Mortgage To Rent Scheme Provides Certainty And Security For Low Income Families Most Affected By Economic Turmoil

The Government is determined to provide certainty and security for families who face the imminent prospect of repossession of their family home according to Minister for Housing and Planning, Jan O’Sullivan, TD.

Minister O’Sullivan was speaking today (28 June, 2012) at the launch of the ‘mortgage to rent’ scheme.  The scheme is specifically targeted at those low income families whose mortgage situation is unsustainable and where there is little or no prospect of a significant change in circumstances in the foreseeable future.  The scheme ensures that the family remains in the home, paying rent, while ownership is transferred to an approved housing body.

“Some families have been caught in ‘a perfect storm’ in relation to mortgage repayments.  They purchased when prices were much higher and in many cases the family income that made the repayments possible has dropped significantly, often through the loss of one or more wage packet.  Many of these families now face the trauma of repossession.  The Government, following on from the Keane Report, pledged to take action and today I am announcing the launch of a nationwide mortgage to rent scheme.”

The mortgage to rent scheme is an option for families who:

Ø  Have had their mortgage position deemed unsustainable

Ø  Are eligible for social housing

Ø  Agree to the voluntary repossession of the property

Ø  Do not have significant positive equity

“The main aim of the mortgage to rent scheme is to give security and certainty to families.  It removes the threat of repossession and the consequent upheaval that entails.  Families can continue to live in their family home with security of tenure and certainty over the payments they must meet.”

“The mortgage to rent scheme is targeted at those with a low family income who are facing repossession of a modest family home.  It is not an easy route for families to embark on as it results in the surrender of ownership, but it does provide families with continuity and security.”

“Since February my Department has operated a pilot scheme.  More than 60 cases are currently going through various stages of the process and the pilot scheme has enabled us to test the model and ensure it delivers.  We are currently budgeting for a take up of approximately 100 families this year.”

“Mortgage to rent is very much a final option for low-income families facing severe mortgage difficulty.  It is just one element of the range of solutions that the Government has been working on.  It offers a viable, stable future for families on low incomes overwhelmed by mortgage debt and is a welcome development.”

Who is eligible for mortgage to rent?

As part of the implementation of the recommendations in the Keane Report a mortgage to rent scheme has been developed for households that:

·         have had their mortgage position deemed unsustainable under a Mortgage Arrears Resolution Process (as provided for under the Central Bank’s Code of Conduct on Mortgage Arrears);

·         agree to the voluntary repossession of their home;

·         do not have significant positive equity, and;

·         are eligible for social housing.

In addition a number of additional criteria apply including:

• Maximum household net income is between €25,000 and €35,000 per annum (depending on regional area)
• Maximum value of the property is €220,000 in the Dublin region and €180,000 in other parts of the country.
• Customer must not own any other property or have assets worth more than €20,000.
• Property must fit owner’s needs (be neither over nor under accommodated)

What does the process involve?

Process involves applicant surrendering possession of their home and the house being purchased by an approved housing body at market rate (or slightly less to take account of transaction costs).

Purchase is funded with a loan from the original mortgage lender (70-75%) and a loan from the Exchequer (25-30%).

Family then becomes a tenant of the approved housing body, paying a rent based on their current income and ability to pay.

Residual debt (different between original mortgage amount and mortgage to rent purchase price) is a matter for bilateral resolution between borrower and lender.  For some cases Government’s new personal insolvency arrangements may come into play.

Lenders currently engaged in the scheme in covered institutions and so-called ‘sub-prime’ lenders.