Mortgage brokers have given a mixed response to the mortgage-to-rent scheme.
The Irish Brokers’ Association described it as a “positive step” to help some families struggling with debt to remain in their homes. However, they insist that its acceptance criteria is too strict to be a successful solution to Ireland’s spiraling mortgage debt problem.
The IBA say that critically, other than voluntary surrender of the home, mortgage-to-rent is the only solution presently available to homeowners in serious distress and its successes will be limited in its current form.
According to Ciaran Phelan, CEO of the Irish Brokers Association “the current eligibility criteria are too narrow for many families whose homes are worth more than €220,000.”
He said: “Families with homes worth more than this limit are caught in limbo. It’s not practical to move to a lower value house simply to access the scheme as it’s extremely unlikely that the existing mortgage lender would facilitate the sale and repurchase of negativity equity properties, particularly where the family is in substantial arrears. In many areas of Dublin a modest three bed home would still be valued at €300,000 plus.
“While the decision of the Housing Minister Jan O’Sullivan to launch this scheme targeting low-income families should be applauded; after four years of recession, the scheme really needs to move past the trial period and develop more meaningful and realistic acceptance criteria.”
The Irish Brokers Association say that some 60 families are currently participating in the Mortgage-to-Rent scheme, which allows mortgage holders with no realistic possibility of ever being able to meet full repayments to continue to live in their home without the threat of repossession. It’s believed that two deals have actually closed, one with AIB and one with a foreign bank. The State pays about 30% of the costs.
Mr Phelan went on to say: “The MTR usually offers the lender the market value of the property subject to a discount. There’s pain in this for everyone as the outstanding mortgage is generally far higher than the value of the property and with 1-2 years of arrears already built up, the lender is looking at writing off up to 50% of the overall debt.
“Mortgage lenders will generally have to write off the balance as the prospect of the lender recovering this element of the debt from a destitute family is close to zero.
“It’s still unclear as to where the funding is coming from for this scheme, but it seems to be one of the more logical and workable schemes to have come out of the mortgage crisis and if developed properly could help prevent many more families from losing their homes.”