Independent TD Mattie McGrath has said he will be seeking immediate cross party support for a private members bill aimed at establishing an off-balance sheet National Housing Co-Operative whose sole intention will be keeping families in mortgage distress in their homes. The National Housing Co-Op Bill 2017, which has already been submitted to the office of the Ceann Comhairle by Deputy McGrath and Fianna Fail’s John McGuinness, has the backing of Fr Peter McVerry, and The Right2Homes organisation. Commenting on the Bill Deputy Mattie McGrath made the following comment:
“The time for piecemeal and clearly ineffective ‘solutions’ to the mortgage crisis is over.
We need a radical approach that will generate significant and sustainable progress in the fastest possible time.
The Bill I have submitted seeks to establish a new stand alone entity – The National Housing Co-Operative Society- that will acquire all Principal Dwelling House Loans (PDH’s) and all Buy To Let Residential Loans (BTL) in arrears over 360 days.
We are aware that changes to legislation may be required and that the government may have to seek some flexibility with respect to the existing European Central Bank fiscal rules; but all of this is perfectly achievable if the political will is there.
What we have provided for in this Bill is a structured, legally sound, and ambitious pathway that has the potential to fundamentally reform our approach to mortgage distress and mortgage arrears.
Tens of thousands of families are in stark and urgent need of this kind of ambitious approach, an approach that we are hoping will receive full cross-party support,” concluded Deputy McGrath.
The National Housing Co-Operative Bill 2017
The Current Position
A watershed moment in the Distressed Irish Residential Mortgage Crisis, is upon us, for a variety of reasons, with more than one hundred thousand Irish residential mortgages in various levels of arrears.
In excess of 6% of total residential mortgages in Ireland are now in the hands of so-called “Vulture Funds.” Contrary to what we are led to believe, there is no economic, social or moral benefit in having “vulture funds” operating in Ireland and their presence should be discouraged as soon as possible.
As the economy moves through recovery the fact is, this rising tide is simply not lifting all boats. Because of the sheer numbers of citizens affected, the medium to long-term effects cannot be measured in terms of moral and social impacts, although we are seeing increases in reported cases of alcohol/drug abuse, suicide, mental illness and marital/family breakdown.
Every occupant of an Irish Residential Dwelling affected, whether they are a Mortgagor or a Tenant is in the firing line of the stated intentions of the Banks under increasing pressure from the ECB, and the “vulture funds” who will ultimately control these properties.
WHAT SIDE ARE YOU ON?
THE COMMON GOOD or THE VULTURE FUNDS
Several adjustments to existing legislation are proposed to enhance the ability of Courts to deal with applications of Possession and Sale of property securing default Loans, in a fairer, more transparent way and to eliminate the practice of bundling large numbers of loans into portfolios for sale to “Vulture Funds”, while at the same time ensuring where an order for sale of a property securing a defaulted loan is managed to ensure the best possible outcome is achieved for both the Lender and the Borrower.
Additionally, increased application of relevant EU Law is proposed to ensure existing protections for Borrowers are recognised and considered by the Courts.
The National Housing Co-Operative Society
The National Housing Co-Operative Bill 2017 proposes a potentially all-encompassing solution to the issue of Residential Dwelling Mortgage Arrears regardless of whether the underlying security for such loans is a Family Home or a Buy To Let investment property.
The controversial issues of “Strategic Defaulters” and/or “Moral Hazard” shall be dealt with in detail, and in truth, the real “Moral Hazard” is if we simple do nothing.
IF NOT US – THEN WHO?
IF NOT NOW – THEN WHEN?
So, the proposal contained in this Bill is as follows:
- Establish a new standalone Entity – The National Housing Co-Operative Society
- Acquire ALL Principal Dwelling House Loans (PDH’s) and ALL Buy To Let Residential Loans (BTL) in arrears over 360 days.
- The figures are as follows:Number of accounts: 59,000
- Balances outstanding: €13.9 Billion.
- (Figures are per Central Bank at 31/12/2016 issued 16/3/2017.)
- Purchase Price of Mortgage Book: These firms would receive the price paid by them to the Banks/Building Societyb). From Banks.
- Based on Balances outstanding at 31/12/2016 minus accumulated Bad Debt Provisions advised to Central Bank PRIOR to 31/12/2016 verified on a case by case examination covering all accounts in the specific categories of accounts being acquired. All additional costs incurred and debited against customer accounts to be deducted from sale price.
- with an appropriate adjustment based upon cost of funding and time in existence.
- a). From Vulture Funds.
- Establishing the money value of the purchase:Number of accounts Balance O/S Estimated Written down value @50% Number of accounts Balance O/S Estimated written down value@30% Rounded to a purchase cost of €5.00 B. FUNDING ARRANGEMENTSAt current available interest rates the cost of borrowing this sum should not exceed 2% fixed.SECURITY FOR THIS PROPERTY BONDNote: Essential as a minimum that the “Buy-In-Values” be achieved in order to provide a margin of security. Hence NO NEGOTIATION over price, unless at a lower value. EFFECT ON BANKS AND VULTURE FUNDS.
- Lest there be concern about the impact of this transfer from the Banks and Vulture Fund’s on their respective Balance Sheets the following would apply.
- This will allow the Property Bond to stand alone and be without Government Guarantee and thus be Off Balance Sheet.
- The borrowings under this arrangement to be secured by a charge over the properties being acquired from Banks and Vulture Funds.
- NTMA to be mandated to negotiate on behalf of the Co-Op, but not to underwrite in any way, a Secured Property Bond to raise the total needed through the ECB/EIB with a combination of 15 year and 20-year fixed interest rates.
- The final cost of the purchase would be established after examination of figures in Central Bank and the Lending institutions in order to cross check for accuracy of Bad Debt Provision figures. The exercise would be completed on a no profit no extra loss to Banks i.e. neutral in their respective Balance Sheets.
- Total: 59K €13.9 B. €4.63 B.
- 47K €11.6 B. €3.48B.
- Accounts +24 months
- 12K €2.3 B. €1.15 B.
- Accounts +12 months
- No Profit or Loss to V.F’s. They exit the Irish Market early.
- Banks would receive a sum calculated as the lesser of 4 (b) or 5 above.
- Banks would not incur new losses because of this exercise.
- Neither would they make any profit write-back as a consequence of any rise in property values.
- Banks would receive a big profit boost arising from the reduction in the cost of managing 59,000 accounts with all the attendant internal costs being eliminated. The same comment would apply to the mountain of external costs being incurred – Legal/Solicitors costs and expenses etc…
- A very significant infusion of new free capital would accrue to the Banks as a result of this sale. It would also assist Banks to come more quickly into accord with new ECB requirements.
- The New Capital should be “ring fenced” by Government to require Banks to provide low interest rate funding for New Social & Affordable Houses to be built to relieve the pressure on the lower end of the housing market and other necessary socially desirable projects, which are not the subject of this document.
For No Fault – Defaulters and for Judgment Mortgagors whose homes are about to be repossessed, this Bill rolls out the Mortgage To Rent option on an industrial scale.
The draft Bill clearly describes the legal architecture but, as a legal text, is still a work in progress.
LET’S KEEP PEOPLE IN THEIR HOMES
ITS UP TO YOU
THE TIME IS NOW
“Níl aon tinteán mar do thinteán féin”