FF launches Private Members Bill on mortgages

[Brendan Burgess]

[broken link removed]

[FONT=&quot]Th[/FONT][FONT=&quot]e overriding purpose of this Bill is to secure the family home.[/FONT]



[FONT=&quot]1[/FONT][FONT=&quot]. A Credit Institution cannot start legal proceedings to repossess a person’s family home until the institution certifies to the Court in writing that the Code of Conduct on Mortgage Arrears has been complied with.[/FONT]


[FONT=&quot]2[/FONT][FONT=&quot]. The Credit Institution must provide to the court:[/FONT]

[FONT=&quot]a[/FONT][FONT=&quot]) An independent report from MABS on a person’s (in) ability to pay. b) Copies of original mortgage documentation.[/FONT]


[FONT=&quot]3[/FONT][FONT=&quot]. It also sets out alternatives that the court may direct instead of a repossession order:[/FONT]

[FONT=&quot]a[/FONT][FONT=&quot]) Interest only option for up to 4 years[/FONT]

[FONT=&quot]b[/FONT][FONT=&quot]) Extension of mortgage term by up to 20 years
c) One year payment holiday[/FONT]
[FONT=&quot]d[/FONT][FONT=&quot]) An adjustment to the Interest Rate
e) A debt for equity option[/FONT]
[FONT=&quot]f[/FONT][FONT=&quot]) The Deferred Interest Scheme[/FONT]



[FONT=&quot]4[/FONT][FONT=&quot]. If the Court believes, having reviewed the original mortgage application, that the mortgage was granted in an unlawful or reckless or negligent manner taking into account the true financial position of the borrower at the time the mortgage was entered into, the Court may rescind the mortgage agreement.[/FONT]


[FONT=&quot]5[/FONT][FONT=&quot]. If [/FONT][FONT=&quot]t[/FONT][FONT=&quot]h[/FONT][FONT=&quot]e [/FONT][FONT=&quot]c[/FONT][FONT=&quot]o[/FONT][FONT=&quot]u[/FONT][FONT=&quot]r[/FONT][FONT=&quot]t [/FONT][FONT=&quot]d[/FONT][FONT=&quot]eems [/FONT][FONT=&quot]i[/FONT][FONT=&quot]t [/FONT][FONT=&quot]a[/FONT][FONT=&quot]pp[/FONT][FONT=&quot]r[/FONT][FONT=&quot]o[/FONT][FONT=&quot]p[/FONT][FONT=&quot]r[/FONT][FONT=&quot]i[/FONT][FONT=&quot]a[/FONT][FONT=&quot]t[/FONT][FONT=&quot]e [/FONT][FONT=&quot]t[/FONT][FONT=&quot]h[/FONT][FONT=&quot]at an order [/FONT][FONT=&quot]f[/FONT][FONT=&quot]o[/FONT][FONT=&quot]r repossession should not be granted, it may order that the borrower remain in the family home as a court approved tenant of the lender for a rent and on terms to be fixed by the court.[/FONT]


[FONT=&quot]Thes[/FONT][FONT=&quot]e options are radical and may be controversial. However, we believe they are needed. Essentially these provisions equip the Courts with a set of tools which can be used to avoid the Family Home being repossessed.[/FONT]

 

[Brendan Burgess]

These are very poor proposals.

We have a very low repossession rate in Ireland. Lenders facilitate anyone who genuinely engages with them. More people want to surrender their homes than banks want to repossess them.

It also sets out alternatives that the court may direct instead of a repossession order:

d) An adjustment to the Interest Rate

The contract set out the interst rate. I doubt if it would be constitutional to vary the contract in retrospect. The lender and borrower agreed the rate when the mortgage was taken out. Why should the judge intervene?

The possible exception to this would be where a lender was applying penalty interest rates to borrowers in arrears.


In general, we have to be careful not to introduce a charter for blaggards. There are very few repossession cases given the high levels of arrears. In many cases, a voluntary surrender is the best option for the borrower. Some of these proposals would just facilitate the many people who simply don't want to pay their mortgage e.g.

[FONT="]2[/FONT][FONT="]. The Credit Institution must provide to the court:[/FONT]

[FONT="]a[/FONT][FONT="]) An independent report from MABS on a person’s (in) ability to pay. b) Copies of original mortgage documentation.[/FONT]

and

[FONT="]4[/FONT][FONT="]. If the Court believes, having reviewed the original mortgage application, that the mortgage was granted in an unlawful or reckless or negligent manner taking into account the true financial position of the borrower at the time the mortgage was entered into, the Court may rescind the mortgage agreement.[/FONT]

