintroduce Mortgage Interest Supplement for those borrowers who would be dependent on the state for their housing – this would be much better than repossessing the house and much cheaper for the taxpayer than the cumbersome Mortgage to Rent Scheme
If we don’t allow lenders to repossess houses, they have no choice but to sell them to vulture funds.
Three repossession orders were granted by the Registrar in the Dublin Circuit Court last Friday.
In case 1, the first missed payment was in 2009. Since 2012, she has paid €1,870 in total. The arrears are €92k which is the equivalent of 7 ½ years repayments. KBC initiated proceedings in 2014. It took KBC 4 years to get an order for possession. Even then, the Registrar put a stay of one year on it. KBC applied for legal costs but were refused. The woman appears to be living on her own without a partner or children in a three bed house. This woman will have the equivalent of 8 ½ years free accommodation. Of course, while this accommodation, will be free to her, the other responsible mortgage holders will be paying it for her.
This is the reality of what is happening in our courts. Some borrowers are simply not paying their mortgage and it takes the banks years and huge legal expense to recover the home.
The lenders cannot devote this amount of time and resources for a period of years trying to recover the houses where the borrowers simply won’t pay. They are right to sell these mortgages for whatever they can get and move on.
The majority of responsible borrowers are paying for the small minority of borrowers who won’t pay
We have the highest mortgage rates in the Eurozone. Not just a little bit higher, but almost 1.5% higher.
On a mortgage of €300,000, a borrower is paying €370 more per month than she would be paying in the average Eurozone country.
And many borrowers are paying 4.5% by default.
No foreign lender will enter the Irish market until the system is changed to allow them to repossess properties where the borrower is not paying.
This dysfunctional possession system suits the Irish banks. While it frustrates them on a case by case basis, it keeps overseas competitors out of the most profitable mortgage market in the eurozone.
The Tracker Mortgage Scandal was really the Very High Mortgage Rates Scandal
If a borrower who lost their tracker rate of 1%, paid the eurozone average of 1.8%, they would have paid around €200 more in interest each month, which they could cope with. But those who are paying 4.5% instead of 1% are being charged an extra €900 a month, which is life-changing.
If the Irish banks were charging fair mortgage rates, the lenders would have been less determined to deprive borrowers of them and any borrowers so deprived would have been impacted much less.
Mortgage Interest Supplement should be reintroduced for those who can’t pay
In the UK, the government pays the mortgage interest for those who would be dependent on the state. But it is a loan secured on the home which is repayable when the borrower dies or sells the house.
This would be so much cheaper and quicker to implement than the extremely cumbersome Mortgage to Rent Scheme. All it would require would be the normal Social Welfare means test and an assessment of housing needs from the local authority. Despite the high mortgage rates in Ireland, it would be much cheaper for the taxpayer to pay the interest on a borrower’s mortgage than to pay their rent for them.
