Coveney announces significant changes to the Mortgage to Rent Scheme that will see a major increase in the numbers of households benefitting
Minister for Housing, Planning, Community and Local Government, Simon Coveney, T.D., today (8 February 2017) announced significant changes to the Mortgage to Rent Scheme that will see a major increase in the numbers of households benefitting. It is important to note that availing of this Scheme is a matter of choice for the mortgage holder. In addition, households who benefit from Mortgage to Rent become social housing tenants, with the same security of tenure and differential rents based on household ability to pay.
Speaking today Minister Coveney said “I am pleased to be able to publish the Review and set out a series of actions and amendments that will make Mortgage to Rent (MTR) quicker, more transparent, easier to navigate for borrowers and ultimately, more accessible to more households in mortgage distress. Crucially, the changes will also dramatically increase the numbers of households availing of the scheme”.
The Minister acknowledged that mortgage arrears can be extremely distressing for families. At the extreme end of mortgage arrears where household may be facing the trauma of losing their homes, mortgage to rent is intended as the solution to take that trauma away and allow households remain in their family homes.
Recent Central Bank statistics on mortgage arrears show that the level of arrears is declining. But the Government is concerned that there remains a significant number of borrowers in long-term mortgage distress who have no prospect of a significant change in their circumstances in the foreseeable future. The scheme so far has not had the capacity to deliver significant scale or volumes of transactions. 217 transactions have been completed to date with a further 635 reaching conclusion. Up to now, the mortgage to rent scheme has relied on single transactions by Approved Housing Bodies (AHBs) buying lenders properties that have been voluntarily surrendered by eligible borrowers.
The Minister said “I want to give Mortgage to Rent a shot in the arm by testing alternative funding models that can deliver volume. The Housing Agency will work with a number of financial entities who have come forward with an interest in working with the MTR scheme to progress a minimum of 200 units based on these new arrangements. The objective is to see how we can structure the scheme to benefit a greater number of households. The new funding arrangements, increased flexibility and expanded scope in terms of eligible properties will enable us to do that'
The Review represents the completion of an early action in the Government Rebuilding Ireland: Action Plan for Housing and Homelessness. It follows broad consultation on the operation of the current scheme which was originally developed in 2011.
As part of the amendments that will be made, a more formal communication protocol between the lenders and borrowers is being proposed; several changes to the eligibility criteria of the scheme are being made which will mean more households in rural areas, in particular, will be eligible; conveyancing, valuation and repairs process are all being refined; and a significant borrower, lender and local authority awareness raising and training programme are being initiated. Furthermore, the key role of the Abhaile Service, the Insolvency Service and the Money Advice and Budgetary Service (MABS) are all being harnessed as critical to the successful delivery of the scheme.
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Notes to Editors:
The Approved Housing Body Mortgage to Rent Scheme for borrowers of private commercial lending institutions was developed as part of the implementation of the recommendations of the Keane Report on Mortgage Arrears in 2011 and is one part of a concerted effort across the whole of Government to tackle the mortgage arrears crisis. The scheme is part of the overall suite of social housing options and an important part of the mortgage arrears resolution process.
Mortgage to Rent (MTR) targets the most acute mortgage arrears cases where a situation is unsustainable and where there is little or no prospect of a significant change in the householder’s circumstances in the foreseeable future. Under the scheme, a householder with an unsustainable mortgage goes from being a homeowner to becoming a social housing tenant of an Approved Housing Body (AHB). They voluntarily surrender their property to their lender who, in turn, sells the property to an AHB. The AHB becomes the landlord and the household gets to remain in the family home.
The household must be eligible for social housing and the property must meet the appropriate standards for social housing. Householders are able to buy out the property at market value after a period of 5 years. However, in reality, their circumstances would have to have changed very radically in that period for them to be in a position to access mortgage finance.
The key changes to the scheme identified in the review are:
• Lenders will be required to formally communicate with borrowers as to why they are not suitable for the scheme.
• Flexibility will be provided in relation to the size of properties which qualify for the scheme. In practical terms, this means that an assessment of the property size suitable to a particular household will allow for a maximum of two additional bedrooms in the property above the actual needs of the household, with the property still being considered eligible.
• The property price thresholds for eligibility under the scheme will be increased in line with the acquisition thresholds for social housing generally. The threshold for a house in Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow is being increased to €365,000 while the threshold for an apartment / townhouse in these areas is being increased to €310,000. For the rest of the country, the threshold for a house is being increased to €280,000 and for an apartment / townhouse to €210,000. The most significant increases are in the more rural locations which is consistent with market findings. These thresholds will be subject to regular reviews taking account of the market at the time and will continue remain in line with the acquisition thresholds for social housing generally.
• A significant change if that the application by the borrower for Social Housing Support will be made by the borrower to the local authority prior to submitting the MTR application to the Housing Agency. This change means that the borrower will know from an early stage of SHS eligibility or not, and if not will need to focus attention on other options to deal with their debt.
• New property valuation procedures will be put in place; the current valuation process is not operating as it should be. A new communications protocol for MTR will be agreed and implemented to cover communications between all stakeholders and at all stages of the MTR process.
• The process by which the necessary repairs to properties are costed will be revised to speed up the process of agreement between all parties.
• Delays arising at conveyancing stage and how these might be addressed will be explored at a forum to be attended by Approved Housing Bodies and lenders in Q1 2017.
• A key objective of the actions – and a measure of success – will be reduction in the average length of time for the completion of a transaction will reduce from between 12-18 months currently to less than 9 months.
• Increasing the visibility and familiarity of the scheme among borrowers is a critical objective. The new Abhaile Service and MABS will be important in that context. There are specific actions focused on engaging those agencies and their nationwide support services.
• A Step by Step Guide for borrowers will be developed. The guide will clearly set out how borrowers can benefit from the scheme, how they can access it, what to expect from the various bodies involved, and how long the process should take.