‘Disastrous sub-prime mortgage sector needs dedicated government action’ – says Cork TD

4 January 2016
By Tom Collins

13,000 sub-prime mortgages in arrears for more than two years

Carrigaline, Co Cork based TD Michael McGrath is also Fianna Fail’s Finance spokesman

Fianna Fáil Finance Spokesperson Michael McGrath TD has described as inexcusable the Government’s complete failure to take action to deal with the spiralling arrears crisis in the sub-prime mortgage market, noting that the owners of these loans are now amongst the most aggressive in the market at seeking court ordered repossession.

New figures provided by the Central Bank indicate that 20,338 mortgage accounts issued by sub-prime lenders were in arrears of more than 90 days at end-September 2015. This compares to 19,935 at the end of December 2014. The sector now accounts for 22.5% of all residential mortgages in arrears more than 90 days compared to 15.5% a year previously.

In recent years, there have been several loan books sold in Ireland. 47,461 mortgages are now in the hands of non-bank lenders and vulture funds. GE Money disposed of its subprime mortgages to Pepper in 2012. Among the other buyers of mortgage books was US private equity fund Tanager who bought 2,000 distressed home loans from Bank of Scotland Ireland. Permanent TSB sold around 2,200 home loans to Mars Capital while the IBRC liquidation also saw loans originally issued by Irish Nationwide sold off to various vulture funds.

Deputy McGrath stated, “The situation in relation to mortgages issued by sub-prime lenders is absolutely disastrous. While the mortgage arrears crisis generally has shown some signs of easing, the trend in relation to these mortgages has been steadily deteriorating in the face of complete indifference from the government.

“It is clear from court reports that sub-prime lenders account for a disproportionate level of legal action being initiated in many Circuit Courts. The fact that 61% of the outstanding balance on these mortgages are in arrears is of huge concern. In many ways, this is not surprising given the very high interest rates and income multiples associated with these loans.

“Most of the originators of these loans have now sold them on. In my view there is a clear need for a specific response to the problems of this sector including clear targets for resolution measures.

“Fianna Fáil is putting forward 3 proposals to tackle this issue:

Extend the Mortgage Arrears Resolution Targets to the sector. Currently, the targets only apply to the 6 main banks operating in the State.
Establish a dedicated mortgage to rent scheme targeting this group of loans which would potentially prevent thousands of families from being evicted from their homes.
Require the Central Bank to publish a specific report on how the current owners of these loans are complying with the Code of Conduct on Mortgage Arrears. Significant fines should be imposed in cases where breaches of the Code take place.

“This issue is now reaching a crisis point and unless action is taken we will be facing a massive social problem.”

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