Mortgage proposal ‘manifestly unthought out’

A proposed State-backed mortgage solution that would see county councils pay a portion of a borrower’s repayments directly to the lender has been described as “manifestly unthought out”.

New Beginning co-founder Ross Maguire said the plan would “on first glance, fall apart”. The proposal, whereby payments on a split-mortgage would be divided between the borrower and their local county or city council, was suggested by the Irish Mortgage Holders’ Organisation.

A split-mortgage sees the loan divided into two parts. One is warehoused with the balance on that portion not repayable until the end of the mortgage term and the other has payments made in the interim.

The rationale for the proposal involving State funds was that the outlay would be less than that incurred if the local authority were to be liable for rent supplement.

However, a county council making mortgage payments directly to a bank is unfeasible and raises questions over the ownership of the property, Mr Maguire said.

“If the local authority are paying your mortgage, do they then develop an interest in the property? It appears that somehow they get a second charge on the property so what does that mean? Does that mean that when they pay part of their mortgage they’re effectively lending you money which you then owe them? Again, it’s very unthought out,” he said.

If a borrower can’t make repayments on their mortgage or a restructured home-loan, they must surrender the property. Provisions should be made for a family to stay in their home on a rental basis, Mr Maguire said.

A government-backed mortgage-to-rent scheme has failed to live up to expectations with just 88 such resolutions to date — 13 of which were finalised by the State’s main lenders.

Mr Maguire said a mortgage-to-lease scheme, whereby 4,000 to 5,000 homes were bought from banks by a fund such as New Beginnings using private money — as opposed to a housing authority under the mortgage-to-rent scheme — would provide an option for families that had given up their home to remain under the same roof.