Credit: Independent.ie

People in deep mortgage arrears are not putting themselves forward for a State-backed scheme that allows them to stay in their homes as renters – because they are getting away with paying nothing, it is claimed.

Mortgage campaigner David Hall said the Government was behind on its target for the mortgage-to-rent scheme because homeowners in financial distress do not see any realistic risk that their homes will be repossessed.

The scheme means people do not have to leave their home, and they become renters instead, with most deals involving debt write-offs.

But just 223 mortgage-to-rent cases have been completed in the first six months of the year, according to figures posted on the website of the Housing Agency.

This is down from 280 mortgage-to-rent deals completed last year.

The Government’s Housing For All strategy commits to providing 1,000 mortgage-to-rent cases a year. However, there are around 14,000 residential mortgage accounts in arrears for five years or more.

Private company Home for Life and non-profit body iCare Housing, which is run by Mr Hall, completed 80pc of the mortgage-to-rent deals in the first three months of the year.

Mr Hall said it was hard to get people to sign up for mortgage to rent, while banks were not engaging with it while also not pushing for repossessions.

“There are virtually no repossession proceedings at the moment. So why would people in arrears be persuaded to give up ownership of their home to become renters when they are paying nothing?” he said.

He estimates up to 6,000 people in long-term arrears were paying nothing to the lenders, so are living rent free.

But Mr Hall said banks and those in long-term arrears were reluctant to do mortgage-to-rent deals. Most of the deals being done are with credit service firms that act for vulture funds.

Mr Hall said: “Trying to persuade someone to give up ownership of their home, to pay rent, when they are no longer in negative equity is very difficult. Many of these people have been paying nothing for 10 years.”

He said the fact that so many were in long-term arrears gave people a sense of security. About 26,000 residential mortgage accounts are in long-term arrears. “Why would someone come forward for mortgage to rent when they have been living in the home for free for 10 years?”

The latest Central Bank figures show 344 mortgage accounts in arrears entered legal proceedings in the last three months of last year.

“The majority of accounts in mortgage arrears are not currently subject to legal proceedings,” the Central Bank said in its last arrears statistics.

The cost of repossession proceedings, the length of time it takes, and the reluctance of courts to grant repossession orders meant banks shy away from taking proceedings.

Pepper and Start Mortgages, which services thousands of mortgages in arrears and is owned by vulture funds, are facilitating the most cases.

Home for Life chief executive Paul Cunningham said mainstream lenders were slow to take up the scheme, with 88pc of current deals being agreed by credit servicing firms.

He said: “The Government is supportive of the mortgage-to-rent scheme. In the Housing for All plan, the Department of Housing stated it had an objective to achieve 1,000 completions a year on average over the remaining term of the Government.

“We believe that target can be achieved if there is greater awareness of the scheme amongst those in long-term arrears, and great commitment from a wider number of mortgage lenders.”

A spokesperson for Housing Minister Darragh O’Brien said the scheme was demand-led and the take-up reflected the progress of individual borrowers through the Mortgage Arrears Resolution Process  and in certain cases, legal proceedings. These processes were affected by the effects of the Covid-19 pandemic and this was now being reflected in the cases which are coming forward in the scheme, the spokesperson said.

He said the department was working on a number of initiatives both internally and with the approved housing body (AHB) sector to improve their participation rate in the scheme “in order to assist the AHB sector to achieve this challenging target”.