# First Case of Mortgage-to-Rent Scheme



## Wishes (7 Feb 2012)

The Government has concluded the first transaction under a new _*mortgage-to-rent scheme*_, which will see a housing association take over a home owned by a family facing repossession by a bank. 

The family will now rent the home from the approved housing body _*Cluid*_. It is understood the bank involved is_* GE*_. 

As part of the deal, the lender has written off a significant portion of the debt associated with the original loan. _*GE*_ has provided a new loan to the housing body _*Cluid*_ to buy the home in West Dublin which allows the original occupiers to remain in the property. The family have surrendered the home and become social housing tenants. 

The deal has been negotiated with the _*New Beginning group*_ and the _*Department of the Environment*_. 

The Housing Minister Jan O'Sullivan told RTÉ News that there could be up to 100 distressed borrowers who may be in a position to avail of the scheme. 

The _*mortgage-to-rent programme*_ is targeted at homeowners whose properties _*could be suitable for social housing*_. 

To qualify, the borrowers must have unsustainable mortgages and face repossession from banks. They must agree to surrender their homes and then rent them from an approved housing body which would then take control of the property. 

The Department of the Environment provides 25% of the equity for the new loan.

The department also says it is working with AIB on a pilot project involving some of its mortgage holders who are eligible for the scheme. Under this arrangement, AIB would provide loan finance to Cluid.

Source: www.rte.ie


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## Wishes (7 Feb 2012)

What does "could be suitable for social housing" mean?

I was unaware that such a scheme was in existance.


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## Alwyn (7 Feb 2012)

Maybe I have been living under a rock for the past couple of months but I was completely unaware of this scheme. When did this come into effect? I have not been formally served with repossession papers but I know it's only a matter of time before I am. I don't want to leave Ireland for the UK and I am avoiding filing for bankruptcy.  The article is informative but it is not giving away too much information.


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## Brendan Burgess (7 Feb 2012)

Wishes said:


> What does "could be suitable for social housing" mean?
> 
> I was unaware that such a scheme was in existance.



It means that the family must undergo a Housing Needs Assessment by the Local Authority.
The result would mean that they would go to the top of the Housing List.
It works out cheaper for the state to rent the house than to find them a new house.

Basically it would be for families with children or single parents where the house they are living in is suitable to their needs.

Couples without children or single people can forget about it.

Brendan


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## Alwyn (7 Feb 2012)

Brendan Burgess said:


> Couples without children or single people can forget about it.
> 
> Brendan


 
That pretty much excludes me then.

Wonder how much of a write off there was on their mortgage.


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## ajapale (7 Feb 2012)

Brendan Burgess said:


> It means that the family must undergo a Housing Needs Assessment by the Local Authority.



Are you sure about this? Can you point to a link?


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## ajapale (7 Feb 2012)

OK Charlie Weston in the independant states "Also, those_* families*_ benefiting will have to be eligible for social housing." which is close to what you are saying. However the RTE article states..."The mortgage-to-rent programme is targeted at homeowners whose _*properties*_ could be suitable for social housing".There is a subtle but important distinction between the two.In the first case it is the family that has to be eligible and in the second it is the property that has to be suitable.


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## Kerrigan (7 Feb 2012)

Wow, for once I am stumped for words.

Don't think this is particularly fair for couples with no children or single people.


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## Mrs Vimes (8 Feb 2012)

According to the Irish Times article on this case:

The property must be valued at less than €220,000 and be “appropriate to household need”.

I assume this would preclude a single person in a large house, or for that matter a family with one child in a six-bed house, but I don't see how it would rule out a single person or couple in a small house?

Also, would the house have to be up to the usual standards of social housing (eg RAS scheme)?


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## Velazquez (9 Feb 2012)

Does anyone know what happens to any outstanding debt / shortfall? Not much pain in this for the banks if they get market price for the house, charge a commercial lending rate to the housing association to fund the purchase and then pursue the household for the outstanding debt.


