# New scheme for people who don't qualify for Mortgage to Rent



## Bronte (23 Jan 2019)

A new scheme ARIZUN STAY IN YOUR HOME

https://www.independent.ie/business...s-back-to-families-hit-by-debts-37739869.html

https://www.independent.ie/business...or-those-at-risk-of-losing-home-37739829.html

At least this one doesn't cost the taxpayer anything.  They mentioned on the radio today that this might be a better option for banks then selling to vulture funds.

I guess with a wallet as big as Arizun has to buy three thousand homes that Arizun will negotiate to buy with some of the debt written off.  After all the bank would only get the value of the property less costs.


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## Bronte (23 Jan 2019)

Their website is very clear and well laid out



Might this be a solution for those amongst the 28K still with mortgage arrears...


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## Brendan Burgess (23 Jan 2019)

Hi Bronte. I will be discussing this on Newstalk and this is the briefing note I sent them. I also sent it to Arizun and asked them to call me.

Maybe, I am missing something, but I can’t imagine any situation in which a borrower would benefit from this

If a borrower can afford to pay the market rent on their home, then they have enough to be able to do a deal with their lender.

Over 100,000 Irish mortgages have been restructured. The only ones not being restructured are where the borrower is paying nothing.

So if a borrower can afford to pay the market rent, then they should do so and they will get a restructure.

*Example  of a house worth €300k with a mortgage of €300k *






Don’t forget that with a mortgage, you are repaying the capital every month and will own the house outright after 25 years.

*But what if you can’t clear the arrears and the lender is threatening repossession? *

If you are paying €2,000 a month on a mortgage of €300,000, no court will grant an order for possession.

*But what if you are in deep negative equity? *

Let’s say your house is worth €300k but you have a mortgage of €400k?

Such borrowers can apply for a Personal Insolvency Arrangement and get the negative equity written off.

*And if you can’t pay €2,000 a month rent… *

Then Arizun will evict you.  It’s easier to evict a tenant than a mortgage holder.

*I just can’t envisage any situation where this would be workable  *

If someone is poorly informed and under pressure from a vulture fund, they might go for this rather than face court proceedings or a Personal Insolvency Arrangement, but they shouldn’t.

*This system works in the UK *

In the UK, if you don’t pay your mortgage, the lender will repossess it and sell it at auction.

There is an active market where people sell their home at a discount to buyer who clears the mortgage and rents it back to them.

But it only works because there is a real danger of having your home repossessed.


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## Bronte (23 Jan 2019)

It might work if the bank writes off the arrears?

Let's say the property is worth 200K, but because of arrears you owe 300K.  People won't engage there because of the NE maybe, that it's pointless paying it off because of the amount of arrears.  But if Arizun get the right downs, which the vultures get anyway, then the homeowner now has zero debt, but can purchase the property for 200K.  But if it is going to take you 6 years to do so, you won't be able to get a mortgage because of your bad credit rating.

I think it's a good scheme if it can work because it keeps people in their homes with zero cost to the tax payers.

It also helps to clean up the banks

And finally it maybe solves some of the intractable mortgage arrears cases.

Clearly this company has oddles of cash.


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## Bronte (23 Jan 2019)

Brendan Burgess said:


> *Example  of a house worth €300k with a mortgage of €300k *
> 
> View attachment 3383
> 
> ...



If you added in arrears to those figures how would it look. And of course I agree with you about the capital.


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## Bronte (23 Jan 2019)

On Newstalk now with Ciara Kelly, she asked listeners would they be interested in the scheme. ( I missed the beginning of it)

Arizun statement came into the show: 28K people in 2 year or more in arrears, far in excess of value, they will negotiate the arrears, ie write off. (this sounds reasonable to me, if this scheme can work that surely is a great result, but I'd like figures, if people are so overwhelmed that they are ignoring their debts)

CK : They are speaking to people who are overwhelmed.

BB: says it still doesn't make sense because you can go into personal insolvency.

CK: Would the banks prefer dealing withArixn rather than individual mortgage holders.

BB: if they can pay rent of 2K, ... are people afraid to speak to their banks, ostrachies. explained UK repossessions , rent it back to old owner schemes there

CK: low repossessions, struggling to pay all the debts, can you explain the difference between Bankruptcy and Insolvency.

BB: Bankruptcy = lose all assets and debts,  house gone (except marriages), good if you've no income

PI =  arrangment made, debts written down, keep the house, you have an income

Cormac: why doesn';t the government do this.CK says they do.
Frank: people need to be careful

BB housing in Dublin should be kept for workers

Tommy: banks don't want to negotiate, I'm in court today, after 7 years

?: can they get HAP,

BB hadn't thought of this, but he thinks the state should help the squeezed middle.  But it would be better for teh state to pay the mortgage than to pay the rent.

