Tens of thousands of buy-to-let landlords will be first in the firing line when the Government removes a legal loophole which has stopped banks repossessing properties.
Some 37,000 people who own buy-to-let homes and have a mortgage, as well as some of the 11,000 people who have restructured their loans, are likely to be affected.
Tanaiste Eamon Gilmore said today that the legislation would be changed in the first half of next year.
Until now, these landlords have been protected by a High Court ruling last year that effectively made it impossible to repossess their homes.
The Government has promised the Troika it will remove the legal impediment by March.
However, ministers will not introduce the measure until borrowers’ homes are protected with the enactment of new insolvency legislation.
The Government will remove “unintended constraints on banks to realise the value of loan collateral under certain circumstances,” it said in the latest update to its bailout programme.
Currently, one in 12 buy-to-let mortgages are in arrears with people owning more than €1.3bn on mortgages of €13.3bn. But despite the mounting mortgage arrears, repossession orders were given on only 97 houses in the three months to June, after the courts found legislation applied only to mortgages granted after 2009.
Now the Government, under pressure from the EU and the IMF to cut the cost of debt, has committed to change the law.
The Irish Banking Federation has moved to calm fears that hundreds of families could lose their homes, saying there will be no change in the culture that saw an average of 17 repossessions per 100,000 mortgages, compared to 70 in Britain.
Last year, the High Court found banks cannot apply for a repossession if the mortgage was created before 2009.
The judgement exposed a loophole, which will now have to be fixed, under the agreement with the Troika.