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## ajapale (9 Feb 2012)

It appears to me that the schemes (there are two of them) are still under development and what we are looking at here is a pilot. When a number of pilots are reviewed I imagine the scheme rules will be drawn up.



> *351.* * Deputy Robert Dowds*
> 
> 
> 
> ...


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## Bronte (10 Feb 2012)

Wishes said:


> _*mortgage-to-rent scheme*_, which will see a housing association take over a home owned by a family facing repossession by a bank.
> 
> The family will now rent the home from the approved housing body _*Cluid*_.
> 
> ...


 
Where is the benefit to the homeowner.  If the bank repossessed the house as they couldn't afford it then all debt would presumably be written off.  Is the advantage that the homeowner can stay in that particular house, but couldn't they rent something similar anyway and social welfare would pay. 

I see that 25% of the equity was paid by the department.  How does it work.  House with mortgage of 300K and worth 100K.   Cluid purchases it for 250K but department gives/grants 25% of that purchase price 62K so Cluid has a mortgage of €188K.  Family get rent from social welfare and pay Cluid, Cluid pays GE.  GE is happy as they have written off 50K (300-250), received 62K in cash and have a performing mortgage of 188K.  If they didn't agree to this scheme they would have had to write off 200K plus costs.  Is that how it works?  My mind is addled with this, doesn't smell right.


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## Mrs Vimes (11 Feb 2012)

Bronte said:


> Where is the benefit to the homeowner.  If the bank repossessed the house as they couldn't afford it then all debt would presumably be written off.  Is the advantage that the homeowner can stay in that particular house, but *couldn't they rent something similar anyway* and social welfare would pay.




It sounds like you are underestimating the benefit to a family or individual in staying in the exact house they have been living in, in the same neighbourhood. Even without the hassle and expense of moving (van hire, elec/gas deposits, etc) people do get emotionally attached to their houses.

It has been raised previously on AAM that it is unfair to others on the social housing list who have so little choice in which house they live in.


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## Bronte (13 Feb 2012)

Mrs Vimes said:


> It sounds like you are underestimating the benefit to a family or individual in staying in the exact house they have been living in,  people do get emotionally attached to their houses.


 
I suppose there is a benefit to this, can't see though why renting in the same area is any different.  From a financial cost point of view it seems to be costing tax payers more than need be.  But maybe I've misunderstood how the financing goes.


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## Brendan Burgess (13 Feb 2012)

As I understand it the scheme should work as follows.

A borrower has an unsustainable mortagage and so they should surrender their home or the bank should repossess it. 
They go to the Local Authority for a Housing Needs Assessment. 
The Local Authority puts them towards the top of the list based on their needs - a family with children will go to the top of the list.
They push others who are already on the list further down the list. 
If the house is suited to their needs and is suitable to Cluid's portfolio, it works out cheaper for the local authority/DoE to fund the acquisition by Cluid. 

As GE would have had difficulty in selling the house and legal costs in repossessing it, I presume that part of the deal was that the shortfall would be written off.  This might not be an accurate presumption though.

Brendan


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## Wishes (28 Jun 2012)

As news breaks today of the mortgage-to-rent scheme 'possibly' being made available to most hard pressed mortgage holders I'm wondering what everyones opinion is on this.

I am divorced and after the seperation purchased my home. I would be interested in hearing more about the scheme but I have heard very little about the possibility of 'single' homeowners being allowed to rent their home back frome either the bank or a housing organisation. Where do us singles stand in all of this?


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## Kerrigan (28 Jun 2012)

It would also depend on how many rooms are in your home.  If you are living in a four bed property then I cannot imagine you could rent your home back from a housing organisation as it would be deemed too big for purpose.


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## Alwyn (28 Jun 2012)

The more I read about this the more it doesn't sit right with me.  

If somebody avails of this scheme then obviously they become a renter.  When you are a renter it is up to the landlord to replace household appliances when broken and decorate the exterior etc.  

As the housing organisations will be part funded by bank loans and government grants who gets lobbed with the bill for maintaining these properties?


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