“It is essential to create the building blocks of reconstructing our stressed housing economy on a North-South basis.

The Ed Honohan Bill, when it becomes law will create a bonus no one has noticed.

There is no Mortgage Rescue Scheme in Northern Ireland and the one-way traffic of the reliance in the South on Vulture Finance has created a smugness in the North. There is a tendency here to say ‘We have it under control, no Vultures here’.

The main mortgage lenders backed off running to the courts about a year ago and seem to think they have a successful formula of reputational damage limitation. This, they say relies on forbearance, extended terms and agreement on voluntary sales.

This simply cannot last with the highest levels of negative equity in the UK and a potential tsunami of home loss once base rates rise again, as they certainly will.

Social lenders and housing associations on a cross-border approach to mortgage rescue have to be part of the answer. There are sources of funds still to be tapped in Ireland, Europe and the USA for social ethical lending where the funders will be interested in the ethical bottom line.

Ulster Community Investment Trust (UCIT) is willing to take the lead in creating an “Ethical Housing Finance Fund”.

Erskine Holmes| Founding Director of UCIT and NIFHA

MORTGAGE RESCUE – NO COST TO THE TAXPAYER

WHETHER you are a “performing” borrower or a “non-performing” borrower and in arrears, the sale of your loan and mortgage to a Vulture Fund represents an alarming development. Even though it is stated Government policy to “keep families in their home”s the self-same Government’s actions are of little effect.

The Bank or Building Society which gave you the loan in the first place had the right to demand repossession once you fell into arrears and, even if you were up to date, could have changed the interest rate at it’s “discretion”. They often didn’t press these buttons, though, because the banks are long term credit providers and can afford to  take a long term view.

For Vulture Funds, however, the scenario is entirely different. You are not a “customer” as such. They are not offering you credit cards or car loans. They want to get back what your loan cost them, together with a windfall profit. If you cannot raise the finance to meet their demands, you will eventually be evicted.

And if you are not currently in arrears they will “review” your loan term and use those very same “discretionary” clauses to squeeze you to the point of unaffordability and eventual default.

Default is the end game, and the Vulture Funds are not regulated.

Since 2016 players in the consumer mortgage market are forced to comply with very extensive data requirements imposed by EU Directive when they offer a new facility, and any offer of new terms for an existing loan is, strictly speaking, a new facility. Vulture Funds have no intention of becoming long term providers of credit. Forget that. They want to sell or flip the property and pocket the profits. If the house is sold, the State can rehouse the borrowers,  job done, right?

It’s happening already in the rental market. Without any Court Order, a mortgage lender can appoint a Receiver to evict tenants and sell. That’s the reason for the lengthening emergency housing lists. And the Judgement Mortgage carnage will be next.

The Focus Ireland Amendment to keep tenants in their homes when a Landlord or his Receiver is selling was deemed “Unconstitutional.” Michael McGrath’s Bill to set up a debt resolution agency was “blocked by the ECB.” Boxer Moran’s Bill to require Courts to conduct a full inquiry is now “on the long finger.”

I have the strong suspicion that although Ministers talk about” keeping people in their homes,” they are really ok with the situation as described above.

Repossession and Personal Insolvency is their preferred option!

Slowly but surely Official Ireland is preparing to turn a blind eye to the activities of the vulture funds cranking up to evict families in mortgage arrears.

Evicted families will struggle to find emergency accommodation anywhere.

About 10% of all house mortgages are in serious arrears. Leo Varadkar has claimed that their default has resulted in higher interest rates for the rest, but the reality is that it is the loss making tracker mortgages which are forcing Irish banks to overcharge on variable rate mortgages. An Taoiseach is joining the mob which is demonising the 10% as “strategic defaulters” without any serious research to back up this allegation. It is a populist charge and unbecoming of an Taoiseach.

He also asserts that if lenders in a housing market cannot be reasonably sure of repayment, if necessary through repossession, they won’t lend. That, clearly, is not the case when one sees the competition in lending at the moment. If an Taoiseach was keen to see other lenders entering the market, why is he so opposed to the Public Banking proposals of Sparkasse?

