# How Mortgage to Rent Works



## Brendan Burgess (10 Jan 2019)

Hi Delboy

This is how a Mortgage to Rent works
1) iCare buys the house from the owner
2) the proceeds are paid to the lender who writes off the shortfall
3) iCare rents the house to the Local Authority at market rent - probably about 10% of the property value
4) The local authority rents the house to her on a differential rent - an average of €50 a week.



Her kids will probably buy the house at 60% of the market value.

Brendan


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## Brendan Burgess (10 Jan 2019)

Bronte said:


> What will Hall do if the tenant doesn’t pay the rent?



He won't give a damn. 

His tenant is the Local Authority.  They will pay him whatever happens. 

Brendan


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## Bronte (10 Jan 2019)

Brendan Burgess said:


> Hi Delboy
> 
> This is how a Mortgage to Rent works
> 1) iCare buys the house from the owner
> ...



Is this correct.

1. The LA pays iCare 30k rent 10% of 300k)
2. The tenant pays the LA €2600 a year. Where does she get this money if she’s not working?
3. The landlord then is the LA. 

Would it be cheaper for the LA to pay her rent on a different property.


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## Bronte (10 Jan 2019)

Brendan Burgess said:


> He won't give a damn.
> 
> His tenant is the Local Authority.  They will pay him whatever happens.
> 
> Brendan


That’s hilarious.

I was wondering what the catch was. Aren’t the LA’s the worst landlords ever.


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## Delboy (10 Jan 2019)

Brendan Burgess said:


> Hi Delboy
> 
> This is how a Mortgage to Rent works
> 1) iCare buys the house from the owner
> ...


I understand that Brendan. My point was that the kids buy it from iCare at that 60% reduce price say in 20 years time. 2 years later they sell it at market value.
How can that be stopped...I don't see how.


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## Feemar5 (10 Jan 2019)

I agree that no home should be repossessed if it could go under the mortgage to rent scheme but I also feel there is not enough repossessions where people are making no effort to engage.   People who are paying their mortgages are taking the hit and paying above what the interest rate should be.   I also think there are too many Charities involved in the housing crisis .


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## Bronte (12 Jan 2019)

I was wondering how iCare is funded. Hall got 15 million from AIB. But they also get state funding.

https://www.irishtimes.com/business...p-icare-eye-target-of-1-000-tenants-1.3576329

So the state provides subordinated debt to iCare. ICare gets to own the properties. And then the state pays again. Paying iCare rent for the properties.

AIB gets rid of their most problematic properties, family homes with non payers. Presumably carefully picked homes too.

Anyone care to explain what state subordinated debt means in this context?

I'd love to know the figures on one of these transactions.  And whether it is costing the state more than them just paying the mortgage directly.


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## Jim Stafford (15 Jan 2019)

Bronte said:


> And whether it is costing the state more than them just paying the mortgage directly.



The MTR scheme is a fancy form of "off balance sheet" financing, which will cost the tax payer a fortune in the long run.

The tax payer is providing a state guarantee to the investors that they will:


Pay the market value of the rent to the investor for, say, 20 years.
Agree to keep the property in  a good state of repair.
When the tenant vacates, the tax payer (via the Local Authority) will be responsible for any further repairs.
The Local Authority will only receive a low rent in return.
When the investor sell the property in, say, 20 years time, it will be the sole beneficiary of any capital gain.

I 100% agree that a MTR scheme should be put in place, but the scheme should be one where the tax payer buys the property directly, and avoid the expensive "middle men". Given that the Government recently raised some €4 billion of 10 year money on the international bonds market at a cost of just 1%, such an option would be much better value for the  tax payer. Instead of the tax payer paying just 1% finance costs, it will end up paying in the order of 8%, and will lose out on the future capital gain.

