As part of the implementation of the recommendations in the Keane Report The Dept of Environment, Community and Local Government is developing a mortgage to rent scheme on a pilot basis.
This work has been assisted by Clúid Housing Association, a number of local authorities, the Housing and Sustainable Communities Agency, AIB, and more recently, New Beginning and another lender.
The scheme is aimed at households that:
a) have had their mortgage position deemed unsustainable under a Mortgage Arrears Resolution Process
·b) agree to the voluntary repossession of their home;
c) do not have significant positive equity
d) are eligible for social housing.
In addition, the house must also be appropriate to the needs of the household need. Households availing of the scheme will become social housing tenants, paying a rent calculated on the basis of household income.
The treatment of any mortgage shortfall or residual debt will be a matter for agreement resolution between the borrower and lender.
The Keane report recommended 2 options for a mortgage to rent scheme.
The main difference between the 2 options relates to ownership of the property after the voluntary repossession has taken place.
Under the first model, after voluntary repossession has taken place the property would be purchased by an approved housing body at current market value. The household would become a social housing tenant – they would no longer be homeowners. The purchase of the property would be part loan financed, using loan finance generally obtained from the initial mortgage provider, and the Exchequer using funds available under the 2012 allocation for the Capital Advance Leasing Facility. My Department is also consulting with the Central Bank to ensure that the process through which households might be offered the option to participate in the scheme complies fully with all existing consumer protection and other regulatory requirements.
Under the second model, the lender would become the long term owner of the property after voluntary repossession had taken place. The household would become a social housing tenant of the relevant local authority and the local authority would, in turn, lease the property from the financial institution for the period of the lease. The household would enjoy the same benefits as any household already accommodated under the social housing leasing initiative in terms of security of tenure, differential rents, eligibility etc.
It is anticipated that the first transactions under the first model will take place very soon. Ultimately, the schemes will be rolled out nationally using the criteria set out above and it is hoped that all lenders will agree to participate.