Michael McGrath: Mortgage scheme ‘failing’

Michael McGrath, Fianna Fáil finance spokesman, has turned up the heat on the debate about the best ways to lower the still elevated levels of mortgage arrears, saying one approach — the so-called mortgage-to-rent scheme — is not working as it should.

The claim comes as the Central Bank prepares next week to release the latest figures on mortgage arrears.

This release is the first since the new minority government was formed and will likely reignite the debate about the large numbers still facing arrears, as well as the high numbers whose mortgage deals are falling apart following some sort of restructuring.

The figures will probably reveal a further small reduction in arrears cases in the first three months of the year.

They are the first since many political parties and groupings inside and outside the Government have focused on the arrears problems.

Mr McGrath yesterday highlighted the inadequacies of the almost three-year-old mortgage-to-rent scheme which, he said, despite an overhaul last year, is still “not fit for purpose”.

“Figures supplied to me in the Dáil show that just 162 mortgage-to-rent transactions involving approved housing bodies have been approved nationwide since its inception in July 2012,” said Mr McGrath.

“This represents less than four per month. Against the backdrop of 38,000 family home mortgages in arrears of two years or so, this is a truly abysmal performance by the scheme.”

The data also show that in some counties, no transactions have yet been approved, he said.

Mortgage and arrears experts agree.

“There are restrictions in the scheme which make it less user-friendly than it should be,” said Ross Maguire of advocacy group New Beginning, citing rules on family size and mix.

“It was launched in the UK in the 1990s to resolve their mortgage crisis there and was successful because it did not have the restrictions.”

Mr Ross also said that the problems with restructured mortgages remain “a cause for concern”.

Michael Dowling, chair of the mortgage committee at the Irish Brokers’ Association, said: “It [the mortgage-to-rent scheme] is a very good idea in principle because it allows people to stay in the family home on a rental basis.

“But it so cumbersome because so many people are involved—the approved housing body is involved, the bank is involved, the solicitors are involved. And then there is not enough money because the property has to be bought at market value,” Mr Dowling said.

There were 88,292, or just under 12% of residential accounts in arrears at the end of 2015.

Almost 14% of restructured home mortgages were not meeting the terms of the new deals. Lenders had classified a huge number, totalling 120,739, of home mortgage accounts as restructured.

The Central Bank said in March that “restructuring arrangements and forbearance techniques include: A switch to an interest only mortgage; a reduction in the payment amount; a temporary deferral of payment; extending the term of the mortgage; and capitalising arrears amounts and related interest.”