Jim Stafford


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## Bronte (15 Jan 2019)

Thanks Jim for that analysis. If we're still around in 20 years we'll have a thread on what a waste of money this was.  The i-Care charity are the big winners here.  Anybody on their board will be also in employment for years to come. Because as I said upthread, they're going to be the second biggest landlords in the country after the state. With zero landlord obligations or costs.

Did nobody in the Dept of Finance sit down and work out how costly this is.  This being the most shocking:

_Instead of the tax payer paying just 1% finance costs, it will end up paying in the order of 8%, and will lose out on the future capital gain.
_
Surely the state could have protected itself better.  David Hall must be laughing.


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## NoRegretsCoyote (15 Jan 2019)

Does icare not get funding from the Housing Finance Agency to make the purchase?

This is how other AHBs get their funding.

HFA funding is basically at whatever the NTMA can borrow at.


I have mixed views on the whole AHB model. There are good public finance reasons for a steady flow of public spending rather than 'lumpy' capital spending with big debt redemptions down the road.

AHBs may be better at managing the asset and reducing voids. Some local authorities have been poor at this in the past.

I have never come across good evidence either way on this.


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## dereko1969 (15 Jan 2019)

What are the staff costs in iCare? Are there any publicly available figures? Is it also not a little dodgy seeming that Mr Hall posts on social media the threat of a protest outside the house and then his company/charity buys the property?


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## NoRegretsCoyote (15 Jan 2019)

dereko1969 said:


> What are the staff costs in iCare? Are there any publicly available figures? Is it also not a little dodgy seeming that Mr Hall posts on social media the threat of a protest outside the house and then his company/charity buys the property?



Actually there is a brilliant website called Benefacts which pulls together information on non-profits.

As of December 2017, there was very little information available on [broken link removed]care. Take a [broken link removed]. 

Apparently it had no employees, and it abridged its financial statements, claiming it can do so under the Companies Acts.

I guess as its balance sheet grows more should emerge into the public domain.


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## elcato (16 Jan 2019)

NoRegretsCoyote said:


> Apparently it had no employees, and it abridged its financial statements, claiming it can do so under the Companies Acts.


Alarm bells


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## Bronte (16 Jan 2019)

elcato said:


> Alarm bells


I don't understand how there are no employees. Surely someone has to be managing all the paperwork, doing the negotiating etc. And that takes actual people. And they have to be paid.

I suppose the directors and trustees get paid.  Would that be much does anyone know.  Presumably that pay comes out of the profits the charity is making.


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## NoRegretsCoyote (16 Jan 2019)

@Bronte 

That was the situation at end-2017. Have a look yourself.

I would suspect they have employees at this point. Their website indicates a business address and phone number.


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## Brendan Burgess (17 Jan 2019)

I have extracted these from another thread to focus on the MTR issue


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## NoRegretsCoyote (17 Jan 2019)

I am still curious as to how icare gets its long-term funding to purchase properties.


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## RedOnion (17 Jan 2019)

NoRegretsCoyote said:


> I am still curious as to how icare gets its long-term funding to purchase properties.


"iCare is non-profit, with €100m in funding, buying the eligible properties at a heavy discount via ordinary commercial lending, Government-funded aid at low interest rates, with the local authority stumping up to 92pc of the rent stream via its normal housing support system."
https://www.independent.ie/business...-the-red-tape-on-mortgagetorent-36302859.html


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## NoRegretsCoyote (17 Jan 2019)

@RedOnion 

So a body with no employees already has €100m in funding

The 'government' bit would presumably by the HFA, but according to their website the HFA's own criteria for lending to AHBs is:


_Evidence of at least three years' operation of projects under the Capital Loan & Subsidy Scheme_
_Acceptable legal form (company, co-operative, society)_
_Three years' audited financial statements_
_Current Tax Clearance Certificate_
It would appear that icare cannot meet the criteria of three years' operations and financial statements. 

So where David Hall getting the 'government' funding if not the HFA?


