The enhanced mortgage to rent scheme is a joint initiative between AIB, EBS, Haven, the Irish Mortgage Holders Organisation (IMHO) and social housing organisation iCare.
Under the deal, AIB will sell hundreds of homes where the mortgages are in severe arrears to iCare, which is fronted by mortgage campaigner David Hall. AIB is understood to have provided financing in the region of €100m to social housing organisations to buy the properties.
The properties will be leased by iCare to the local authorities and rented back to the families on a long-term lease (approximately 30 years) at a social housing rent rate. The local authority will pay 92% of the market rent and the tenant will pay back, on average, €40 a week to iCare.
In order to be eligible for the scheme, the customer’s mortgage debt must be deemed unsustainable and they also must be eligible for social housing.
Once they are accepted to the scheme, ownership of the customer’s home then transfers to iCare and they become the agency’s long-term tenant. Any remaining residual mortgage debt, following the sale of the property, is fully written off.
However, the customer has the option to buy back the home, at any time, at the price that iCare paid for the property, including any discounts negotiated between iCare Housing and the bank.
CEO of the Irish Mortgage Holders Organisation and iCare David Hall hailed the deal between as being “probably the biggest breakthrough since the mortgage crisis began, and a very welcome one”.
He estimated that between 7,500 and 10,000 mortgages are eligible for such a deal, roughly equating to around 50,000 people being able to remain in their homes and avoid repossession orders. Mr Hall’s initial aim is to conduct buy-and-rent back deals with between 500 and 600 householders in the next few years.
He has also held initial talks with other mortgage lenders, with regard to similar schemes, and said he has had “positive engagement” on this front.
Mr Hall also defended criticisms of the scheme that it rewards people who have failed to keep up-to-date on their mortgage repayments by allowing them to essentially jump the social housing queue and stay in their own home at a fraction of the cost. He pointed out that the scheme will only apply to people who cannot pay and face losing their home rather than those who will not pay.
However, consumer expert Brendan Burgess of Askaboutmoney.com described the deal as “a kick in the teeth” for the “responsible” mortgage holder who has made huge sacrifices to keep up their repayments.
“In any other country, their home would have been repossessed and sold on to someone able to pay the mortgage,” said Mr Burgess. “They would join the social housing list and get allocated accommodation based on their needs and their place in the queue.
“But in Ireland, the bank is prevented from repossessing the house. Now, instead of joining the social housing list, they skip the 100,000-stong queue and not only get a house but get the house of their choice in the location of their choice.”