Report Urges Halt On Repossessions

The current moratorium imposed on lending institutions from repossessing homes of people who have defaulted on their mortgage payments needs to be extended.

A report published by the Oireachtas Committee on Social and Family Affairs has found from this should be increased from 12 to 24 months,

This is one of more than 20 recommendations contained in a report which examines the high level of debt in Irish society, considers how best to protect those at risk of defaulting on mortgages and advises on how to manage high levels of personal debt caused by the economic downturn.

Committee member and report co-author Olwyn Enright TD said: "The rapid decline in the economy and the unfortunate loss of employment has now fundamentally changed the ability of people to repay their debts. Accordingly, there must be changes in policy and practices to help people cope with this new reality.

"Mortgage holders are particularly vulnerable, with an estimated 35,000 people now in arrears and repossession orders soaring by almost 100% last year.

"For this reason, as a first step, the Committee is recommending that the current arrangement which obliges the capitalised banks (BOI and AIB) to wait 12 months before it can initiate legal action against homeowners who fall into arrears, be extended to all the financial institutions.

"However, ultimately the Committee believes that twelve months is not an adequate timeframe and advises that the Government immediately work with the banks to extend the moratorium to two years," he continued.

"This measure will give homeowners the much needed breathing space to try and arrange their financial affairs and will mean they won't loose their homes," he said.

In addition, when homeowners do encounter genuine difficulty in meeting mortgage repayments there needs to be a strong incentive for them to engage with the lender in order to reach some accommodation.

For this reason we are recommending that those who do avail of the Financial Regulator's Code of Practice do not have their credit rating damaged.

To inform the report, the Committee conducted extensive research and held hearings with a range of agencies including; Irish Banking Federation, Monetary Advice and Budgeting Service (MABS), Central Bank, Community Welfare Officers and Irish Financial Service Regulatory Authority.

Some of the other key recommendations of the report include a need for a radical overhaul of the Mortgage Interest Supplement Scheme. There is currently a lack of consistency and fairness in administering the programme.

They also said special assistance should be provided for those who are in mortgage arrears.

One such scheme, operated in Scotland, allows the State to take a financial stake in a home at risk of repossession. The State makes financial payments to the lender but the mortgage holder retains ownership.

The Financial Regulator needs to draw up a short, readable document on the rights of mortgage holders in difficulty and the options open to them.

Where lending practices have been reckless, responsibility should not rest with the borrower but liability proportioned to the financial institution.

Utility companies should refer customers to MABS prior to disconnection.

An alternative dispute resolution system should also be developed so that borrowers can avoid the costly and intimidating adversarial court system.

The report is entitled 'High Level of Indebtedness in Irish Society'.

(BMcC/GK)