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## Delboy (17 Jan 2019)

The Journal has run a story on this also

https://www.thejournal.ie/icare-mortgage-to-rent-4445156-Jan2019/[/quote]


> The housing body secured funding from AIB under normal commercial terms and borrowed to purchase the houses. The State funded 30% of the purchase price via a long-term low interest loan. Hall said most of the banks and one of the vulture funds have agreed to discounts on a case by case basis.
> 
> Though he said he was “not the biggest fan” of the banks, he said he had to give them credit today. Some 150 of these deals were made with AIB, but he said all of the main banks – and two funds – are engaging.


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## Bronte (18 Jan 2019)

So the state pays the following:

1. 30% of purchase price (Balance funded by AIB loan)
2. State pays full rent to icare, forever
3. If the tenant doesn't pay the low amount of rent to the LA it just goes onto the amount that is constantly outstanding
4. State pays for all repairs
5. State is exempt from RTB

What does iCare get:

1. 19 properties, with another 600 to come on stream (second biggest landlord in the country)
2. Full rent
3. No property costs
4. Can sell the properties in time at a profit
5. Do they pay rental income tax? Does being a charity affect this?
6. Doesn't have to deal with the tenancy as that's up to the LA
7. No oversight by the RTB as they are not the landlord
8. Employment forever running iCare. 

What does the property owner get:

1. They lose their house
2. They can live in it for a minimum amount
3. They are allowed purchase it for the price iCare paid for it

What does the bank get:

1. They get rid of their most problematic cases
2. No bad publicity for evicting families
3. Their books look better

What does the media get:
1. A lovely happy story, bad bank, good guy Hall, family stays in home. 

Where can all this go wrong taxpayers?


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## Brendan Burgess (18 Jan 2019)

Charlie has an article in today's Indo quoting my views 

*Mortgage-to-rent plan 'a scam on taxpayers - it's like a lottery win'*

Mr Burgess claimed those getting a mortgage-to-rent deal were equivalent to Lottery winners.

Housing charity iCare leases the property back to the occupants on a long lease, ensuring the former owners that were at risk of losing their home can stay in it long term and pay an affordable rent.

But Mr Burgess said: "Mortgage-to-rent is a scam on the taxpayer. It is a scam on the people who have already been on the housing list many years. It is a lottery win."


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## Brendan Burgess (18 Jan 2019)

I will be discussing it with David Hall on Newstalk Breakfast at 7.20 on Monday morning. 

Brendan


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## RedOnion (18 Jan 2019)

Brendan Burgess said:


> I will be discussing it with David Hall on Newstalk Breakfast at 7.20 on Monday morning


I'll have popcorn at the ready!


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## Bronte (18 Jan 2019)

Brendan Burgess said:


> I will be discussing it with David Hall on Newstalk Breakfast at 7.20 on Monday morning.


Nice picture BB.  Did you delete the thread I started on this? If yes, I'd like my original first post if you have it please.

Can't wait to hear you on Monday. I hadn't realised you thought this was a scam on the taxpayer. I see Hall in the article says his scheme saves the tax payer money.  Do you know on what basis he is claiming that?

You're not going to look good claiming Hall isn't a saviour to people.


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## RedOnion (18 Jan 2019)

Bronte said:


> Did you delete the thread I started on this


This was split from a different thread: https://www.askaboutmoney.com/threads/david-hall-claiming-credit-for-stopping-an-eviction.211134/


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## Bronte (18 Jan 2019)

Thanks Redonion.  Well BB is going to have his work cut out for him with a hero who stopped an eviction.


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## Delboy (18 Jan 2019)

Bronte said:


> I see Hall in the article says his scheme saves the tax payer money.  Do you know on what basis he is claiming that?


I presume he will use the cost of putting people up in hotels at several thousand euro per month as there's no other accommodation available


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## NoRegretsCoyote (19 Jan 2019)

The mortgage to rent scheme has been in existence seven years and has only served 400 homeowners.

