From top: David Hall; AIB; Vanessa Foran
Yesterday, AIB/EBS, the Irish Mortgage Holders Organisation and iCare Housing agreed a deal which will see the bank buy out hundreds of homes from distressed mortgage holders.
Those homes will be then rented back to them.
David Hall, chief executive of the IMHO and iCare, described it as “sensible, practical solution” to the housing crisis.
Accountant and insolvency expert Vanessa Foran (her off the telly!), writes:
It will by now be a well-read story and well covered announcement about David Hall and his iCare Housing Agency launch with AIB/ EBS.
The inevitable spin will surely have spilled into all your timelines; therefore I feel obliged to comment as I have contributed on this type of solution, Mortgage-to-Rent (MTR) in the recent Housing Special hosted by Broadsheet on the Telly.
I’m not going to argue against the Mortgage-To-Rent (MTR) scheme set by the Central Bank themselves within the Mortgage Arrears Resolution Process (MARP) as I have brokered a number of them myself on behalf of distressed home owners.
But this work is all pro bono as there is no place or role for the Personal Insolvency Practitioner (PIP) in this process.
The Creditor Bank will pay a Solicitor and a Financial Advisor (usually the original Mortgage Broker) but they will not pay a PIP. Which is an insult to the legislation introduced to deal with Mortgage Arrears and Personal Debts; The Personal Insolvency Act 2012.
The offence is caused to me in two parts. I cannot progress a Personal Insolvency Arrangement (PIA) unless the Debtor(s) have complied with MARP. A body of regulations in the hands of the Central Bank of Ireland and can be changed at their whim and yet a whole section (Chapter 4) is beholden to it.
Secondly, this Legislation created the new profession of Personal Insolvency Practitioner to specifically manage insolvent homeowners in a process that attempts to keep them in their Family Homes. Yet we are not considered suitable parties for the Mortgage-To-Rent solution.
I brokered the few I have because either the Mortgage Bank insisted that was the only solution they were prepared to consider or that I couldn’t find a more local Voluntary Housing Association to purchase the house by way of a Voluntary Assisted Sale (this might also be referred to as an Assisted Voluntary Sale or a Consensual Sale).
Before I continue, I must advise, and David Hall’s Twitter feed over the years will confirm likewise, that he has a very poor opinion of PIPs and of my profession.
The current MTR process requires the Debtor home owner to surrender their property to the Creditor Bank, from where the Bank proceed to sell the property.
The Home owner does not get to agree the sale price of the most important asset they may ever own, or even control the biggest liability they may have; and that is something I cannot defend.
It is from my direct experience to date that I can confirm that it is not good value as the costs of the eventual sale, such as selling costs and conveying costs are charged to the outstanding debt of the home owner.
An additional burden on the Debtor is that they must get themselves onto the Local Authority Housing List, and I know of no MTR progression to date that took less than 15 months. Some Banks will forgive this outstanding debt, and I will tell you AIB/EBS is one of them, but many don’t.
The process I work on behalf of these qualifying clients, and where I have built a reputation and a portfolio of successful outcomes is with Voluntary Assisted Sales.
Here the homeowner is the Vendor, they agree the price with the buying Housing agency and convey the property themselves with a Solicitor representing them; the “Assisted” in these resolutions is the agreement from the Creditor Bank to allow the home owner to sell their own property.
Ideally it is to a local and active housing association that will keep the family in their community and within their support network, and they will have already gotten the family onto the Housing Lists before anything progresses; and so far so good.
What is happening with the Mortgage-To-Rent path to Social Housing is that financing the housing bodies like David Hall’s iCare is in the control of the banks and the private sector, and at National Level. Not in your local Authority or your local communities.
Social Housing should be community based and run; and from where they can negotiate their own finance options and make their own decisions. My experience, which is direct and hands-on confirms this.
Some immediate questions need to be answered amid the announcements and fanfare around this AIB-led Housing Agency.
Will there be a cap on value for house eligibility?
How will iCare manage a dispersed portfolio?
And if the now tenants do get afforded the opportunity to buy back the property, how will that future price be calculated?
If it was that easy to run a Housing Association, we would all be at it since there is 100s of millions out there available for the Voluntary Housing Sector to acquire properties from banks that have had them surrendered by desperate homeowners willing to do anything to stay in their homes.
The last time I checked it costs €600 to set one up.
What worries me most is not that iCare cannot be good landlords and won’t be able to manage tenancies and property assets in every county in the state; it’s the lack of Independence blatantly on display; the conflict of interest is so dominant I could chip a tooth on it.
It is no secret that David Hall’s Irish Mortgage Holders (IMHO) have always had finance from AIB and other banks. And now again with this new venture iCare.
AIB clearly have direct influence over all these activities, all parties can negate this and talk to us about Chinese Walls, data protection legislation, privacy policies etc., but there is no denying that a series of conflict of interest risks exist.
Of which the lack of Independence regarding the contractual sale prices paid and the property selections should probably be addressed before any family be allowed proceed.
Selling the properties, and then financing the purchase by an organisation that already secures significant funding from the lender is not in the best interest of the distressed homeowner, and it is most definitely not in the best interest of any realistic and long-term viable National Social Housing Strategy.
I sincerely wish iCare and IMHO every success, the more success stories we have in this profession the better, because it encourages more people who are in need to reach out.
I am an active member of this new profession but it is in everyone’s interest to ensure we all do our best work to ensure it is respected, valued and AT ALL TIMES independent and transparent.
It needs to thrive so that the Mortgage Arrears crisis can finally come under control; otherwise you have to accept that homeless families, accommodation shortages and social housing stock shortfalls as a permanent tattoo on our National Identity.
Vanessa Foran is a principal at Recovery Partners. Follow Vanessa on Twitter: @vef_pip