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Government scheme to help families in mortgage distress 'fails 70% who turn to it'

Just 30% of those who engaged with Abhaile’s financial advice have a solution in place or are on track for one.

ADVOCATES WORKING WITH families in mortgage distress have said results from the first two years of the government’s arrears assistance scheme indicate it is not working. 

The Abhaile scheme works with borrowers to deliver insolvency arrangements, alternative repayment plans, or other arrangements such as debt-for-equity deals or mortgage-to-rent.

As of July 2018, over 30% of the 11,695 borrowers who engaged with Abhaile for financial advice during the first two years of the scheme either “have a solution in place or on trial, or will have within one year of taking up advice”.

David Hall, CEO of the Irish Mortgage Holders Organisation accused the government of trying to put a positive spin on the figures when the reality is that the scheme “has not worked for 70% of those who engaged”. 

“The figure of the 11,000 who engaged blows the bank-lovers and wafflers out of the water with their comments about people who are not willing to engage. This shows a large number of people – desperate people – did engage,” he said.

“But just because they engaged doesn’t mean they got a solution or that they will get one. 

The majority of people coming forward through Abhaile don’t have any money, they can’t afford a restructure. What are they going to do with the 70% of people that the scheme can’t help? In any other country, with that level of engagement the government would be sitting down to find out what worked and what didn’t and why can they only help 30%. 

Hall said the government should publish more complete data to show how many of these arrangements will keep people in their homes in the longterm. 

When it comes to borrowers who have engaged but do not have a solution in place, 53% are still in their homes. Just 16% of borrowers who received advice initially are no longer engaging with the scheme.

Possession proceedings

The main function of the scheme is to provide vouchers to distressed borrowers for a consultation with a financial adviser, personal insolvency practitioner (Pip) or a solicitor.

Abhaile does not provide in-court legal representation, though duty solicitors are available at possession proceedings to speak beforehand with borrowers. They can not, however, speak for the borrower in front of the registrar or judge which means the debtor still has to represent themselves against a lender with a full legal team.

Today the Community Action Network (Can) said the system where people can avail of at most two consultations with a solicitor is “futile against the legal strength of banks and lending institutions”.

“Put simply, Abhaile is not working for people who are trying to hold onto their family homes,” said Cecilia Forrestal of CAN.

It may be well meaning, but by its own admission, its failing 70% of people who turn to it. In reality, Abhaile is largely a tick-boxing exercise – something that government can say it’s doing for people, when in fact, its support can only be minimal and largely ineffective against the legal representation and persistence of banks.

Personal insolvency

One area that the government hailed as a success today is the personal insolvency process, with 95% of arrangements negotiated under the scheme keeping borrowers in their homes.

Abhaile provides for financial advice and negotiation assistance from a personal insolvency practitioner (Pip) and legal aid for a court review if a creditor has refused a reasonable proposal.

In 64% of court review cases legally aided by Abhaile during its second year, the court decided to impose the personal insolvency arrangement proposed by the borrower, which had been rejected by the creditors.

In one case shared in the report today, a separated parent was no longer receiving contributions to the mortgage repayments from their former partner. 

The borrower availed of a free consultation with a Pip who proposed a personal insolvency arrangement (PIA) to her creditor.

The requisite proportion of her creditors did not support the arrangement so the Pip applied for a court review on her behalf. A review involves the court evaluating the fairness of the proposal to all.

In this case the court approved the arrangement which resulted in a write down of over €80,000 on the borrower’s mortgage arrears and her other debts were dealt with under the arrangement. The borrower and her children were able to stay in their home.

The reports today also state that 86% of the solutions achieved by dedicated mortgage arrears advisers under the scheme enable borrowers to remain in their homes.

Speaking today as he launched reports, Justice Minister Charlie Flanagan said it is “now delivering real, successful solutions for borrowers struggling to pay their mortgage arrears”.

“I am particularly pleased to see that Abhaile is delivering results even for borrowers in the more challenging levels of arrears, who are those most at risk.

“Abhaile is undoubtedly making an important contribution to the drop in arrears for this worst-affected category and is helping those who fell into arrears due to loss of earnings, illness or family separation.”

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