By Stephen Donnelly
One Christmas present that’d be welcomed by 350,000 men, women and children across the country is a speedy resolution of the mortgage crisis. That’s how many people still live in homes in mortgage arrears in Ireland today. It’s more than 10,000 in Wicklow alone. Many in the negative equity generation remain trapped in accommodation unsuitable for growing families, and the rate of repossessions is rising rapidly.
Years of government inaction have allowed the crisis become far worse than in other countries. The result is years of unnecessary stress and suffering. Total arrears are, finally, falling, but the recovery should be faster and fairer. Some lenders are making genuine efforts. Others are not. Often, whether a solution can be found comes down to who the lender is.
Arrears over two years aren’t falling. This represents tens of thousands of families in serious trouble, many of whom are in court, have unsustainable loans and are most at risk of eviction and homelessness.
The good news is that the solutions are known. Last week the Social Democrats launched our policy response to resolving the mortgage crisis. The measures are sensible, achievable, and come at no additional cost to the State. Unlike the current situation, our response would minimise repossessions, provide equal and fair treatment for borrowers, ensure appropriate solutions are offered on a case by case basis, and minimise on-going social and economic damage. According to David Hall, founder of the Irish Mortgage Holders Organisation, IMHO, if what the Social Democrats propose were to be implemented, the mortgage crisis would be resolved within twelve to eighteen months.
Which brings us to the other good news – the government has consistently voted against these measures, when tabled by me and others. But there’s an election coming, and both Fine Gael and Labour are acutely aware of the 350,000 people they’ve abandoned. So a well-known communications firm is being consulted, and a new bill is being discussed by Cabinet, with a view to getting it over the line before the election. All we know of the bill so far is that it would reduce bankruptcy from three years to one. This should have happened in 2011 of course, but better late than never. It’s a welcome step, but on its own, won’t make that much of a difference.
Which is why a more comprehensive approach needs to be taken. Many people in arrears can’t afford the sort of financial advice and legal representation they need. The result is that viable restructurers are missed and people fall further and further into debt. There needs to be a one-stop-shop established for borrowers in arrears, that’s free to use. This would provide financial and legal expertise and representation, and could be launched quickly using the existing MABS network.
Right now, no lender is obliged to make any type of restructuring offer, regardless of how suitable an offer might be. This needs to stop, with lender mandated to offer, at a minimum, restructuring solutions that include a split mortgage, a debt-for-equity swap and mortgage-to-rent (where these meet the requirements of sustainability). Similarly, lenders are not required to explain why they’re offering particular restructuring offers, and not others. This should change, so that full and clear explanations are given.
The mortgage-to-rent scheme has been heralded by government as the panacea for many thousands in mortgage arrears. To date, there have been less than 170 cases completed nationally. As well as mandating that lenders offer the scheme, it needs to be simplified and funded so it can be scaled up.
By providing a one-stop-shop, a mandated set of solutions, and a workable mortgage-to-rent scheme, it would be possible for far more people to find sustainable restructuring solutions for their mortgages. In additional to this, courts should be given the power to refuse repossessions if a sustainable offer of restructure can be made.
Some households with mortgage arrears would qualify for social housing, and / or rent support payments, were they to lose their homes. A pilot scheme should be established to allow local authorities provide temporary mortgage support in such cases, to keep people in their own homes, rather than move them to an already over-strained social housing system.
The actions proposed by the Social Democrats are designed to ensure that sustainable restructures of mortgages in arrears are found wherever possible and that no avoidable repossession occur. The actions are straightforward, and would greatly accelerate the speed and fairness at which the mortgage crisis is resolved. With 350,000 men, women and children still at risk, implementing this approach would be a very welcome Christmas present indeed.
Stephen Donnelly is a Social Democrat TD for Wicklow and East Carlow
