Reforms to help borrowers in arrears

Struggling borrowers facing repossession of their home in the courts are expected to be offered increased legal support as part of the Coalition’s package of reforms on mortgage arrears.

The Economic Management Council of the Cabinet last night discussed the long-awaited reforms, designed to help borrowers in long-term arrears.

The measures are expected to be unveiled today. They include an expanded mortgage-to-rent scheme, reforms on how courts oversee insolvency deals for borrowers, and a review of the bankruptcy rules.

The Department of An Taoiseach is overseeing the mortgage-arrears package.

Sources said the reforms will include increased legal aid for borrowers who are facing home repossession in the courts or where negotiations are ongoing with banks about a debt agreement. They will also be able to access free legal aid if they are involved in negotiations on an insolvency deal with their banks

“Up to now, there has been no free legal aid for families facing repossession,” said a source. “Somebody who has to go to court can’t afford a solicitor. This will be small, but will help families.”

The package of reforms will include an expanded mortgage-to-rent scheme to allow borrowers give up their property to the bank and walk away debt free. Private investors or agencies would then buy the property and former owners would be allowed remain under their roofs as social housing tenants.

Limits on the value of a home and a person’s income are expected to be eased to allow more owners, particularly in the Dublin area, to apply to the scheme.

The Department of Justice will lead reforms in the Insolvency Service to allow courts overrule a bank’s veto on debt deals. Instead, a plan to repay the debt will be agreed through an intermediary, such as an insolvency practitioner. This new deal would be overseen by a court and considered a going concern, in a scheme similar to business examinership.

The reforms package is also expected to include an enhanced role for MABS, the Money Advice and Budgeting Service, which would act as a one-stop shop for borrowers in arrears.

It will also include steering owners away from the courts towards insolvency deals.

Separately, it is expected that calls by Labour for the bankruptcy term to be reduced from three years to one will now be reviewed by the Oireachtas finance committee. Willie Penrose’s proposals will now be examined before a report goes back to Government.

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