More Needs to be Done to Help Those in Mortgage Arrears – says Respond!

October 14, 2009 Updated: May 26, 2010

Irish housing charity Respond!, insists that more needs to be done to assist those in
mortgage arrears and facing the possibility of losing their homes.

Respond! Housing Association recently presented their Homeowners Mortgage Support Scheme to the Joint Oireachtas Committee on Finance. The aim of the scheme is to assist those struggling to repay a mortgage that are in negative equity.

In a statement from Respond spokesperson Aoife Walsh said, "The scheme is needed for the 25,000
families currently in mortgage arrears who may face the possible repossession of their home when the mortgage moratorium expires in February 2010."

According to Ms Walsh, the number of families in mortgage arrears has increased significantly in the past year, the figures have almost doubled in the past 12 month period.

Ms Walsh made the point that significant support was being given to financial institutions however
the same could not be said of those facing homelessness.

"We are calling on the government to adopt this Homeowners Mortgage Support Scheme that will reduce monthly mortgage repayments for families that are struggling due to recent unemployment or a significant reduction in income," said Ms Walsh.

One of the suggestions made by Respond! was that families should be able to renegotiate
with their lender the value of their mortgage, taking into account current market value of the property. It was unclear from the Respond! statement if this meant changing the terms of the mortgage.

All borrowers applying to the scheme must provide proof of loss of income and show that they can meet 30 per cent of the monthly mortgage interest repayment owed on the mortgage.

The applicant must also adhere to their legal obligations regarding their mortgage. For example if a borrower has provided false information, then heshe are deemed ineligible from the scheme and
will face legal consequences. As for the lenders, they will receive incentives to create alternatives to repossessing homes.

According to Respond! their objective is to provide borrowers who have shown a commitment to repay their mortgage the opportunity to get a "new mortgage" with payments that are affordable today and sustainable over the lifetime of the mortgage.

Commenting on the possible reasons for the increase in mortgage arrears occuring in the past year, Ms Walsh said, "In the past 13 years, we have witnessed massive increases in personal indebtedness from 58% of disposable income in 1996; to 100 per cent in 2003; to an alarming 175 per cent in 2007. The provision of long-term mortgages, 100 per cent financing and looser income/loan ratios are some of the reasons for this."

Ms Walsh felt that if home owners who were in financial difficulties did not have their monthly repayments reduced to a "sustainable level" then Irish society would be affected in a negative manner.

"The scheme brings together borrowers, lenders and the government so that all stakeholders share in the cost of ensuring that home owners can afford their monthly mortgage payments and ultimately stay in their home," said Ms Walsh.

Who would avail of this type of scheme? According to Ms Walsh "the scheme would offer assistance to those who have experienced a recent drop in income or become unemployed as a result of the economic downturn."

Respond! have presented the details of the scheme to the Joint Oireachtas Committee on Finance and
the Public Service and the scheme includes the establishment of an Independent Arbitration Committee to oversee its operation. This committee would consist of a member of the legal profession, a banking professional and a consumer advocate.