Only a quarter of subprime mortgages have been restructured and the lenders cannot be forced by the Government to speed up the process as they are not bound by the mortgage resolution targets.
In a response to a parliamentary question from Fianna Fáil’s finance spokesperson Michael McGrath, the Minister for Finance Michael Noonan said that only about a quarter of subprime mortgages in Ireland have been restructured.
“The Central Bank has advised that for the subprime category of lender, there are 17,807 primary dwelling homes accounts of which 4,341 have been restructured. In addition, out of the 659 buy-to-let mortgage accounts, the Central Bank has advised that 68 have been restructured,” he said.
Although subprime lenders only account for 3% of mortgage lending due to the profile of their clients they account for 10% of total arrears.
These are consumers who are more likely to be in difficulty due to the fact they would have gone to subprime lenders after being turned down elsewhere due to a poor credit history.
As these lenders lent to riskier prospects they charged interest rates of up to 10%.
The biggest players in the sector were Start Mortgages which was part of GE, Stepstone — a joint venture between Lehman Brothers and KBC — Nua Mortgages, which was part of Investec, and Springboard, which was a joint venture with Permanent TSB and Merrill Lynch.
While the main Irish banks are bound by the mortgage arrears resolution targets which require the banks to have offered sustainable solutions to 75% of borrowers by June 2014, subprime lenders are not.
M Noonan said that the while subprime lenders are not bound by these targets they must comply with the code of conduct on mortgages.
“Retail credit lenders, which are not licensed to accept deposits such as subprime mortgage providers, are not subject to the prudential standards set out in the MART.
“However, the same consumer protection framework applies to retail credit lenders as to other regulated lenders, including the consumer protection code and the code of conduct on mortgage arrears and the Central Bank engages with these firms in relation to their treatment of borrowers under the mortgage arrears resolution process.
“In particular, the code of conduct on mortgage arrears sets out requirements for all mortgage lenders, including retail credit firms, dealing with borrowers in arrears or pre-arrears on a mortgage secured on a primary home,” he said.
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