New Rent to Buy Scheme between IMHO and AIB

Brendan Burgess

Brendan Burgess

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http://www.independent.ie/business/personal-finance/property-mortgages/plan-for-families-in-mortgage-arrears-to-stay-put-as-renters-36172747.html


Families who are in deep arrears have been given fresh hope that they will be able to stay in their homes - as renters.

Mortgage campaigner David Hall has done a deal with AIB to buy out hundreds of homes where the mortgage holders are in arrears.

They will then be rented back to the families that previously had mortgages on them.

It is understood that funding of up to €100m for Mr Hall's iCare Housing organisation is set to be provided by the bank for an initial phase of the scheme.

Debts of those taking up the scheme will be written off, once they surrender their homes to iCare. People who get on to the scheme will have to qualify for social housing.

But they will get an opportunity to buy back the homes in the future if their personal circumstances improve, the Irish Independent has learned.
 
Here is a note on the proposal which I sent to the media this morning:

Below is my take on the scheme which the Minister is due to announce today according to this article in the Irish Independent.


http://www.independent.ie/business/...-arrears-to-stay-put-as-renters-36172747.html


This is a kick in the teeth for responsible mortgage holder and the taxpayer generally


What about responsible borrowers who have made huge sacrifices to keep up with their mortgages? They have cancelled their health insurance and their holidays. They have taken up a second job or worked overtime. They may have got rid of their car. They may have borrowed money from their parents. And they may well still be in negative equity in a house which they would have expected to trade up from some years ago. What is their reward? – a mortgage rate which is twice the rate being charged elsewhere in the eurozone.


What about people who haven’t paid their mortgages? In any other country, their home would have been repossessed and sold on to someone able to pay the mortgage. They would join the social housing list and get allocated accommodation based on their needs and their place in the queue.

But in Ireland, the bank is prevented from repossessing the house. Now instead of joining the social housing list, they skip the 100,000 queue and not only get a house, but get the house of their choice in the location of their choice.

We the taxpayer will pay their rent for them. (These houses will be leased back to the local authority who will pay iCare. If the tenants don’t bother paying their rent, as 30% of council tenants don’t, then tough on the council/taxpayer – iCare will still get their money.)

And to add insult to injury, in 10 years or so, they will be able to buy back the property at a 40% discount to the market value.

This is just wrong.

It rewards people who have not paid their mortgage and the responsible people who have paid, end up paying double the interest rate.

It penalises people on the social housing list already, because now 500 people will be jumping the queue and using up the limited resources.

The numbers in the newspaper look wrong.

“Eligible properties for the scheme must be valued between €280,000 and €365,000, depending on the location, with the higher values for Dublin.”

I presume that this means up to a limit of €280k outside Dublin and a limit of €365k in Dublin.

But are some of these not genuine?

Some probably are. But there is a very simple solution. They should retain ownership of their house and the taxpayer should pay the interest for them.

That would be a lot cheaper than paying rent for them. It is much more expensive to pay rent than to pay interest – even though interest is twice the rate being charged in the rest of Europe.



Why is AIB doing this?

In any other country, they would simply repossess the houses and move on. In Ireland, they just can't repossess the houses.

At the other end, they are being told by politicians and the regulatory authorities to deal with mortgages in arrears.

So they are in an impossible position and this solves it for them.
 
AIB's statement issued this morning

Subject: New initiative from AIB, IMHO and iCare aimed at keeping people in their homes



27th September 2017

· Enhanced Mortgage to Rent solution to benefit AIB, EBS and Haven customers in long-term arrears who qualify for social housing

· Eligible customers who complete the Mortgage to Rent process will continue to live in their home as long-term tenants of iCare Housing

· Customers can buy back their home at the discounted price paid by iCare Housing if their circumstances improve

AIB Group, the Irish Mortgage Holders Organisation and iCare Housing today announced a joint initiative aimed at keeping customers in difficulty with their mortgage, and who qualify for social housing, in their own homes. iCare Housing, a not-for-profit Approved Housing Body was set up for the purpose of providing and managing social rented housing for customers who are eligible for Mortgage To Rent.


