HOMEOWNERS will only be protected from repossession under a new scheme if they can work out a deal on repayments.
A new promise from lenders to wait longer before they repossess homes was questioned last night after it emerged it would only apply in cases where some money was being paid towards the loan.
If the bank does not believe the borrower’s efforts are sufficient, then it can end the arrangement, critics of the new Irish Banking Federation (IBF) scheme have warned.
The IBF said it was looking to help customers who were facing genuine difficulties.
The 10 institutions involved are ACC Bank, AIB, Bank of Ireland, Bank of Scotland (Ireland), EBS Building Society, Irish Nationwide Building Society, KBC Bank Ireland, National Irish Bank, Permanent TSB and Ulster Bank.
Subprime lender Start Mortgages also pledged to match the scheme after fears early yesterday it would not be included.
However, the IBF stressed that any agreement between lenders and borrowers would have to be “mutually acceptable” and would be reviewed every six months.
Questioned
But Free Legal Advice Centres‘ director general Noeline Blackwell questioned the IBF promise.
Ms Blackwell said the new scheme would offer protection to some hard-pressed house owners, but she said the new arrangement was merely voluntary.
“Who will oversee this? The banks’ proposal depends on the borrower maintaining the goodwill of the bank,” she said.
“If the bank does not believe the borrower’s efforts are sufficient, they can end the arrangement unilaterally. A wider and more comprehensive solution is needed for borrowers.”
Under the scheme, the lenders have committed to reviewing cases where homeowners are struggling to meet repayments on a six-monthly basis, with no legal threat during this time. However, the new arrangements will only apply if the homeowner can work out a deal on repayments.
Yesterday, Start Mortgages, which takes more court cases for repossession of homes than any other lender, said it would sign up to the scheme, even though it is not part of the Irish Banking Federation.
“Start Mortgages is ineligible to be a member of the Irish Banking Federation, but it is nonetheless fully committed to the principles of this pledge — working with customers who are facing repayment difficulties in their principal private residence due to changed economic circumstances,” the subprime lender said in a statement.
“We believe that our current policies and procedures are in line with those described in this new pledge.”
The State-supported Money Advice and Budgeting Service (MABS) welcomed the statement of intent by the lenders. It added that one out of three people seeking its help were in trouble with mortgage repayments.
The two main banks — AIB and Bank of Ireland — have already signed up to a deal which stops them initiating legal moves to repossess a house for a year after homeowners get into arrears. And a new statutory code of conduct means other lenders must wait six months from the time the arrears first arise before beginning legal action for repossession.
Yesterday’s statement of intent from the lenders means the period of grace will be extended by at least another six months, if the customer enters into dialogue with the lender. If the customer sticks to the new repayment schedule, no legal action will be taken against them in relation to their mortgage.
Revelations
But Labour’s Ciaran Lynch said the pledge on mortgage repayments did not go far enough. He called for a new body to be set up to help those who can’t pay their mortgages.
Meanwhile, Fine Gael housing spokesman Terence Flanagan said the revelations in yesterday’s Irish Independent — that huge numbers of homeowners are being refused the mortgage interest relief supplement — meant that the Government would have to loosen qualifying conditions and include subprime lenders.
“The statistics are frightening, with 500 homeowners a month being refused assistance from the Government. This is a crisis situation which will only get worse in the current economic climate,” he said.