A “BROAD range of concrete proposals” aimed at helping mortgage holders in difficulty “through no fault of their own” are expected to be outlined in a report on the mortgage debt crisis published this morning.
However, Government sources have ruled out a widespread debt forgiveness programme or relief for people who engaged in “reckless borrowing”.
The report, commissioned by the Government earlier this year, was drawn up by a group chaired by Declan Keane, from the Department of Finance. It includes officials from his department and the departments of Social Protection and Environment. Although it took submissions for banks and advisory groups, none were asked for assistance in drafting the final report.
“This idea that there is going to be widespread debt forgiveness is mad,” a Department of Finance source said yesterday. “Instead, what you will get are some very targeted measures aimed at helping the broadest range of people possible. There will be enough new measures to cover most of the people who find themselves in trouble,” he said.
One of the key elements of the report will focus on the establishment of a new organisation to help homeowners negotiate with banks over loans.
Initially, the plan had been to broaden the remit of the Money Advice and Budgeting Service (Mabs) to give it a greater role in mortgage negotiations, but the committee has instead recommended the establishment of a separate entity, dubbed “Mabs 2”, which would guide individuals in mortgage distress through the complexities of the process of negotiating with their lenders.
Once the report is approved, about 100 financial advisers will be recruited by the new organisation and they will offer a debt support service to people facing the threat of losing their homes.
Proposals will also be put forward this morning which will see local authorities and charities taking possession of the homes of people with mortgage arrears they cannot possibly pay back.
Rather than losing their homes, people will be given the opportunity to lease them from the local authorities at a more affordable rate.
Included among other proposals likely to be put forward will be a system which will give people the chance to park a portion of their mortgage for a period to reduce their monthly payments, while still allowing them to chip away at the capital owed, and a system outside the traditional courts which will help people over-burdened with debt to have some unsustainable loans written off.
The report will also contain measures which will allow people to take out negative equity mortgages. This will facilitate people who want to trade down to take the balance they owe on their original home on to the mortgage of the new, smaller home.
Central Bank figures to be published later this week will paint a clearer picture of the number of mortgage borrowers who are in financial distress, but the most recent figures show the level of arrears is close to 10 per cent.
Central Bank governor Patrick Honohan has ruled out a blanket debt forgiveness scheme but said banks do need to show a greater degree of flexibility when dealing with distressed borrowers.
Anecdotal evidence has suggested a growing number of banks are writing off some mortgage debts, particularly when it comes to investors.
However, lenders are reluctant to confirm this approach as they want to ensure it is the measure of last resort, and few have engaged in serious debt forgiveness for mortgages on people’s homes.
Bank discussions: interest deferral on the table
THE NEW Beginning group of lawyers and economists helping people in mortgage arrears will meet “a major bank” today to discuss a mortgage restructuring plan.
The plan does not involve debt forgiveness, according to barrister Vincent P Martin, one of the founders of the group, but a different way of repaying mortgages.
He said at the moment mortgages are front-loaded with interest for the first number of years, which means very little of the capital is reduced during those repayments. The plan involves reversing that structure so that a significant portion of the capital would be repaid at the beginning and the interest, deferred toward the end.
"We wanted to bring this to the table," he told The Irish Times.
“If it doesn’t work we’ll use it as a possible defence in the courts . If that fails, we’ll be considering a union of mortgage-holders.”
The New Beginnings group was set up almost a year ago by Mr Martin, Ross Maguire SC and others to provide legal assistance to those faced with financial institutions taking possession of their homes. They were joined by non-lawyer David Hall, and tapped into the existing public access panel of barristers.
“We wanted to provide assistance to people who were not represented,” he said. “The banks have barristers and sometimes senior counsel, courtesy of the taxpayer, while those same taxpayers were not represented.
"We don't take cases unless we have a chance of winning and we are quite pleased with our success to date." CAROL COULTER