Under the enhanced Mortgage To Rent solution:

· AIB, EBS and Haven customers can contact their lender or avail of free financial advisory services from the IMHO.

· If a customer’s mortgage debt is deemed unsustainable following an affordability assessment completed by the Bank, the Mortgage to Rent solution may be suitable.

· If a customer is eligible for, and completes, the Mortgage to Rent process:

Ø Ownership of the customer’s home transfers to iCare Housing

Ø The customer becomes a long-term tenant of iCare Housing

Ø Any remaining residual mortgage debt, following property sale, is fully written off

Ø The customer has the option to buy back their home, at any time, at the price that iCare Housing paid for the property, including any discounts negotiated between iCare Housing and the Bank.


Jim O’Keeffe, AIB’s Head of Financial Solutions Group said “This initiative is primarily about keeping our mortgage customers who are in difficulty in their homes wherever possible. We have made good progress in reducing our non-performing loans from c.€29 billion three years ago to c.€7.8 billion at half year 2017, including c40,000 mortgage customers with solutions in place. We remain very aware that there are still customers who have very limited ability to meet their mortgage payments, and this enhanced Mortgage to Rent initiative is being provided to extend our range of solutions to support customers in this position. As always, I would encourage any customer who is in difficulty with their mortgage to engage with us to find a suitable way forward.”


David Hall, CEO of the IMHO and iCare said “Today is a hugely significant day for those who have been struggling with unsustainable mortgage debt for the last number of years. For AIB, EBS & Haven customers an option now exists, for those who qualify for mortgage to rent , to remain in their homes, have their residual mortgage debt written off and have the option to buy their home back in the future for a price that is discounted from today's market value. Having been involved in advocating and helping people in mortgage arrears for the last seven years, this is the most significant solution I have been involved in. For people who are in trouble with their mortgage I would encourage them to contact us - solutions exist that allow families get their lives back and allow them stay in their home".


As an Approved Housing Body, iCare will be funded via the Housing Agency, rent roll from the local authority, and commercial lending. iCare Housing will be supported with commercial funding from AIB Corporate Banking. AIB Corporate Banking has significant experience in financing of the Social Housing Sector. It is working with a number of other approved housing bodies on funding for acquiring social housing.


AIB, EBS and Haven, and the IMHO, urge customers to engage with them to find out more about iCare Housing. Customers who want to discuss their mortgage arrears can contact:

IMHO on 1800 988 977

AIB on 1800 200 811


More information at www.icarehousing.ie and [broken link removed]-housing, [broken link removed]-housing,
 
Hi Brendan, heard you discussing this on Newstalk. Well said, about time somebody spoke up and pointed out how utterly bananas this situation is. It is maddening that politicians in this country either cannot understand or cannot accept that the very reason the mortgage arrears problem is so bad is because of offering deals like this instead of repossession.

So they announce this and the consequences will be yet another swathe of mortgage holders will understandably conclude that paying the mortgage is a mugs game. And the situation gets worse.

Meanwhile the rest of us are paying for it!
 
I'm delighted with this. It should have been done years ago.

I don't see the benefit of people struggling long term being now evicted and going on the housing list which is already out of control.

I'm very very glad for the many posters over the years on here who did everything they could, many suicidal. Many who actually committed suicide, left Ireland, broken families, broken people.

And let me be clear, I make a distinction between the won't pay versus can't pay.
 
Making the distinction and proving it are two entirely different things, the wont pay would be fools not to jump on the band wagon.
 
Number One Rule of an efficient economy : You should never have a situation where those who work the hardest and who conduct their financial affair in a responsible manner end up worse off financially than those who don't work as hard and are less responsible with the management of their financial affairs and are rewarded by a bail out from the taxpayer.

This is a very dangerous development ... people will do the math's and realize that working hard and being responsible is in fact not the best course of action... so why do it.