CK:

BB: how can they get deposit and mortgage if their credit rating is shot, he doesn't think it's possible.  Said talk to your bank, talk to an insolvency practicioner, that in 25 years you'll own it.

ill conceived scheme, and of those that do take it, very few will buy it back.


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## Bronte (23 Jan 2019)

BB that was a much better interview. Maybe because you were in the studio and there was no stress about time limits.  I think it would have been more interesting is Arizun were there too.  It was a much more relaxed format.

Ciara knew her stuff too and put in some valid questions.

I also thought you made a very good point about the rent meaning that really you should pay your mortgage and you'd end up owning the property eventually.


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## Bronte (23 Jan 2019)

CK: Comments

Says they are never for the borrower.  Called them a a vulture fund, CK says it's not a VF. Says take good financial advice.  Whatever people decide. 

That was it.


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## Jim Stafford (23 Jan 2019)

Brendan Burgess said:


> If a borrower can afford to pay the market rent on their home, then they have enough to be able to do a deal with their lender.



This is the crux of the matter.  

From my knowledge of the financing structures in place for such schemes, Arizun would need a minimum 7% rental yield on their investment. On a €200,000 property this would involve  a rent of €14,000 a year, i.e. *€1,166.66* a month.

As a PIP, I could possibly do a Section 115A PIA under which I would:


Reduce the mortgage to say €190,000 (yes, as a PIP I can reduce the mortgage to less than its market value: I could technically reduce the mortgage to €180,000 i.e. 90% of its market value to allow for what the bank would realise from the property in a bankruptcy)
Fix the interest rate at 3%.
Fix the term at 20 years
The monthly mortgage payment would be *€1,053.74*
Their website says that they will consider HAP tenants. Time will tell if HAP will deal with such properties that are, by definition, outside the existing Mortgage to Rent scheme.

Jim Stafford


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## Bronte (23 Jan 2019)

So Jim than the question is why are people not going to a PIP like you.


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## Brendan Burgess (23 Jan 2019)

A caller suggested that it might be targeted at people who would get HAP


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## Bronte (23 Jan 2019)

Jim Stafford said:


> Their website says that they will consider HAP tenants. Time will tell if HAP will deal with such properties that are, by definition, outside the existing Mortgage to Rent scheme.



HAP is where the state pays the rent directly to a landlord. And the tenant pays an amount to the local autority, a low amount is my understanding. It's instead of the old rent allowance.


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## Bronte (23 Jan 2019)

Brendan Burgess said:


> A caller suggested that it might be targeted at people who would get HAP



But that doesn't make sense because this scheme is for those of sufficent income that they are not entitled to state help.


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## The Horseman (23 Jan 2019)

Jim Stafford said:


> This is the crux of the matter.
> 
> From my knowledge of the financing structures in place for such schemes, Arizun would need a minimum 7% rental yield on their investment. On a €200,000 property this would involve  a rent of €14,000 a year, i.e. *€1,166.66* a month.
> 
> ...



I am at a bit of a loss on the above so please bear with me and my questions.

If you can get a PIP for less than the market value why don't all people go for this option. Does a PIP involve a write down by the banks. I suspect no bank will fix a rate for 20yrs.

I would have thought that the only way a bank would agree a write down was if they sold the property to a vulture fund etc where they are getting a cash injection now rather than a monthly mortgage payment and the risk associated with it.

The deal that is being offered by the new company appears to be completely in their favour. They can avail of high rents, they have the carrot of the tenant purchasing the property within 6 yrs. The onus would be on the tenant to keep the property in good repair if they thought they could purchase same at some point in the future.

So the new company are getting in most in stances more than the 7% return (this could be made up of rental income and capital appreciation) with little or no trouble from the tenants (in most cases).


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## Delboy (23 Jan 2019)

Bronte said:


> CK: Comments
> 
> Says they are never for the borrower.  Called them a a vulture fund, CK says it's not a VF. Says take good financial advice.  Whatever people decide.
> 
> That was it.


The head guy of Arizun was on with Sean O'Rourke this morning. When asked if they were a vulture fund, he said no...."we are more like a pension fund".
If you buy back within the 6yr time frame, Arizun get 60% of any house price appreciation and the buyers/tenants get the other 40%.

Look, if you can pay market rent, especially in Dublin, then you can afford to pay the mortgage.


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## Jim Stafford (23 Jan 2019)

Bronte said:


> So Jim than the question is why are people not going to a PIP like you.



Bronte, thousands of people have already availed of PIA's.  Having said that, I am still baffled, in 2019, to meet clients facing severe financial difficulty that have not previously heard of Personal Insolvency Arrangements, despite all of the media attention and advertising.




The Horseman said:


> I suspect no bank will fix a rate for 20yrs.



