Distressed mortgage scheme could cost Cork City Council millions

Distressed mortgage scheme could cost Cork City Council millions

A GOVERNMENT-backed scheme that allows the holders of distressed mortgages to stay in their homes could cost Cork City Council hundreds of millions, it has been warned.

Central Bank figures show more than 2,000 homeowners are in mortgage arrears in Cork but only 26 households have availed of the Government’s Mortgage to Rent Scheme — which allows approved housing bodies to buy the homes and lease them back to local authorities who are then charged rent at 95% of the current market value for 25 years.

A Government-approved mortgage to rent provider Home For Life (HFL) is leading a drive to increase the numbers taking up the scheme.

HFL delivered a presentation to councillors in Cork recently and the body says it can come up with a solution in many cases of serious mortgage arrears.

However, Solidarity Councillor Fiona Ryan estimates if just a quarter of people in mortgage arrears in Cork take up the scheme, the Council would have to pay out almost €200m over the next three decades.

“I did the maths on this and if a quarter of all mortgages in arrears take up this scheme, it would cost €195m which the Council would have to pay over 25 years at current market rate.

“Because of the desperation that we have to very quickly assist some of the most struggling aspects of society and because local authorities are hamstrung in terms of how they can intervene to solve it, public money is just being thrown into private hands and it’s not sustainable.

“Current market rates are wildly inflated. The Council will get rent at social housing rates which are 15% of household income so the positive is that the percentage of income increases once the house expands, kids grow up and start working, etc.

“We’re already having problems with the Housing Assistance Payment (HAP),” added Ms Ryan. “That was supposed to be an emergency stop measure but it has become a solidified part of the social housing programme even though it’s private tenancies.

“It seems we are doing anything thing besides what’s necessary, which is mass house building.”

Worker’s Party representative Ted Tynan said the plans don’t represent value for public money.

“While [HFL’s] plans are quite good in helping people out with arrears on their mortgage, they will rent the houses for 25 years at a rate of 95% of the market value.

“The amount of money drawn down from public funds to pay massive rates for these homes is not sustainable. It’s a massive drain on resources and that money should be pumped into public housing.

“These are huge sums of money,” he added.

Cork City Council director of housing, Brian Geaney, said the key requirement of the scheme is that people don’t have to leave their own homes which banks would have otherwise repossessed.

HFL describes itself as a government-sanctioned private operator which is spearheading a drive to enable mortgage holders in unsustainable debt to stay in their homes debt-free as long-term tenants of their local authority.

Under the scheme, a property is sold to HFL and then leased back to the State through the local authority which, in turn, sublets the house or apartment back to the homeowner.

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