New guide aims to help borrowers in mortgage distress

A guide aimed at helping borrowers in mortgage distress and those facing eviction to fight for their rights has been published by the Centre for Housing Law, Rights and Policy at NUI Galway.

The authors say the guide, published jointly with Open Society Foundations' Abusive Lending Practices Project, could also be used by anyone improperly denied or forced off a tracker mortgage and those given incorrect interest calculations.

A decade after the crash and with one in 10 mortgages in arrears, the Republic has one of the highest level of mortgage defaults in the world. According to Central Bank statistics, more than 72,000 mortgages are in arrears with over 31,000 of these in arrears for over two years, putting them at far greater risk of repossession.

The laws outlined in the new guide oblige the courts to assess the fairness of mortgage terms under the EU Unfair Contract Terms Directive. They should also assess the human rights impact of an eviction on all occupants in the home, including children, older people and people with disabilities.

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Although the requirements are not new, they are not being fully applied in Irish courts, according to the Irish and international legal experts behind the guide.

Dr Padraic Kenna, director of the Centre for Housing Law, Rights and Policy at NUI Galway and one of the authors of the guide, said it “sets out simply and clearly how existing EU law should be routinely applied to determine, firstly, whether a mortgage contract term is fair and, secondly, whether a possession or eviction notice is a proportional response to any breach of a mortgage term.

“By applying these EU laws, Irish courts and lawyers can really assist their clients and vulnerable defendants.”

In tandem with its publication , a group of facilitators is being trained by Community Action Network, an NGO with housing rights expertise. The facilitators will be available to help promote the guide to people in mortgage distress and to service agencies who may be working with them.

They will help people understand the information in the guide, but will not provide legal advice or representation.

It has been created as part of the Open Society Foundations’ Abusive Lending Practices Project, in conjunction with the Centre for Housing Law, Rights and Policy at NUI Galway, and a group of Irish lawyers and advocates.

Case Study

What follows is an extreme example of an Unfair Contract Term. The EU Charter of Fundamental Rights can also be applied with regard to the right to a home and the rights of the elderly.

Paul lives in the west of Ireland, and he and his wife obtained a mortgage from a lender for £30,000 in 1997 to fund their child's university studies. They had lived in their home for 21 years and only owed £3,000 on their initial mortgage. Paul admits that he did not have a good credit rating and had difficulty getting a loan.

He went to a small unfamiliar lender who agreed to the remortgage. He thought all of his prayers had been answered. Looking back now he says “these guys preyed on people like me - cash strapped and desperate”.

The lender initiated possession proceedings against the couple in 2013. It said the couple had agreed to pay monthly amounts of £513 for 15 years at an interest rate of over 29 per cent. The couple allege that at the time of entering into the loan, they did not receive a clear explanation of the operation of the interest clause.

The only matter explained was the monthly repayments. They were told that the interest was 2 per cent but it was actually 2 per cent per month - something they say they were not made aware of.

As of July 2016, the total amount owing resulting from the initial £30,000 loan was over €230,000. At that point, the couple had already paid back over €80,000.

While there is no repossession order in this case. Paul and his wife have been carrying the burden themselves and none of his family are aware of the stress they have been living with. He doesn’t want to tell anyone. He is elderly and has grandchildren and just wants to let their own family enjoy themselves and get on with their lives without burdening them.