[FONT=&quot]5[/FONT][FONT=&quot]. If [/FONT][FONT=&quot]t[/FONT][FONT=&quot]h[/FONT][FONT=&quot]e [/FONT][FONT=&quot]c[/FONT][FONT=&quot]o[/FONT][FONT=&quot]u[/FONT][FONT=&quot]r[/FONT][FONT=&quot]t [/FONT][FONT=&quot]d[/FONT][FONT=&quot]eems [/FONT][FONT=&quot]i[/FONT][FONT=&quot]t [/FONT][FONT=&quot]a[/FONT][FONT=&quot]pp[/FONT][FONT=&quot]r[/FONT][FONT=&quot]o[/FONT][FONT=&quot]p[/FONT][FONT=&quot]r[/FONT][FONT=&quot]i[/FONT][FONT=&quot]a[/FONT][FONT=&quot]t[/FONT][FONT=&quot]e [/FONT][FONT=&quot]t[/FONT][FONT=&quot]h[/FONT][FONT=&quot]at an order [/FONT][FONT=&quot]f[/FONT][FONT=&quot]o[/FONT][FONT=&quot]r repossession should not be granted, it may order that the borrower remain in the family home as a court approved tenant of the lender for a rent and on terms to be fixed by the court.[/FONT]

We need to face up to the fact that repossessions are inevitable. A protocol needs to be developed for them. Banks acting as landlords is not workable

[FONT="]3[/FONT][FONT="]. It also sets out alternatives that the court may direct instead of a repossession order:[/FONT]

[FONT="]a[/FONT][FONT="]) Interest only option for up to 4 years[/FONT]

[FONT="]b[/FONT][FONT="]) Extension of mortgage term by up to 20 years
c) One year payment holiday[/FONT]
[FONT="]...[/FONT][FONT="]
e) A debt for equity option[/FONT]
[FONT="]f[/FONT][FONT="]) The Deferred Interest Scheme[/FONT]

If the borrower is paying the interest on their mortgage, the lender will not be repossessing the house.

Extending the mortgage period is similar to interest only.

The "debt for equity option" is a meaningless concept in the era of negative equity. If the borrower has equity in the house, then selling it is probably the best solution.

The Deferred Interest Scheme has been adopted by lenders covering around 80% of mortgages. The Expert Group and Financial Regulator achieved this through persuasion. Those who are not in the scheme have equally good schemes. I don't think it's necessary to make it compulsory.

 

[demoivre]

The contract set out the interst rate. I doubt if it would be constitutional to vary the contract in retrospect. The lender and borrower agreed the rate when the mortgage was taken out. Why should the judge intervene?

The possible exception to this would be where a lender was applying penalty interest rates to borrowers in arrears.

The contract set out the type of interest rate , which for a standard variable rate mortgage, means a bank can charge whatever it likes for the duration of the mortgage. I don't think the exorbitant pricing of a standard variable rate mortgage is acceptable - what's to stop a bank charging 7 ,8 or 10 percentage points above their cost of funds in the case of variable rate mortgages ?

 

[Sunny]

The contract set out the type of interest rate , which for a standard variable rate mortgage, means a bank can charge whatever it likes for the duration of the mortgage. I don't think the exorbitant pricing of a standard variable rate mortgage is acceptable - what's to stop a bank charging 7 ,8 or 10 percentage points above their cost of funds in the case of variable rate mortgages ?

Short answer is nothing. There are money lenders operating in this State that charge 100% interest and what they do is not illegal.

 

[Brendan Burgess]

I don't think the exorbitant pricing of a standard variable rate mortgage is acceptable

In practice, this hasn't happened. In theory, it could happen.

If you allow SVR mortgages, then the rates can rise. In a normally functioning market, competition would mean that borrowers would switch their mortgages. In this market with so much arrears and negative equity, people can't switch.

It should not be up to the whim of a judge to decide that PTSB's SVR is too high.

If it's public policy that the SVR of mainstream lenders is set by the government, so be it. I would disagree with this, but it would be better than a judge setting the rate. It might be worth giving the government or the Central Bank the power to do this, but they would only use it very rarely.

what's to stop a bank charging 7 ,8 or 10 percentage points above their cost of funds

What is a fair price for mortgage lending in Ireland at the moment? 3 percentage points above cost of funds? What is the cost of funds? The banks are paying 4% for deposits but 1.5% for money from the ECB.

What about sub-prime lenders who set the rate based on the credit rating of the borrower?

A possible solution would be to make all mortgages tracker rates. The downside of this is that the margins would have to be high.

Brendan

 

[monagt]

Why not apply the same to the young stuck in huge negative equity as applied to the banks, debt forgiveness, banks taking a 50% share in home for 50% mortgage reduction.

There are too many in Ireland willing to beggar a generation because they were lucky enough to purchase before 2002 or were unable to purchase until after the fall.

 

[Brendan Burgess]

Why not apply the same to the young stuck in huge negative equity as applied to the banks, debt forgiveness, banks taking a 50% share in home for 50% mortgage reduction.
.

Because it's not the "banks" who will be paying for it, it is the taxpayer.

These borrowers may have huge negative equity but can pay their mortgage anyway. They are getting huge assistance anyway with Mortgage Interest Supplement and with enhanced Mortgage Interst Relief.

Brendan

 

[Jim2007]

Because it's not the "banks" who will be paying for it, it is the taxpayer.

Exactly, the banks could no afford it, we'd have to recapitalize them again if we tried that stunt!

Jim

 

[monagt]

I'm funding the banks, my pension fund has been raided, my children paid big stamp duty, my shares in the banks worthless, my pension funded by PRSI extended, my childrens salaries reduced by levies and the Banks get bonuses and redundancies, and now we are going to beggar a generation, == a fair and equitable society???