Mark my words , I've said it hear before ... next up is the responsible people who have provided adequately for their retirement ... as the government struggles to deal with the pension issue they will turn their attention to higher taxes on pensions possible means test away the state pension from people who also paid into a contributory pension also.
 
Bronte said:
Being discussed on Pat Kenny now.
Click to expand...

Thanks Bronte

Caught the end of it. Fair play to Pat Kenny. He pointed out all the downsides by way of all the texts and emails from people who have struggled to pay their mortgage and end up paying the highest mortgage rates in the eurozone.

He also pointed out that these guys all fly up to the top of the social housing lists and get to stay int the house they chose.
 
Sorry, had to take a phone call so didn't get to hear anything other than the start
 
A useful option for the can't pays. But it could be abused by the won't pays.

I'm not against the principle of this, but taxpayers should not be underwriting this and it needs to be made clear that this is only available to historical cases. I'd be sickened if the scheme was going to take on the famous bank buster in my local area who I know refuses to pay his mortgage and holidays in Florida every year....
 
Minister Eoghan Murphy welcomes iCare Housing Mortgage to Rent Scheme Initiative


Minister for Housing, Planning and Local Government, Eoghan Murphy, T.D., today (27 September, 2017) welcomed the announcement by iCare Housing that, working together with a number of specific lenders, they intend to make the Government’s recently reformed Mortgage to Rent scheme work for a large number of households in mortgage arrears around country.


Speaking today Minister Murphy said “I am pleased to support, iCare’s initiative and commend their commitment to using the Mortgage to Rent scheme in order to benefit a large number of households in long-term mortgage arrears. Changes made following the review of the scheme published in February mean that the scheme is now more accessible to more households who may be at risk of losing their home because of unsustainable mortgage arrears. However, delivering the scheme at scale remains a challenge. The announcement by iCare Housing that, for the first time, there is an official arrangement between a lender and Approved Housing Body that will allow a significant number of borrowers to remain in their home as social housing tenants, without the worry of having to deal with legacy debt, is significant. I would encourage other AHBs and lenders to consider how they can work together to utilise the scheme in order to benefit a greater number of eligible borrowers.”


The Minister acknowledged that the Mortgage to Rent Scheme is not a first choice for those in mortgage arrears difficulties. “It is no small matter to lose ownership of your house. However, where this seems to be the last resort, to have the additional option of remaining in your own home and community is invaluable to many families. The key role of the Abhaile Service, the Insolvency Service and the Money Advice and Budgetary Service in communicating the availability of the MTR scheme and the eligibility criteria to borrowers in arrears is critical to the successful delivery of the scheme and I would encourage borrowers in long-term mortgage arrears to engage with these services.”


Underlining the Government’s commitment to the successful operation of the scheme, the Minister remarked “Ultimately we want the scheme to be capable of being a real long-term solution for the families who it is designed for. My Department and the Housing Agency will work with iCare Housing and all the other participants in the scheme to meet the needs of more borrowers who require long-term support with their housing needs.”


ENDS


Notes to Editors:

The Approved Housing Body Mortgage to Rent Scheme for borrowers of private commercial lending institutions was developed as part of the implementation of the recommendations of the Keane Report on Mortgage Arrears in 2011 and is one part of a concerted effort across the whole of Government to tackle the mortgage arrears crisis. The scheme is part of the overall suite of social housing options and an important part of the mortgage arrears resolution process.


Mortgage to Rent (MTR) targets the most acute mortgage arrears cases where a situation is unsustainable and where there is little or no prospect of a significant change in the householder’s circumstances in the foreseeable future. Under the scheme, a householder with an unsustainable mortgage goes from being a homeowner to becoming a social housing tenant of an Approved Housing Body (AHB). They voluntarily surrender their property to their lender who, in turn, sells the property to an AHB. The AHB becomes the landlord and the household gets to remain in the family home.

The household must be eligible for social housing and the property must meet the appropriate standards for social housing. Householders are able to buy out the property at a later stage. However, in reality, their circumstances would have to have changed very radically in that period for them to be in a position to access mortgage finance.