Ask yourself this question, why is  Official Ireland so keen to paint a rosy picture of the future in the hands of Vulture Funds?

The reason is simple. I believe, down the road they want to be able say that when Michael Noonan invited them in and gave them tax breaks, they didn’t know the vulture funds’ real intentions. They can never admit to having made an incredibly stupid mistake. They will say they were misled.

That mistake will cost us all dearly.

There is a grim determination to let the vulture funds get on with their clearout. The government has stalled on Boxer Moran’s bill; on Michael McGrath’s bill regulating debt servicers; on John McGuinness’s bill to introduce not-for-profit alternatives to the vulture funds. None of these would cost the taxpayer a red cent. The government has no genuine interest in addressing the issue, whatever they say in public.

When then Taoiseach Enda Kenny confirmed that it was the government’s policy to ensure that repossession of family homes should only be a last resort, I accepted his bona fides. With the present government, I have my doubts.
Back then, the policy was that banks should deal with distressed borrowers through the insolvency processes, with Mortgage to Rent as a backstop.

Now, the government is sitting back and letting the banks sell off the loans to vulture funds dressed up as “charities” and enjoying tax free windfalls. These arrangements must amount to illegal state aid under EU rules.

Is this the best way to keep families in their homes? I know it isn’t and the government knows it isn’t.

I haven’t seen any cost benefit analysis for the taxpayer or business model published by a vulture fund which offers long term security to distressed borrowers.

It is also untrue that full protection travels with the loan to the new owner. Vulture funds are not regulated. Recently the Finance Committee was informed that only a very low level of regulation (light touch) could be considered for such funds.

The ECB does not want the vulture funds regulated because they believe the funds are necessary for markets or countries that have experienced some kind of financial collapse.

So, what if vulture funds are preferred to cut deals with these borrowers? Where are the borrowers to get the capital to do these deals?

The Credit Bureau is a reference point for all lenders. Once listed, you will be barred from obtaining credit for seven years.

The credit unions, in the past, often assisted those affected by a poor credit history. This is no longer the case because of tight Central Bank regulation.

I proposed the creation of a “friendly” vulture fund to help rescue families who were not strategic defaulters. I proposed a National Housing Co-Op to undertake this project at no cost to the taxpayer.

I was told, by the Department of Finance, that Leo Varadkar would not agree to establish such a co-op. It would appear that any move to challenge the banks or give the citizen a fighting chance to save their home will not be considered under any circumstance.

Yet, the European Central Bank and our Central Bank have confirmed that the banks have not been instructed to sell to vulture funds and the mortgage crisis could be dealt with through social policy.

Furthermore, there is an acceptable accountancy measure, which can be used by the banks to take the loans off the balance sheet and work out individual sustainable solutions for the borrowers but this doesn’t suit their agenda in spite of being saved by the public purse.

There are two main difficulties facing voluntary bodies in this area. Firstly, they are excluded from the tendering process when a bank is offloading it’s non-performing loan books.

Secondly, we cannot legislate to include them, without interfering with the banks’ constitutional property rights unless the sale process is transparently on open market terms.

This is where the legislation I am now promoting comes in. It creates a regulated market allowing ‘not for profit’ co-ops to bid for these homes when they are on the open market.

It also copper-fastens the borrowers’ right to remain in their homes until the sale process is completed. Making individuals and families homeless just adds to the housing and homeless crisis. The process of repossession is devastating for those about to lose their homes.

The legal system is stacked against them. The lay litigant is rarely successful against the might of the banks and their costly legal teams.

In this way, ethically funded or crowd funded housing co-ops can pick up where the bust banks left off.

They could make it possible to keep families in their homes as long term tenants or on a sustainable mortgage arrangement. Contrary to the spin, vulture funds do not do deals of this kind.

They are in for the short term and a quick profit. In fairness to them, they are clear about their intentions.

Government can play its part by supporting the Affordable Housing and Fair Mortgage Bill and maybe even consider investing in the project.

John McGuinness, TD can be reached directly via Email at john.mcguinness@oireachtas.ie

The Affordable Housing and Fair Mortgage Bill 2018 has been written by Master of the High Court, Edmund Honohan, with the aim of enacting government policy in such a way as to keep people in their homes.

