So AIB have decided that there are hundreds of individual loans on their balance sheet that are non-performing and which they have no effective recourse to; are a blight on their balance sheet and should be repackaged and effectively sold to one borrower. Enter taxpayer-supported solution; i-Care.
Result – AIB’s bad debt issue is resolved and instead of having hundreds of non-performing loans, it has one single triple-A, low-risk, performing loan.
AIB avoids costly repossession proceedings and also the avoids becoming a landlord with the associated costs and headaches.
i-Care gain ownership of the houses and the associated rent roll, which presumably is the backing for the loan provided by AIB.
Home owner becomes a tenant and i-Care becomes a landlord.
Even leaving aside the ridiculous buy-back option, the potential issues now associated with this new arrangement are wide-ranging:
- Who pays for maintenance and upkeep of the property?
- Who pays for insurance, management fees, property tax, water rates or any future property-based taxes?
- What rights does the tenant have to paint and decorate, renovate or extend?
- What happens when the tenant gets into arrears?
- What happens when the family unit today changes over the coming years and the “4 bed, family home” is occupied by a single individual?
- What happens in 28 years when the 40 year old homeowner (now) turns 68 years of age and hasn’t bought out the property? Is there anyone who expects that a 68 year old, or their adult-children will be evicted?
And where does i-Care get its funding from?
- 40% comes from the taxpayer (figure of €100m previously quoted)
- 60% comes from AIB and is backed by the hundreds of homes and corresponding rent roll
The State are now going to spend €100m to solve a housing problem that doesn’t exist today.
- The borrowers currently have access to housing.
- The borrowers do not face any realistic prospect of any change to those circumstances.
- If the borrowers are expected to pay a level of rent under the new i-Care regime, then by paying a similar amount to AIB they would demonstrate to any judge a willingness to engage, thereby avoiding the prospect of an adverse judgement in court proceedings.
One’s personal views of the State’s responsibility to provide social housing is entirely irrelevant in this specific situation.
What is happening here is the transfer of wealth from the State to the private sector (AIB).
The problem here is with AIB and therefore it is theirs and theirs alone to solve.
They should either enforce their rights under the affected mortgages or write off the debts.
Passing the problem on to the State should not be an option.
In the unlikely event that they are successful in repossessing any property, then and only then does the problem lie with the State.
When that happens, those affected join the housing list, the same as everyone else.
By providing this safety net, any responsibility on the part of AIB and the borrower to find a solution is removed.
So the next time there is a demand for €5m or €20m or €100m from some sector of society to fix a problem and the response is that the funding is not available; the reason is because that funding was given to AIB instead to solve a problem that did not exist.
