Low-income home-buyers who got mortgages from Dublin City Council are almost €16 million in arrears on their loans, an increase of more than €10 million since the property crash.
Figures up to the end of March show almost half of the city council’s 2,588 mortgage holders are in arrears. The council has categorised one in 10 of these debtors as having “unsustainable loans” unlikely ever to be repaid.
Of the 251 unsustainable mortgage holders, 97 are facing repossession. The council has said it intends to repossess 25 properties this year, 12 of which have been abandoned by their owners.
The council has repossessed 93 homes through the courts to date, half of which were in the Dublin 11 area, including Finglas, west Ballymun and parts of Glasnevin. Almost a quarter were in the Ballyfermot area, with the remaining repossessions scattered throughout the city.
Dr Daithí Downey, deputy director of the Dublin Region Homeless Executive, said the council had to consider whether it could continue to operate as a “subprime lender”, when providing home loans to low-income households had resulted in such “negative outcomes” for both the borrowers and the council.
The council’s involvement in the mortgage market arose as a result of government policy to get low-income households on the property ladder.
Shared ownership
The most significant scheme was the shared ownership loan, introduced in 1991.
Under this scheme, buyers were given a low-interest loan from the council for part of the property and “rented” the remainder, but would acquire the full property by the end of the loan term.
Just over half of the city council loans are shared ownership, with annuity loans, which mainly relate to tenant purchase and affordable housing schemes, accounting for most of the remainder.
Of the 1,192 mortgage holders in arrears with the council, just over half have been behind on their payments for more than a year.
However, these 605 householders between them owe the vast bulk of the debts, at almost €14 million of the total €15.75 million arrears owed.
“ [It] begs the question for the future as to whether DCC should continue to approve subprime mortgage finance or should consider discontinuation of all such lending pending the effective resolution of current forbearance arrangements for its mortgage holders,” Dr Downey told councillors yesterday .
In addition to a potential exit from the market, the council’s housing department is considering a number of measures to deal with unsustainable mortgages, including debt-for-equity swaps, split mortgages, term extensions and voluntary surrender.
In 2007, the council collected 92 per cent of what it was due in housing loans. But last year it had a collection rate of less than 60 per cent.
In 2007 total arrears were just over €3 million, but in 2009 they had increased to almost €5.5 million. By 2012 they had topped €10 million and have now reached €15.75 million.