This is despite the fact that during the same time the number of PPRs with arrears of 2 year or more has never numbered less than 30k!

Vast numbers in arrears, and very few qualifying for mortgage to rent. Why?


Likely because income levels aren't actually low enough to qualify for social housing. And the house value is above the thresholds for eligibility: €350k in big urban areas, and €280k elsewhere.

Of course many people will swear blind that strategic default does not exist in Ireland


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## XMarks (19 Jan 2019)

Bronte said:


> So the state pays the following:
> 
> 1. 30% of purchase price (Balance funded by AIB loan)
> 2. State pays full rent to icare, forever
> ...



Very similar to Cluid who now have 2500 properties with a plan to buy or build 1500 more in the next 3 years.

Funded by state grants, government loans and private finance. I know when I sold a house to them it was 100% financed by the county council.

They also keep all the rent although I am not sure whether it is paid directly by the tenant or the council. 

Staff costs are 9 million. Net surplus also around 9 million a year.

The only difference I can see between the two are that Cluid is not buying non performing loans. They pay full market value.


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## Brendan Burgess (19 Jan 2019)

I had a look at the figures up to the end of December published by the Housing Agency 










*Why are so many rejected? *

·        They must qualify for social housing

·        The housing must be appropriate to their need

·        They must be in negative equity or close to it

·        They must have income below €35,000

·        The maximum value must be €365k or €310k

And, all the following must agree

·        The home owner

·        The lender

·        The local authority

·        The MTR Fund


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## RedOnion (19 Jan 2019)

NoRegretsCoyote said:


> Of course many people will swear blind that strategic default does not exist in Ireland


I fully believe that there are a large number of straregic defaulters, but I wouldn't use the fact that people aren't eligible for MTR as evidence of that.
Essentially, you have to be eligible for council housing.
There are lots of people in genuine difficulty who simply do not meet the criteria.


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## Dermot (19 Jan 2019)

Im sure David Hall will be on the normal CEO rates of salary and expenses + pension and lump sum that these high profile charities like to pay.  Having Peter McVerry in the picture makes them all look good.  A few more pictures and presenting a sob story will help Hall's  profile in a friendly media.


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## Bronte (20 Jan 2019)

Delboy said:


> I presume he will use the cost of putting people up in hotels at several thousand euro per month as there's no other accommodation available


Well that’s actually a good argument. Hall is stopping people going into hotels at massive cost.


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## Delboy (20 Jan 2019)

Bronte said:


> Well that’s actually a good argument. Hall is stopping people going into hotels at massive cost.


Except the fact that not everyone that becomes homeless needs to be put into accomm in Dublin again. If they don't have a job etc, they should look to outside counties with cheaper housing.
But that argument has been had here before and never the twain shall meet!


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## mugsymugsy (20 Jan 2019)

David hall tweetingt about tomorrow mornings phone call - "I will be on @BreakfastNT tomorrow at 7.15am discussing our @icarehousing Mortgage to rent and Ill informed criticism from Number 1 consumer advocate Brendan Burgess , oh and Burgess will be there also. Is 7.15am to early for popcorn??"
https//twitter.com/davidhall75/status/1087081105084375042?s=19


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## RedOnion (20 Jan 2019)

mugsymugsy said:


> Is 7.15am to early for popcorn??"


Nope.
I've been thinking about it since Friday! 



RedOnion said:


> I'll have popcorn at the ready!


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## Bronte (21 Jan 2019)

Live now. BB first.


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## Bronte (21 Jan 2019)

Hall, cheapest and most cost effective in the state.  LA pays rent it would pay anyway.  Solution that gives people dignity and respect. Keeps them in their homes, but they lose ownership.

