Mortgage to Rent makes no sense for the banks

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WizardDr

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Regretfully the Mortgage to Rent Scheme just makes no sense at all.

Assume €300k Mortgage Property Value €150k and client can pay nothing.

Scenario: Bank sells house to housing agency - loss immediate €150k.

Housing agency pays 90% of market rent - say that is 8% so 90% x 8% = 7.2% of €150k which in money terms is €10,800.

€10,800 is 3.6% of €300,000.

The $64 questions:

What banks are getting anywhere near 3.6% on a mortgage and would you as a Bank accept interest only of 3.6%

(If the answer is NO - stick to job you are currently in).
 
WizardDr said:
Regretfully the Mortgage to Rent Scheme just makes no sense at all.

Assume €300k Mortgage Property Value €150k and client can pay nothing.

Scenario: Bank sells house to housing agency - loss immediate €150k.

Housing agency pays 90% of market rent - say that is 8% so 90% x 8% = 7.2% of €150k which in money terms is €10,800.

€10,800 is 3.6% of €300,000.

The $64 questions:

What banks are getting anywhere near 3.6% on a mortgage and would you as a Bank accept interest only of 3.6%

(If the answer is NO - stick to job you are currently in).
Click to expand...

I'm sorry, I don't understand where your figures come from and why MTR doesn't make sense.

As I understood it's like this:
Mortgage-300k, Value 150K.
Housing Association (HA) buys house for 150k less 10% discount so selling price is 135K.
The remaining 165K is now an unsecured debt and the bank will seek to recover this from me.
HA now own the house and rent the house back to me as a social housing tenant at a rent based on my income.

It's a winner for all as far as I can see. Bank gets close to market value with court, eviction and repossession avoided. I get to stay in my community and pay a rent I can afford. The HA gets a well placed house at a reasonable price in an area where there is a demand for social housing. The local authority doesn't have to find accomadation from stretched resources and the DSP doesn't pay me a large amount of Rent Allowance.

The only downside is that I will lose possession of my home but this would likely happen anyway.
 
Its this simple:

The bank suffers a huge write down

The same MONEY payment per month supports the bigger mortgage as interest only - thats the key.


The State loses on other option.

If you can secure social housing rent - that money amount could keep the status quo.
 
Hi Wizard

I am not sure that you understand how MTR works?

If a mortgage is unsustainable, the Housing Agency will buy the house from the borrower and rent it to the borrower.

From the lender's point of view, it's just the same as an Assisted Voluntary Sale.

The bank doesn't lose any additional money via MTR. They have already lost the money.

Brendan
 
ang1170 said:
You mean they have to accept reality?

What's the alternative? repossession? What happens then?
Click to expand...


You hit the nail on the head. The bank offering MTR is them facing reality. It's a last chance saloon for the borrower to stay in their property or face imminent court proceedings. I'm sure the banks don't like getting to that point and would hope that loans will get back on track.

I wonder would the banks use the offer as a low cost litmus test to see if borrowers would really give up possession of their property??
 
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