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We could be repaying our mortgages into retirement - the verdict on the arrears crisis

The Finance Committee’s report on mortgage arrears is in – here’s what they say.

File photo: Banking inquiry release

YESTERDAY SAW THE publication of the Finance Committee’s report on mortgage arrears and the strategies that have been deployed so far to remedy the issue.

The report weighs in with a substantial 47 recommendations, with the Central Bank firmly in the crosshairs of the authors for seemingly giving the banks a free pass to count sending a legal letter as a sustainable solution.

However, that particular scolding was only the tip of the iceberg. At the press conference yesterday, four members of the Committee got into the nitty gritty of the report.

Here’s what they had to say.

‘Sustainable’ solutions may be just the opposite

Fianna Fail’s finance spokesman Michael McGrath put this ball in play early on, attacking the current definition of ‘sustainable’ solutions. He said that “the definition that’s there doesn’t mean a whole lot, and it just gives the bank a chance to define it whatever way they want”.

His sentiments were echoed by Independent TD Stephen Donnelly, who suggested that the entire process was skewed and needs to be broken up and begun again.

Referendum on Irish Banking Crisis Source: Sasko Lazarov/Photocall Ireland

We’ve got to start thinking about sustainability from the perspective of the borrower, ie the citizen, rather than from the perspective of the central bank or the banks.

Fine Gael’s Liam Twomey sent a warning shot across the bows of the lenders, saying “the banks have gone some way along this journey, but they need to come further. If they don’t the option is open to us to propose legislation.”

The Mortgage-to-Rent scheme is not working

Labour TD and committee chair Ciaran Lynch said that the numbers going through the much-vaunted Mortgage to Rent scheme are too low, with McGrath describing it as a “bureaucratic nightmare”.

The Cork South Central TD went on to warn against “complacency” that the crisis had peaked.

Fianna Fail Proposals for Budget Source: Sam Boal/Photocall Ireland

McGrath pointed out an over-reliance on arrears capitalisation as a solution, and a potential tracker mortgage time bomb in the future as borrowers transition into standard variable rate schemes or European interest rates climb.

People may have to pay mortgages past retirement

Lynch said that there is a significant cohort of people who are still heavily indebted despite approaching retirement age.

“What would be a vulnerable group” he explained, “would be people who bought their houses in the eighties and who substantially remortgaged during the 1990s and 2000s.”

The banks themselves do know that they have those people on their books

Arrears solutions vary by bank – and this is unfair

Sinn Fein’s finance spokesman Pearse Doherty said that it is unfair that the full armoury of potential solutions to mortgage arrears are not available to all borrowers in difficulty.

Sinn Fein Ard Fheis Source: Laura Hutton/Photocall Ireland

“It’s about making sure that all of the suite of options are available…debt write off should be an option.”

In a veiled reference to Bank of Ireland’s refusal to consider debt writedowns, the Donegal South-West TD said:

You cannot have a bank that was saved on behalf of the Irish people, by the Irish people, say that they’re not writing off debt when another bank says they will write off debt.

McGrath was on the same page, saying: “It is a case of Russian roulette…it’s not fair that borrowers are treated so differently depending on what bank they’re with.”

Sometimes positive equity can be a bad thing

Negative equity has stalked many of those who bought a home during the boom, but Ciaran Lynch warned that banks may start coming after those in positive equity, whose homes have gone up in value in the course of the recent recovery of the property market.

Banks, he warned, could be attracted to the properties that might promise a better return on the market than currently offered by homeowners in arrears.

The report is cognisant of the situation whereby properties are moving into positive equity and repossessions could become an attractive option for the banks.

Ultimately, it’s up to the top brass to implement the report

All parties present yesterday seemed pleased with their working, praising it as a product of non-partisan co-operation. The problem, they warned, would be getting it implemented.

“The big test” said Pearse Doherty “is whether the Government will introduce the regulations.”

It’s probably one of the first tests of the new cabinet to see where this will go in the weeks ahead.

McGrath sounded off in agreement, saying “The litmus test of this will be whether it becomes another report gathering dust in Government buildings. If it does then it will become a wasted exercise and a missed opportunity.”

Read: Finance Committee tells Central Bank – legal letters to crisis mortgages aren’t ‘sustainable’>

Read: ‘The entire system is rubbish’ – just 40 houses bought through mortgage-to-rent scheme>

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About the author:

Jack Horgan-Jones

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