BB says people who work can't afford to live in Dublin. Talks about repossession, about how Hall can purchase these houses at very low cost and that Hall has said he'll stop all home repossessions, you have to do buesiness with me or you don't do business at all(taxi example)


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## NoRegretsCoyote (21 Jan 2019)

RedOnion said:


> I fully believe that there are a large number of straregic defaulters, but I wouldn't use the fact that people aren't eligible for MTR as evidence of that.
> Essentially, you have to be eligible for council housing.
> *There are lots of people in genuine difficulty who simply do not meet the criteria.*



I take your point. Take an extreme case. Married couple with one income of €36k, mortgage of €300k on 1.2% with 20 years to go. They would have a net monthly income of €2680 and mortgage repayments of €1,400. That's over 50% of income on mortgages before insurance, LPT, etc. This family would really struggle with mortgage repayments but would not qualify for MTR.

That's the extreme, however, both in terms of balance outstanding and income. There are lots of people whose circumtances are easier. Central Bank analysis is surprising in that it shows a lot of people in arrears don't have low incomes and bought pretty valuable houses at origination.

Anyone whose circumstances are worse than the couple above - for example someone permanently on disability - should qualify for MTR. 

Despite the hoops of finding an AHB and agreement of your mortgage provider, it's a bit of a mystery why so few have taken it up. My suspicion is that there are a lot of valuable houses with lots of rooms people don't need, combined with a reluctance to move, and this rules a lot of people out.


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## Bronte (21 Jan 2019)

Hall, Understanding and compassion. These are people would have to be housed anyway, says BB is obsessed with repossession.

Hall says BB doesn't understand.  iCare is providing homes, rent drops (?) humane dignified, that all profits must go back into providing housing

BB - has hugh compassion, but has more for 350k mortgage payers, with higher rates, because of those who don't or won't pay.

Hall says AIB made x billion, that's greed.  Says that the don't or won't pay are a phantom (of BB's imagination I presume)

Hall won the argument hands down.  He also got a few jabs in on BB.


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## Brendan Burgess (21 Jan 2019)

Bronte said:


> Hall won the argument hands down. He also got a few jabs in on BB.



Hi Bronte 

I can't disagree with you.

It's  a very complicated argument to make in 6 minutes.  So someone who is keeping a widowed grandmother  in her home will always come across as nicer than someone who says that  we should not tolerate people being in arrears for 12 years.  

There is also the point that we have a farcical social housing system which allows people to live on their own in three bed houses in Dublin  for €50 a week.  That is not the fault of Mortgage to Rent.  MTR just exploits the stupidity of the system.

Brendan


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## RedOnion (21 Jan 2019)

Brendan Burgess said:


> Hi Bronte
> 
> I can't disagree with you.


He came across much better than you in my opinion Brendan. It was much easier for him as he just had 1 point to keep making : it's cheaper than other options. You can't argue with that.

The real question we should be asking is why is social housing so expensive in this country? There was a mention of HAP being average 26k a year? You can justify anything compared to that.

I agree with elements of your argument Brendan, but if as a society we provide social housing, then the concept of the taxpayer becoming landlord for a person's existing home where they default on their mortgage, and qualify for social housing, isn't such a bad idea. Whether we need AHB's, particularly where the role is undertaken by a commercial entity, is a separate question.

So, questions I would have:
1. Should we provide social housing at all?
2. If we do, should the recipient have any choice of where accomodation is provided?
3. Should the taxpayer buy existing housing stock from banks where mortgages are in default, to provide social housing?
4. Do we need 3rd parties involved in the process?


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## Brendan Burgess (21 Jan 2019)

RedOnion said:


> The real question we should be asking is why is social housing so expensive in this country? There was a mention of HAP being average 26k a year? You can justify anything compared to that.



There are two fundamental problems 
1) We tolerate people who don't pay their mortgage for 10 years 
2) We allow single people on social welfare to live in three bed houses in Dublin for €50 a week while people who pay their own way either share or commute long distances to work. 

In that context, you can justify MTR. 

So really we have to dismantle the first two.

Brendan


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