Review of the Mortgage to Rent Scheme (February 2017):

A review of the MTR scheme published in February identified a number of key changes to the scheme:

  • Lenders are now required to formally communicate with borrowers as to why they are not suitable for the scheme.
  • Flexibility has been provided in relation to the size of properties which qualify for the scheme. In practical terms, this means that an assessment of the property size suitable to a particular household will allow for a maximum of two additional bedrooms in the property above the actual needs of the household, with the property still being considered eligible.
  • The property price thresholds for eligibility under the scheme have been increased in line with the acquisition thresholds for social housing generally. The threshold for a house in Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow has been increased to €365,000 while the threshold for an apartment / townhouse in these areas has been increased to €310,000. For the rest of the country, the threshold for a house is now €280,000 and for an apartment / townhouse €210,000. The most significant increases are in the more rural locations which is consistent with market findings. These thresholds will be subject to regular reviews taking account of the market at the time and will continue remain in line with the acquisition thresholds for social housing generally.
  • A significant change if that the application by the borrower for Social Housing Support is now made by the borrower to the local authority prior to submitting the MTR application to the Housing Agency. This change means that the borrower will know from an early stage of SHS eligibility or not, and if not will need to focus attention on other options to deal with their debt.
  • A key objective of the actions – and a measure of success – will be reduction in the average length of time for the completion of a transaction will reduce from between 12-18 months currently to less than 9 months.
  • Increasing the visibility and familiarity of the scheme among borrowers is a critical objective. The new Abhaile Service and MABS are important in that context. There are specific actions focused on engaging those agencies and their nationwide support services.

Further information on the operation of the scheme to date is available from the Housing Agency’s website:


https://www.housingagency.ie/our-services/housing-supply-services/mortgage-to-rent.aspx



iCare Housing

iCare Housing became a registered Approved Housing Body in October 2016 in accordance with the relevant statutory requirements and has signed up to the Voluntary Regulation Code. The organisation proposes to work with the Housing Agency, who administers the Mortgage to Rent on the Department of Housing’s behalf, utilising the existing MTR scheme to complete a significant number of MTR arrangements around the country. Under iCare proposal, for the first time there is an official arrangement between a lender and AHB on multiple properties rather than negotiations on a per property basis. It should be noted that the MTR scheme is voluntary and is based on the borrower voluntarily surrendering their home to their lender who then sell it to an AHB.
 
Personal Insolvency Arrangements are a more holistic way of addressing unsustainable mortgages as other debt, for example, unsecured loans, Revenue debt, can be included.

And MTR is inherently unfair as it has the effect of putting the "head in the sand" group to the top of the social housing list.
 
Brendan Burgess said:
And to add insult to injury, in 10 years or so, they will be able to buy back the property at a 40% discount to the market value.
Click to expand...

Hi Brendan

Where does this figure come from? Do we know that AIB is taking a 40% haircut?

It seems very odd that the customer has the option to buy back their home, at any time, at the price that iCare Housing paid for the property. What happens if the market value of the property doubles over the next, say, 10 years?

I see Mr Hall has described the scheme as a "golden ticket for these people". Hard to disagree but is it right to run public housing as a lottery?
 
Hi Sarenco

Local authority tenants get a discount up to 60% on the market value of their house. So I used the 40% figure in my earlier comment on it.

David Hall said in the AIB statement :

"those who qualify for mortgage to rent... have the option to buy their home back in the future for a price that is discounted from today's market value."

That could be a lot bigger than 60%.
It sounds as if iCare will buy the houses at around 80% of today's market value.
The tenant will have an option to buy back at this price at any time in the future.

"golden ticket" is an understatement.

Brendan
 
So much for moral hazard.

At this stage, there appears to be no moral, legal or economic rule that the government will honour in their mad scramble to be seen to be doing something about housing.

The only commandment they shall not breach is : "Thou shall not build more houses".
 
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