People with large mortgage arrears are not applying for a state-backed program that allows them to stay in their homes as tenants – because they get away with paying nothing, it is claimed .
Mortgage campaigner David Hall said the government was behind schedule for the mortgage-to-let program because financially distressed homeowners see no realistic risk of their homes being repossessed.
The scheme means people don’t have to leave their homes and become tenants instead, with most deals involving debt forgiveness.
But only 223 rental mortgages were closed in the first six months of the year, according to figures published on the Housing Agency’s website.
This is down from 280 mortgage transactions completed last year.
The government’s Housing for All strategy commits to providing 1,000 rental mortgage applications per year. However, there are approximately 14,000 residential mortgage accounts in arrears of five years or more.
The private company Home for Life and the nonprofit iCare Housing, run by Mr Hall, closed 80% of mortgage-to-rent deals in the first three months of the year.
Mr Hall said it was difficult to get people to take out a mortgage to rent, when the banks were not committing to it and also not pushing for repossession.
“There are hardly any repossession procedures at the moment. So why would people who are in arrears be persuaded to give up ownership of their homes to become tenants when they are not paying anything?”, did he declare.
He estimates that up to 6,000 people in long-term arrears were paying nothing to lenders and therefore living without rent.
But Mr Hall said banks and those in long-term arrears were reluctant to enter into mortgage-to-rent deals. Most current transactions are with credit service companies that act for vulture funds.
Mr Hall said: ‘Trying to persuade someone to give up ownership of their house, to pay rent, when they are no longer in negative equity is very difficult. Many of these people have not paid anything for 10 years.
He said the fact that so many people have long-term arrears gave people a sense of security. Approximately 26,000 residential mortgage accounts are long overdue. “Why would someone ask for a mortgage to rent when they’ve been living in the house for free for 10 years?”
The latest figures from the Central Bank show that 344 delinquent mortgage accounts took legal action in the last three months of last year.
“The majority of mortgage accounts in arrears are currently not being sued,” the Central Bank said in its latest arrears statistics.
The cost of repossession proceedings, the length of repossession proceedings, and the courts’ reluctance to grant repossession orders have made banks reluctant to sue.
Pepper and Start Mortgages, which handles thousands of delinquent mortgages and is owned by vulture funds, facilitates most cases.
Home for Life chief executive Paul Cunningham said traditional lenders were slow to take up the scheme, with 88% of current deals going to credit service companies.
He said: “The government is supporting the mortgage to rent scheme. In the Housing for All plan, the Department of Housing said it aims to achieve 1,000 completions a year on average during the government’s remaining term.
“We believe this goal can be achieved if there is greater awareness of the program among those with long-standing arrears and greater commitment from more mortgage lenders.”
A spokesperson for Housing Minister Darragh O’Brien said the program was demand-driven and participation reflected individual borrowers’ progress through the mortgage arrears resolution process and, in some cases, legal proceedings. These processes have been affected by the effects of the Covid-19 pandemic and this is now reflected in the cases that arise under the program, the spokesperson said.
He said the department was working on a number of initiatives both internally and with the Accredited Housing Organization (AHB) sector to improve their participation in the program “to help the AHB sector achieve this ambitious goal.