Believe me, banks/funds sometimes vote against PIA's.  However, the bottom line is that as long as the PIA produces a better outcome than a bankruptcy, the Courts are likely to enforce it.  See case below, where the interest rate was fixed for 27 years at 3.65%.  The case is  a good illustration of how PIA's can be effective against creditors who object etc

http://www.courts.ie/Judgments.nsf/...8477b6567ec76a6e802581d00054be96?OpenDocument

Jim Stafford​


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## Brendan Burgess (23 Jan 2019)

Thinking about it a bit more, I am now fairly sure that they are aiming for the HAP market in some way. 

The system as described makes no sense. 

I sent them a copy of the briefing note above and they didn't come back to me. 

And their website or press release has no worked example. 

I can't figure out this would work unless they can convince the taxpayer to pay the borrower's rent for them.

Say you are facing repossession because you can't pay anything. 
Well they buy the house and you apply for HAP. 
Everyone sorted except of course the tax payer. 

Or they just simply rent the house to the Council under RAS. 

Brendan


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## Brendan Burgess (23 Jan 2019)

Bronte said:


> Ciara knew her stuff too and put in some valid questions.



Maybe because they were well briefed?  



Brendan Burgess said:


> I will be discussing this on Newstalk and this is the briefing note I sent them. I also sent it to Arizun and asked them to call me.


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## Bronte (23 Jan 2019)

Brendan Burgess said:


> Maybe because they were well briefed?



You forgot to attach the Briefing note up thread.  Ciara clearly is a good reader though. She was on top of your brief !


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## Delboy (23 Jan 2019)

Charlie Weston and Arizun on The Last Word now


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## NoRegretsCoyote (23 Jan 2019)

The only 'profitable' space for these kind of solutions to long-term arrears involves:

1) convincing the government to provide housing supports
2) convincing a bank to write off a large chunk of the outstanding mortgage

Arizun haven't found any magic beans. 

This is all marketing to build a client base that they can take to the banks for a bulk deal.


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## Brendan Burgess (23 Jan 2019)

Bronte said:


> You forgot to attach the Briefing note up thread.



It's incorporated in this post: https://www.askaboutmoney.com/threa...ify-for-mortgage-to-rent.211325/#post-1597952



Delboy said:


> Charlie Weston and Arizun on The Last Word now



I hope Charlie read my Briefing Note. 

Brendan


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## Brendan Burgess (23 Jan 2019)

On Today Sean O'Rourke he says it's for people who don't get government support. 

We are an Irish company, with Irish people trying to fix an Irish problem. 

We are more like a pension fund - long term assets and long term leases 

We don't do bulk buying from a bank. We do it one on one with the borrower. 

We will negotiate with the bank to acquire the mortgage. 

_O'Rourke:  "You will offer the market value of the home to the bank?"_

Yes. 

We offer solutions to people in long-term arrears who have no hope of clearing them. 

_O'Rourke: If the banks give the borrower the discount you are getting, they borrower could do it themselves? _

Yes but they don't do it because of moral hazard. 

The banks are under massive pressure to deal with these loans.  There is no solution for these people

_O'Rourke: Including Insolvency, Mortgage to Rent? _

They won't qualify for MTR, because their income is too low

There are 28,000 over two years in arrears - I would say that less than 4,000 would qualify for MTR. 

3,500 have applied for MTR - 300 have got it. 
_
O'Rourke: How much rent will you charge people _

The market rent wherever they are in the country. 

_O'Rourke: How will they buy back their home? 
_
The tenant can buy back the house and get 40% of any uplift in the value. That will provide them with the deposit. 

If you are 65, you won't be able to get a mortgage. But we will allow a family take it over. We really want the family to stay in the family home. 

_O'Rourke: How open are the financial institutions in dealing with you? 
_
We have had a couple of conversations with financial institutions and they have been very positive.


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## Brendan Burgess (23 Jan 2019)

From the press release: 

_Within the first 6 years of their tenancy, they have the option of repurchasing their home with a 40% share in any capital appreciation to go towards their new mortgage deposit_.






So the house has to double in value for me to have the required deposit of 20%.

And my credit record will have to be clear.

And my earnings will have to be enough to sustain a €160k mortgage

And all these must come together in the one year window opening up after my credit record is clear and the 6 year time limit on the option to buy back my house.

Brendan


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## gahfan (26 Jan 2019)

Jim Stafford said:


> Bronte, thousands of people have already availed of PIA's.  Having said that, I am still baffled, in 2019, to meet clients facing severe financial difficulty that have not previously heard of Personal Insolvency Arrangements, despite all of the media attention and advertising.
> 
> 
> 
> ...



The PIP seems to make sense in some cases alright but the fact that your creditor(s) can vote against it isn't ideal and is there any appeal mechanism if they do please?


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## gahfan (26 Jan 2019)

After doing some research and to answer my own question I see a person can appeal through the courts if their creditor(s) don't agree. Anyone have experience of appealing please?


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