Tuesday, 12 March 2013
Ceisteanna - Questions - Priority Questions
Mortgage to Rent Scheme
To ask the Minister for Environment, Community and Local Government his position regarding local authorities taking on houses with distressed mortgages, for example, a house worth €200k with a €400k mortgage which will not be paid, the council takes on a new mortgage with the same lender at the market value of €200k and rents the property back to the initial occupiers, potentially with a buy back mechanism; the analysis that has been conducted to date on the viability of potential options; the level of activity that has taken place to date in this area; and if he will make a statement on the matter. [13040/13]
On foot of the recommendations of the Keane report on mortgage arrears, the Government launched a mortgage to rent scheme on a pilot basis in February 2012. The scheme, which was extended nationally in June 2012, targets low-income families with unsustainable mortgage situations and little or no prospect of a significant change in circumstances in the foreseeable future. The scheme ensures the family remains in its home. Ownership is transferred to an approved housing body which rents it to the original owner. The eligibility requirements are in line with other forms of social housing support.
Householders seeking to avail of the mortgage to rent scheme must have been involved in the mortgage arrears resolution process with their lenders and have agreed they can no longer afford to pay their mortgage loans now or in the future; must own the property they live in, with a current market value of less than €220,000 in the Dublin area or less than €180,000 in the rest of the country; must have their property in good condition, in a suitable location and appropriate to their current needs; must not own any other property or have assets in excess of €20,000; must have household income not exceeding €25,000, €30,000 or €35,000 a year, depending on the part of the country they live in - household income in this context is net of taxes and social insurance; and must have a long-term right to remain in Ireland. The treatment of any mortgage shortfall or residual debt will be a matter for bilateral resolution between the borrower and lender.
To date, 828 cases have been submitted by lenders. Of these, 459 cases are being processed and 220 borrowers have been engaged with or are in the process of being engaged with by the lenders. Sales have been agreed on 20 properties and eight of these sales have been completed. The number of completed transactions is low but significant progress has been made. All of the main lenders and so-called sub-prime lenders are fully engaged and have instituted the necessary internal processes. It is important to bear in mind that the transition from being a home owner to a social housing tenant is a major one for families.
Additional information not given on the floor of the House
Mortgage to rent or other such interventions cannot be rushed for any party. For example, the process provides a 60-day decision period and a 28-day cooling off period within the timeframe of the scheme. My Department estimates that the overall timeframe per case from start to completed transaction will be up to eight months. This compares favourably to the timeframes in other jurisdictions operating similar schemes. Households benefiting from mortgage to rent have the option to repurchase the home within a five-year period if their circumstances allow. A mortgage to rent option for local authority borrowers in arrears has been piloted in two local authority areas, Westmeath County Council and Dublin City Council, and will be extended nationally in the coming months.
The Government is being played by the banks again. We saw the Keane report in front of the finance committee for a long time and the Government has been in place for over two years, yet the relevant figure is that 20 of these transfers have been completed. We know that nearly one in five residential mortgages is either in arrears or has been restructured, mainly to an interest only arrangement. The banks are telling the Government that they are engaged in this process, but they are not. If the Minister of State talks to the people who are trying to negotiate with the banks on a daily basis to reach these deals, they will tell her that the banks are not engaged in this process, although perhaps one or two of them are.
Deputy Stephen S. Donnelly: The Government, in my opinion, is being played by the banks here again. We saw the Keane report in front of the finance committee a long time ago and this Government has been in place for over two years now and, yet, the relevant figure is that 20 of these have been done. We know that nea5r
The key figure is 20. Two years on 20 of these transfers have taken place. There is huge potential in her portfolio for the Minister of State to do something about this. Based on what the Secretary General, Mr. John Moran, said and the legislation the Minister for Justice and Equality, Deputy Alan Shatter, is about to bring forward, we know that the number of repossessions is going to go up. Mr. Moran has stated he wants them at international levels; therefore, we know that the banks are going to be allowed to make many people homeless and the State will have to pick up the tab. There is a huge opportunity for us to have a win-win, whereby the State wins because it does not pay dead money to landlords and instead pays it on assets of which it has taken control, while the family get to stay in their house and the bank receives a secure amount. Is the Minister of State satisfied that, two years on, 20 transfers have taken lace? That is a somewhat loaded question, as I am sure she is not satisfied. What can she do to massively accelerate this process and engage with and force the banks to act? They may be telling her that they are engaging, but I guarantee her that, if she talks to the people dealing with these issues, they will say the vast majority of banks, with one or two good exceptions, are not doing anything.
A great deal of progress has been made across the board in terms of the personal insolvency legislation and the constant pressure exerted on the banks, as has again been reiterated in the past week. The mortgage to rent scheme is part of this, but it is to deal with the most distressed mortgages. There are a number of criteria, including that people have to qualify for social housing and the homes must be under a certain value. It is a very big decision for a family to make that they are no longer going to own their home and are actually going to rent it. This takes time. For example, we reckon the legal process takes on average eight months. It is a totally innovative scheme which we had to invent and it only came into action last year. I am anxious to see more cases going through. While I accept the number that has gone through is very low, we have 300 cases in train and expect at least 250 to get over the line this year. Again, I stress it is a difficult situation for families and that it is a slow and long process. While we now have engagement with the banks, we will continue to keep the pressure on.
In two years we have had 20 transfers. The Minister of State has said this is a difficult decision for families. It is not. These are families who are about to be chucked out on the street and the decision is whether they want to be chucked out on the street or stay in their house. It is a not a difficult decision for a family to make.
The ones who are slowing down the process are the banks. I know the Government is keen on it, including the Ministers, Deputies Alan Shatter and Phil Hogan, as well as the Minister of State, Deputy Jan O'Sullivan. I appeal to the Ministers to recognise that the reason the number is 20 is the Government is being gamed by the banks. However, they are the ones which are slowing down this process and speaking out of both sides of their mouths. The Ministers should have a think about this. They should think about what they can do to progress this number, not from 20 to 100, but to make this a viable solution. My second appeal is that the Government relax the conditions, some of which, when combined, are nuts. What we want is for housing officers to be able to make the right economic decisions and relax some of the conditions. There are many who would benefit from this process, meaning the State would benefit, but they do not meet the criteria. They might have higher incomes, but because of the house involved, the size of the mortgage and all of the other criteria used, they do not qualify. The process has huge potential.
It was mainly the sub-prime lenders who engaged in this process at the very beginning. We have now got all of the banks to engage, which is an achievement. I accept that it is a slow process and we want to make it quicker; therefore, we are keeping the pressure on.
Every single one of these is a cost to the State as well so it is not the case that we can get them for nothing.
I could argue that with the Deputy but I know we do not have time today; there are certain conditions under which one qualifies for social housing. Not everybody qualifies for social housing so there are restrictions attached to the scheme and we are moving it as quickly as we can.