Introduced in the Dáil last July, the bill highlights Ireland’s adherence to EU law and the European Convention on Human Rights in the context of the housing crisis and, in particular, mortgage arrears.

“I have difficulty with the notion that the defendants in these [home repossession] cases are bound to fail,” Honohan told The Sunday Business Post.

“I feel that this notion has become all-pervasive and feeds into this idea of ‘strategic default’. Because of that, we have families who are being evicted in breach of public policy.

“As far back as September, 2013, the then Taoiseach Enda Kenny said ‘the government has made it perfectly clear that the repossession of houses should be a very last resort’,” Honohan continued. “That is government policy and this bill is about enacting that policy.”

Proposed measures 

Introduced in the Dáil last July by Fianna Fáil TD and chair of the Oireachtas finance committee John McGuinness, The Affordable Housing and Fair Mortgage Bill 2018 provides for a national affordable housing exchange and a non-compulsory purchase option for preferred not-for-profit housing agencies.

It proposes the expansion of the mortgage-to-rent rescue model to voluntary, mutual and not-for-profit housing providers, funded privately and without recourse to public funds or state guarantee, and the reconfiguration of the Abhaile scheme as a mortgage resolution agency.

As Honohan sees it, the odds at present are stacked against lay litigants who find themselves before the courts appealing possession orders on homes that have fallen into mortgage arrears.

Legal aid 

“I have challenged the Minister for Justice to justify the failure to give legal aid to these defendants in light of the complexities of the legal principles and facts at play,” said Honohan.

“They come to me looking for an extension of time to appeal a court order and it is really disheartening to see them. They have no papers. They have not filed an affidavit or they do not know what to say in it.

“They probably think ‘the game is up – we haven’t paid the mortgage and, therefore, there’s nothing more we can say.’ But, they still want to fight it because that is a human reaction. They want to stay in their home.”

Discretionary matter

“The judge in these cases is given to expect that they will have a fully informed basis on which to make a decision, but in these repossession cases, the question is: what information does the judge need to have?” said Honohan

“You might think ‘is there a mortgage and is it a default? End of story’. In fact, the granting of an order for a repossession is a discretionary matter.

“Some judges take the view that the defendant is bound to fail, so there is no need to ask them if there is anything more they want to say once the affidavit has been given.

“So, the defendant is not encouraged to put their best foot forward and I am not sure that the European Court of Human RIghts would be happy at all with the situation whereby an Irish judge simply sits back and allows a defendant to fall flat on their face.”

Abhaile Scheme

The Abhaile scheme was established in 2016 by the Insolvency Service of Ireland with the aim of helping homeowners to find a resolution to their home mortgage arrears.

Abhaile provides vouchers for free financial and legal advice, a service Honohan regards as wholly inadequate in fulfilling its purpose.

“People availing the scheme get a voucher for €200 worth of legal advice. They do not get a representation in court,” he said.

“They do not get a solicitor to attend court and speak on their behalf. They do not get help with the drafting of materials. They do not get advice on the issues they should address. From what I can see, all they get is a quick look over their paperwork.”

Insolvency service

The Insolvency Service of Ireland (ISI) is an independent statutory body established in 2013 with the aim of restoring insolvent persons to solvency.

“In 2013, the government passed a piece of legislation allowing Circuit Court judges to adjourn or recess cases to allow the borrower [in repossession cases] to consult a Personal Insolvency Practitioner,” said Honohan.

“Having availed of this consultation, the borrower could
then go back to court and say, for example, ‘I can afford to pay €800 a month in rent’.

“If we are looking at proportionality in this case and weighing the possibility of a windfall for a vulture fund as against a flow of rental income and allowing the person to remain in their property, the question then becomes: is balance in favour of the borrower?

“It seems to me that it quite clearly is, but the idea that the litigant can consult a PIP in this way has not gathered momentum.

“The judge should tell them off their own bat, but they never do. Abhaile isn’t telling them either and there is no way a lay litigant is in a position to address these issues themselves.”