Mortgage to Rent Scheme

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.

Do Lenders Have to Accept New Insolvency Rules ?

The Irish Minister for Justice and Equality  -Alan Shatter –  was asked in the Dail on Feb 7th 2012 if he had any  plans to ensure that  lenders will have an obligation or incentives to accept the proposals in the Insolvency Bill

The reply from Deputy Alan Shatter  was that the reform of personal insolvency law  will involve the introduction of three new non-judicial debt settlement systems, subject to relevant conditions in each case. These are as follows:

· A Debt Relief Certificate to allow for the full write-off of qualifying unsecured debt up to €20,000, after a one-year moratorium period for debtors with “no assets – no income”;

· a Debt Settlement Arrangement for the agreed settlement of unsecured debt of €20,001 and over with two or more creditors;

· a Personal Insolvency Arrangement for the agreed settlement of both secured and unsecured debt of €20,001 to €3 million with one or more creditors.

The Personal Insolvency Bill will also continue the reform of the Bankruptcy Act 1988, begun in the Civil Law (Miscellaneous Provisions) Act 2011 will include, critically, the introduction of automatic discharge from bankruptcy, subject to certain conditions, after 3 years in place of the current 12 years.

Mr Satter continued to say that it was not for  him  to speculate as to the future conduct of any of the participants in an insolvency process.
He asaid hea was of the view that new personal insolvency laws, including the bankruptcy law reform, should provide a significant incentive for financial institutions to develop and implement realistic agreements to manage or settle debt with their customers.
He said that such agreements should in time become the norm as the most sensible and cost-effective arrangements, particularly where the issue is one of dealing with repayment difficulties for a single major debt, secured or otherwise. These agreements could include measures to address mortgage arrears.