An Irish company has secured €100 million in funding to buy up distressed mortgage loans with a view to keeping people in their homes on a sale-and-leaseback basis.
Arizun said its new “Stay in Your Home” scheme provides a way out of mortgage arrears for middle-income earners who do not qualify for Government support.
It would see the borrowers surrender ownership of the home in exchange for having their borrowings written off and a guaranteed lease at what the company calls a reasonable market rate.
Within the first six years of their tenancy, they would also be given the option of repurchasing their home with a 40 per cent share in any capital appreciation to go towards their new mortgage deposit.
Arizun said it had secured up to €100 million in funding from UK investment fund LCM Partners for the scheme.
It also confirmed it has been in negotiations with various lenders here about the viability of its proposals, which are likely to involve banks selling the loans at a discount and writing off the shortfalls.
“We have been in touch with some of the banks and have met with a positive response. Arizun will buy the mortgage from the bank and write off the mortgage debt plus arrears,” Arizun director Cathal O’Leary said.
Tenancy agreement
On the prospect of participants being unable to pay the agreed market rate, Mr O'Leary said the tenancy agreement would be like any other and disputes would be subject to the Private Residential Tenancies Board process.
“Arizun will work to find a solution and if necessary assist the client in applying for housing assistance payment (HAP) or transferring to a mortgage-to-rent scheme. Our whole concept is to try to keep people staying in their home,” he said.
About 28,000 mortgages are in arrears of two years or more but most do not qualify for the Government’s “mortgage-to-rent” scheme, which is available to people earning less than €42,000 per annum.
Family focus
Arizun , which is domiciled in Ireland and regulated by the Central Bank of Ireland, said it differed from other funds in having a long-term focus and would earn income from managing the portfolio of properties.
The company said its scheme was specifically directed at families with large mortgage arrears but with no opportunity to receive Government support.
It warned that while house repossessions to date had been low, “this will certainly change with the increase in sales of portfolios of distressed mortgages from banks that are under direction to get their balance sheets cleaned up”.
Consumer advocate Brendan Burgess gave a cautious welcome to the scheme but questioned whether distressed borrowers could afford to pay market rents.
“If someone can afford to pay the market rent on their home, then that would be enough to be able to reach an agreement to reschedule their mortgage,” he said. “ So they should not be selling their house to rent it back as market rents in Ireland are much higher than the mortgage costs, and they lose ownership of their home.”
