A new bill in Ireland would widen a scheme allowing mortgage holders in long-term arrears to stay in their homes to include a co-operative solution.
Ireland operates a mortgage-to-rent scheme for struggling home owners, with strict criteria. Under the new bill, written by Master of the High Court Edmund Honohan with input from academics and legal experts, this solution would be widened to include non-profit housing providers such as housing co-ops.
The National Housing Co-operative and Fair Mortgage Bill, which was presented to Ireland’s main parties on 7 March, would allow a new housing co-op to use state funds to buy homes at risk of repossession, handing the property to a non-profit housing provider who would then rent it back to the occupants, allowing them to remain there.
Under the new law, the co-op would have the powers to acquire, manage, rent or sell distressed mortgages, enabling occupants to avail of the mortgage-to-rent model. The legislation would also allow the co-operative to issue a compulsory purchase order if the offer to buy the mortgage at a written-down price is rejected by the bank.
The co-op would be exempt from Stamp Duty while the profit it generates would be reinvested in affordable housing projects.
Master Honohan’s bill argues that the right of the owner of mortgage to recover a property is in conflict with the rights of occupants to fair treatment where non-payment is for reasons outside their control.
It also points to “an acute shortage of alternative accommodation”, and the fact that insolvency processes tend to result in the sale of the debtor’s home.
Supporters of the bill include Right2Homes, an organisation working to prevent bank repossessions of Irish family homes. Co-founder Brian Reilly says the approach is different from the traditional model of housing co-ops.
He says the co-op would be about keeping people in their homes, not building new ones. Every adult resident of a home purchased by the co-op would become a member. They would have to abide by co-op principles but could also participate in the management of the co-op’s property.
Mr Reilly added: “The overall objective of this carefully crafted bill is to help protect tens of thousands of Irish families, north and south of the border, from the feckless sale of billions of euros worth of distressed home mortgages to vulture funds, by bailed-out Irish and UK banks, regardless of the crippling human and social impact of such immoral actions.”
According to Right2Homes, 6% of total residential mortgages in Ireland are now in the hands of these vulture funds.
Last week the Irish government agreed to support Fianna Fáil’s bill (Republican Party) to regulate vulture funds. Finance minister Paschal Donohoe also said the Central Bank would review their code of conduct for how financial institutions deal with those unable to pay their mortgages. The bill is currently not being backed by the government but some of the opposition parties expressed support for it.
Earlier this year Permanent TSB, a bank 75% owned by the state, announced it would sell off a €4bn portfolio loan book, which includes mortgages. The decision is likely to affect 20,000 family loans.