Report says mortgage support is insufficient

A NEW mortgage support and advice service should be set up to deal with the huge volumes of distressed mortgage holders and the range of issues they face, the Government’s mortgage arrears report has advised.

According to the report, MABS, the money advice and budgeting service, presently lacks the capacity to deal with the problem.

The report recommends a new service, which links to MABS offices, to ensure that mortgage holders know how to access the advice.

However, the creation of a two-tier debt resolution service could be “problematic” for consumers, according to MABS.

Spokesman Michael Culloty acknowledged the difficulty that MABS had in dealing with the scale of the problem, but questioned the sense behind setting up a separate mortgage-specific service.

“MABS takes a holistic approach to a client’s problems. We look at all credit issues and devise a strategy from there. From the consumers’ point of view, if you start to separate things out and say, for example, just concentrate on the mortgage debt, does that mean you have other creditors breathing down your neck? Will it mean people will have two advisers — one for mortgages and another for everything else, and could this put more pressure on people?”

Commenting on the proposed “mortgage to rent” scheme, which aims to help those people with unsustainable mortgages, FLAC (Free Legal Advice Centres) said there was “considerable detail” to be worked out.

FLAC policy advisor Paul Joyce said it remained to be seen what level of buy-in there would be from the banks, as there were significant disadvantages for them. “An approved housing body can actually take ownership of the house, but the bank cannot.”

In this scenario, the bank and a local authority (LA) enter into a 20-year lease with the tenant paying rent to the LA, but the mortgage lender retains ownership of the house. There is no proposed exit from the leasing arrangement for lenders.

Mr Joyce said there was considerable details to be worked out under each proposal, but that mortgage to rent schemes had worked in other countries. As regards the state, Mr Joyce said it could mean a shortening of the social housing list, but could also cause resentment among people who had been waiting for a house for a long period.

The report also says the Mortgage Interest Supplement (MIS) payment cannot continue as it is, calling it a “welfare trap” and a state subsidy to the bank. Currently more than 18,700 households are availing of the payment which was designed as a short term support.

Approximately 12,000 households have been on MIS for more than year and more than 6,000 for over two years.

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