Home repossessions will “rise significantly”, the financial regulator has warned, saying it was an “unpalatable fact” that lenders would no longer hold back.
It was left to Matthew Elderfield to deliver the starker message to distressed homeowners, as Finance Minister Michael Noonan took a softer approach, saying the number of homes seized will be “very small”.
They held a joint press conference yesterday to announce a plan to deal with the mortgage crisis that sets quarterly targets for banks to restructure loans in arrears.
Mr Noonan accepted there “might be a difference in tone” between him and Mr Elderfield on the likelihood of repossessions “but there’s no difference in what we’re saying. It’s the final option.”
He said there was a range of solutions that could be reached between banks and homeowners to restructure loans, and repossession was “the very end of the line”.
He said: “I presume it will be exercised in a number of cases. I couldn’t possibly assess what the number of cases will be but my view is that it will be very small and as a matter of policy we want it to be very small.”
At the end of 2012, there were 94,000 private residential mortgages in arrears of 90 days or more, of which 46% were on interest-only or less than interest-only arrangements with their lenders.
Under the plans announced yesterday, the banks will be forced to reach sustainable solutions with 20% of borrowers in arrears by the end of July. That figure will increase to 30% by the end of the third quarter of 2013 and 50% by the end of the year.
The Government has also pledged to introduce legislation by the end of this month to change an uncertainty in the law about the repossession rights of lenders.
Mr Elderfield said he expects to see a “substantial acceleration” by the banks in tackling the arrears cases.
“Early and ongoing engagement between the borrower and the lender is crucial in each case,” Mr Elderfield said
“Various factors have temporarily restrained lenders but it is an unpalatable fact, in light of the severity of the crisis, that repossessions must be expected to rise significantly.”
Fianna Fáil said it accepted repossessions will be required in certain cases. But it criticised the plan for “the additional powers it gives to banks and its failure to set any meaningful targets”.
The party’s finance spokesman, Michael McGrath, said there will be “unnecessary repossessions of family homes” as a result of the policy.
“The message today is that the banks are going to get you and the Government are supporting them in that process,” he said.
Sinn Féin expressedconcern that the final say on mortgage restructuring will remain in the hands of the banks.
The party’s finance spokesman, Pearse Doherty, said there were no details of writedowns in the policy. He said the Government put residential mortgages and buy-to-let in the same category.
“The Government is now allowing the banks to repossess family homes,” he said.
“If the bank considers it more beneficial to sell a house at a current value than restructure a loan, it will turn to repossessions.”
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