Lenders raise concerns over mortgage-to-rent scheme turmoil

A number of lenders expressed concern over disruption to a State scheme to keep distressed borrowers in their homes as renters, amid issues with the standard of required repairs carried out on properties.

Under the mortgage-to-rent (MTR) scheme, defaulting borrowers can stay in their home as a renter after surrendering ownership of the property to their mortgage lender. The local authority collects rent as a landlord when the lender sells the properties to providers signed up to the scheme. Those providers agree to carry out any repairs to bring the homes up to required council standards.

Late last year the Housing Agency halted issuing any new agreements for lease to the scheme’s largest provider, Home for Life (HFL), due to concerns over the standard of repairs carried out.

Claire Feeney, Housing Agency director of services, wrote to lenders involved in the scheme such as Start Mortgages and mortgage services provider Pepper Finance on December 16th, to inform them there was an “operational issue with post-completion repairs” of HFL properties.

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Several local authorities reported issues with works carried out by HFL, with an audit finding upon inspection many properties had outstanding issues that needed to be addressed.

“We must ensure that the integrity of the scheme and the condition of the properties in leases to local authorities are maintained to a high standard in everybody’s interest,” Ms Feeney told lenders.

As a result the State agency had paused issuing new agreements for lease to HFL, while it carried out a review.

Start Mortgages wrote to the agency three days later outlining customers had “already been negatively impacted by this issue”. Borrowers who were in the MTR process with Start and HFL “have now apparently been left in limbo”, the lender said.

The correspondence queried if those in the middle of applications with HFL would have to start the process again with another provider.

In a 20th December email, the Banking & Payments Federation Ireland (BPFI) told the agency its members had concerns the disruption would negatively impact customers.

Mags Fullen, head of mortgages in the banking lobby group, said if MTR sales fell through for distressed borrowers they could lose the homes through possession orders.

“A considerable amount of time has been spent working with customers on these challenging cases ... with many of our members noting customers’ expectations that these would have completed by year end,” she wrote.

The suspension of new leases involving HFL had created “uncertainty” among BPFI members over outstanding applications to the scheme, she said.

In a January 16th response, Ms Feeney said the aim was not simply to get borrowers into the scheme, but “to ensure that they are getting what they signed up to”.

Ms Feeney said in the event any existing applications did not proceed with HFL, officials were examining “a number of proposals” to keep the borrower in the mortgage-to-rent scheme.

In a 23rd January email to the Housing Agency, Paul Byrne, head of deleverage at Pepper, said the company had a “number of investors pushing for an update” on the issues with HFL.

“We’re also seeing an increasing amount of direct queries from borrowers and coming under pressure to provide them with an update,” he said.

Paul Cunningham, Home for Life chief executive, has previously said he was confident the company was addressing all of the issues related to repair works.

A spokeswoman for the Housing Agency said they continued to engage with HFL “to ensure that they meet the obligations under the lease agreement”.