Mortgage to rent scheme in need of complete overhaul – FF

Fianna Fáil Finance spokesperson Michael McGrath has described the Government’s “Mortgage to Rent” scheme for distressed borrowers as an abject failure following confirmation that just 42 cases have been fully concluded under the scheme since its inception in July 2012. While a number of other cases are reported to be in the pipeline the overall take up of the scheme remains very low. It was originally envisaged that the scheme would facilitate approximately 500 cases a year with a total of 3,500 over seven years.

Under the mortgage-to-rent scheme people in difficulty with the mortgage payments can switch from owning their home to renting their home as social tenants.  Deputy McGrath has called for a complete review of how the scheme is operating.

Deputy McGrath stated, “We know there are over 35,000 households who are more than two years in arrears on their mortgage. The reality is that they face a very high risk of seeing their home repossessed. While there is no ‘one size fits all’ solution, Mortgage to Rent should be a viable option for some families in these circumstances. As it stands at the moment, the scheme is having no discernible impact on the mortgage arrears crisis. Less than 2% of cases put forward by private lending institutions for consideration under the scheme have been brought to conclusion. This is due to a combination of bureaucracy between the parties involved and unnecessarily restrictive rules which apply to its operation.

“There are a number of specific difficulties with the scheme as it is structured. One significant one is the maximum current market value of €220,000 which applies in the Dublin region. This is now hopelessly out of date given that in the first quarter of 2014 the average price of a Dublin house stood at €330,000, reflecting an increase of €62,000 in twelve months. A large number of applications are being ruled out on this basis. There are also problems around the restrictive nature of income limits for participants. For example the maximum net household income which applies in the Dublin City local authority area for a family of two adults and two children is €38,500. It is also questionable whether adequate funding is in place for the scheme should these difficulties being ironed out.

“It is a big step for a family to give up ownership of their house given that they may have put their life savings in to the home but the voluntary housing associations have indicated that, in the completed cases to date, tenants report being pleased to have removed the threat of repossession and they are able to remain in the family home. The scheme has significant potential but it is simply not being realised at the moment.

“The banks also need to step up to the plate and actively support the scheme. In this context the question of what happens to the residual debt once the property is sold to a housing association appears to be a major stumbling block. The banks have to recognise that in some cases the debt is irretrievable and they will have to write off a proportion of it. To date they appear to be very reluctant to recognise this fact.”