New €20m Fund to Assist Local Authority Mortgage Holders in Distress
Minister for Housing and Planning, Jan O’Sullivan, TD, today (11th Feb 2014) announced a new €20m fund to assist the most distressed local authority mortgage holders. The fund will be used to offer the ‘mortgage-to-rent’ solution to these local authority mortgage holders across the country.
“The mortgage arrears problem is particularly acute in the local authority sector, with approximately 31% of all loans in arrears for 90 days or more. It is important that these households are given access to the same options available to other mortgage holders. The Mortgage Arrears Resolution Process (MARP) has been implemented across the local authority sector and today’s announcement will ensure that the ‘mortgage to rent’ option is available to local authority mortgage holders,” stated Minister O’Sullivan.
Mortgage to rent was one of the solutions identified in the Keane Report on mortgage arrears. It enables low to middle income families in an unsustainable mortgage situation to remain in their home. For holders of mortgages from private lenders, the home is bought at current market value and the family becomes a tenant of an approved housing body. To date, 33 mortgage to rent transactions are complete, another 61 are at sale agreed stage, 22 are under offer and 61 are at valuation stage.
“The €20m fund will allow local authorities to offer the mortgage to rent scheme to local authority mortgage holders with unsustainable mortgages. This will enable families to stay in their home and their established community. Surrendering the ownership equity in a home is a very difficult decision for a family; however, the mortgage to rent option does provide families with stability and continuity, after an often long period of financial turmoil. Ownership of the home transfers to the local authority and the family pays a differential rent.”
“This is just one of a range of solutions available to local authority mortgage holders in arrears. The most important step any family in arrears can take is to engage early with the Arrears Support Unit of the local authority. Solutions are available and advice should be sought as early as possible.”
Minister O’Sullivan also added that she intends to be in a position later this year to bring forward proposals for the shared ownership loan book in particular. “There is a very real legacy issue in dealing with shared ownership loans. The new ‘mortgage-to-rent’ facility may be of benefit to a minority of these mortgage holders. I’ve also recently introduced some measures, such as removing the impediment to a homeowner to rent a room, which will provide some relief to people with shared ownership loans. However, a more comprehensive response for these particular loans is required and will be addressed during 2014.”
Local authority mortgages are generally taken out by people who were refused credit by two commercial institutions.
In the main, the facility was used by tenants to purchase their existing local authority home or to enter into a shared ownership arrangement with the local authority.
To be considered for the mortgage to rent scheme, mortgage holders must satisfy a number of criteria including:
- The mortgage must be deemed unsustainable with any change unlikely in the future;
- The mortgage holder must be engaging with the Arrears Support Unit in the local authority;
- Property must be the sole property of the mortgage holder and the primary residence of the mortgage holder;
- Property must have a current market value of less than €220,000 in the Greater Dublin area and not more €180,000 in the rest of the country;
- The property must be in negative equity;
- Household must be eligible for social housing support from the local authority and net household income must not exceed a maximum of €25,000, €30,000 or €35,000 a year depending on where a family is located.