It has been six years since the Mortgage to Rent Scheme was introduced by the Irish Government. We review its progress so far and how recently implemented Government actions can help to streamline the process and increase the number of lenders and borrowers availing of the scheme.
What is the MTR Scheme?
Under the MTR Scheme, borrowers who are in mortgage arrears go from being a homeowner to becoming a social housing tenant of an Approved Housing Body, or AHB. The property is sold to the AHB which in turn leases the property back to the borrowers.
The MTR Scheme is administered by the Housing Agency, on behalf of the Department of Housing, Planning and Local Government. Funding for the Scheme is provided through:
- Capital advanced funding through the Capital Advance Leasing Facility (CALF)
- The AHB’s own finance, and/or
- A payment and availability agreement between the AHB and the relevant local authority.
In order to qualify for the MTR scheme, borrowers must:
- Complete the Mortgage Arrears Resolution Process (MARP) with the lender
- Be eligible for Social Housing Support in the local authority in whose area the house is located
- Not own any other property
- Be living in a property that suits the borrower(s) needs
- Not have cash assets worth over €20,000
In addition to these criteria, the property must be of a value no more than €365,000 for a house and €310,000 for an apartment or townhouse in the areas of Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway. The maximum values for the remainder of the country are €280,000 for a house and €215,000 for an apartment or townhouse.
The borrower(s)’ income must not exceed €25,000, €30,000 or €35,000 a year, depending on what part of the country they live in. These income thresholds are subject to additional allowances for children.
Finally, borrowers must also voluntarily surrender possession of their property to their mortgage lender, who then immediately sells it to an AHB. A Tenancy Agreement is then entered into between the borrowers and the AHB.
Benefits of the scheme to the borrowers
- It offers the borrowers security of tenure
- The borrowers pays an income-based affordable rent to the AHB
- The borrowers have an option of buying back the property after a five year period at the same value the property was sold for
- The proceeds of sale will redeem the mortgage debt and in some instances, the residual debt is written off by the lender
By December 2016, a total of 217 MTR Scheme cases had completed. This was attributed, in part, to the number of stakeholders involved, which led to a protracted process. Other factors attributed to the slow uptake were a lack of understanding and awareness of the Scheme. The actions proposed by the Government’s “Rebuilding Ireland”- Action Plan for Housing and Homelessness are welcome initiatives designed to benefit both borrowers and lenders. The broadening of the eligibility of properties in turn offers an opportunity for acquirers of large loan portfolios to participate in the MTR Scheme.
The MTR scheme offers a good solution to a complex problem. At the recent announcement of the National Housing Co-Operative and Fair Mortgage Bill 2018, Mr. Edward Holohan, Master of The High Court, endorsed the broadening of the eligibility of the scheme to include ethically funded non-profit housing providers that are outside the public sector.
The broadening of the eligibility of the scheme, particularly the option for borrowers to buy back their homes, together with the streamlining of the process are all welcome initiatives, which in turn should increase the number of borrowers and lenders participating in the scheme.