Banks’ pledge to home owners ‘useless’

A PLEDGE by mortgage lenders to help struggling customers are useless without legal backing and the inclusion of subprime lenders, organisations aiding those in financial difficulty have claimed.

The 10 major banks and building societies have vowed not to take immediate legal action against hard-pressed homeowners – but only if they can work out a deal on repayments.

In a so-called statement of intent, the Irish Banking Federation (IBF) said it was looking to help customers who were facing genuine difficulties due to “changed economic circumstances”.

But it said any agreement would have to be “mutually acceptable” and would be reviewed every six months.

Under the plan, those unable to meet repayments are asked to talk to their lender as soon as possible to prevent repossessions.

Last night Start Mortgages, the country’s largest “subprime” lender stated it was “fully committed to the ethos of this pledge”.

However, the Free Legal Advice Centres (FLAC), which advises those in financial difficultly, said the majority of people whose homes are being seized have mortgages with subprime lenders and without statutory backing the guidelines may have little real influence.

FLAC director General Noeline Blackwell said subprime lenders not being fully signed up amounted to “a huge gap” in the new guidelines.

She added that the courts also needed statutory powers to reschedule mortgage repayments in situations were lenders were unwilling to agree reasonable terms.

It is estimated as many as 25,000 mortgage customers have a mortgage with subprime lenders. As many as 50% are in arrears.

In its statement last night Start mortgages claimed it believed its “current policies and procedures are in line with those described in this new pledge”.

The subprime lender is currently involved in nearly 40% of repossession cases going through the High Court.

Aoife Walsh, spokeswoman for housing charity Respond, said laws were needed to make all financial institutions, including subprime lenders, comply with industry regulations.

“We are calling for a statutory code of conduct to be imposed on these lenders as they are slow to show any compassion to those in difficulty,” she said.

Labour housing spokesman Ciarán Lynch said the IBF announcement did not represent a realistic attempt to address the problem.

He said subprime lenders had proven to be “trigger happy” when it comes to initiating repossession proceedings and a “comprehensive statutory framework,” was needed.

The IBF claims a low level of repossessions exists in Ireland, with main mortgage lenders seizing 70 homes in the first half of this year. It said 49 of these were voluntary repossessions.

However, these figures do not include those homes seized by subprime mortgage lenders.

Finance Minister Brian Lenihan said he welcomed the IBF pledge and called for continued “engagement between lender and borrower”.