New Government scheme to keep debtors in their homes

Thousands of struggling mortgage holders will be offered an option to walk away from mounting debts but still live in their homes under a scheme being finalised by the Government.

The new mortgage-to-rent scheme will allow home-owners write off their debt — if they give their homes to the bank — but still live under their roofs as social housing tenants.

Private companies or investors would then buy properties off the banks and local authorities would act as management companies and lease the properties to the former owners.

Government sources have confirmed the outline of the scheme, which will be unveiled as part of a package involving insolvency and bankruptcy measures in the next fortnight.

“Banks can clean up their own books by offloading mortgages, while local authorities would collect a rent and pay this to the private company,” said one source. “This model keeps people in their homes. There could be a huge level of take-up.”


More than 37,000 mortgage holders are in long-term arrears and have made no payments in over two years, Central Bank data shows. It is hoped the scheme could appeal to these borrowers.

The scheme would not add to social housing list numbers and it is understood that both banks and private companies have so far expressed interest in it.

While less than 100 homeowners availed of a previous mortgage-to-rent scheme in 2012, a key change this time would allow applicants have higher home values and incomes.

This would allow a greater number of mortgage holders in difficulty, particularly in Dublin, to sign up for the scheme. Under the old scheme, homes in the greater Dublin area had to be less than €220,000 in value, and those outside of the capital, less than €180,000.

Both Labour and Fine Gael ministers are understood to back the scheme, which is being finalised by the inner Cabinet known as the Economic Management Council.

Measures yet to be decided include whether the insolvency services might have a role in leasing homes, and what types of investors or private firms would buy up the large numbers of properties given over to the banks. The issue of subsidising the rents of the new social housing tenants, so investors get a reasonable return, has also still to be worked out.

One senior Government source said: “The key is that people get to remain in their home. The value of homes [allowed] needs to be finalised, as well as who exactly administers it.”

However, a separate source said: “The State will be coughing up rents and there’s no way around that.”

A large take-up in the scheme could go some way to solving the mortgage arrears crisis and avoid a nightmare scenario for the Coalition where large numbers of repossession cases could proceed in the courts.

New Beginning, a group supporting mortgage holders, has advised the Government on the expanded scheme. Environment Minister Alan Kelly and his officials have also been involved in it.

One provision being considered would allow original owners buy back their homes down the line.

The new mortgage-to-rent scheme will be included in a bigger mortgage-arrears crisis package, to be announced by the Coalition in the next two weeks. This is expected to see courts given the power to overrule banks when they veto insolvency proposals from borrowers with arrears. Instead, a deal would be imposed by the courts in a type of ‘examinership for homeowners’.

The mortgage arrears package will also address calls to ease current bankruptcy terms. However, some Government sources say Labour’s call for the current three-year term to be cut to one may be passed to an Oireachtas committee to examine. This is due to the fact the current bankruptcy regime is relatively new and a large number of bankruptcy cases end up with homes being repossessed.



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