Ask The Expert: Week 4 Show Notes - Best Bits

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Personal Insolvency Practitioner’s and MABS staff cover a variety of topics on week 4 of our Ask the Expert series. Listed below are questions taken from each interview. If you’d like to hear more of a specific interview, scroll to the bottom of the page where the full recordings are listed as information sources.

Explain to me if somebody gets a legal letter relating to debt, what should they do? I know what probably I would do in those circumstances, which is not the right thing to do, is bury the head in the sand. But what is the right thing to do?

Yvonne Bogdanovic (MABS) on Live 95:

“As soon as you get a legal letter, or your lender starts speaking to you about potentially going legal, I would say to you contact MABS. We are a free service, we are paid for out of your taxes. Even if all you do is pick up the phone and have a conversation that sets your mind straight on what to do, and you don't ever come near us again, at least you will have gotten independent advice on what to do next. We don’t cut across solicitors, solicitors still have a part to play and anybody who wants to challenge a letter they get or summons they get. We do give sound advice to people and try to get people onto the right track.”

A listener has questioned whether a free service is of much use? That old thing of you get what you pay for, and if you’re paying a professional, then you’re more inclined to get the professional service.

James Morgan (MABS) on LM FM:

“What I always say to that is, the air we breathe is free, and we wouldn’t get too far without it. The people employed in MABS as Dedicated Mortgage Advisers have the most experience in dealing with mortgage arrears. Quite often, we get referrals from solicitors and accountants who are aware of the professional specialist service that we provide

Just as an example, I myself am a qualified chartered accountant with a degree in accounting and finance and a qualification in personal insolvency. Other DMAs have legal backgrounds or backgrounds in banking or finance, and others have a Money Advice qualification. The fact is that we are nationwide, and we pool our experience and knowledge.

Let's be honest here, in some cases, people are so much in debt, their income is so low, that another bill from an accountant or a solicitor can be quite prohibitive, and it may indeed exclude them from going that route. Our service is free, and we can give you the time that your case deserves and indeed needs to progress without racking up more debt.”

Meet some of our qualified professionals in this Advice from our Experts Playlist.

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Can you explain the Mortgage to Rent scheme? How does this work and how's the rent set within the Mortgage to Rent scheme?

Brian MacGabhann (MABS) on GB FM:

“The Mortgage to Rent scheme would be a solution that would be available for people very often where there is no other realistic option. This would be typically somebody who say, for example, is on social welfare payments, and there are no realistic prospects of their circumstances improving. The way it works, you would apply from Mortgage to Rent through your lender. Then once you're approved for the Mortgage to Rent, there are various boxes that you have to tick.

Once you tick those boxes and you're approved for Mortgage to Rent, you would surrender your property to the lender. The lender would then immediately sell that property back to what's called an Approved Housing Body (AHB) and you will continue to live in the property but now you live in the property as a rental tenant.

You would pay the Approved Housing Body a weekly rent. Rent is set using the same formula that is set to assess local authority rental tenants. It's assessed using the differential rents scheme. It's the equivalent of what you would be paying if you were paying local authority rent. Now, although the property has been surrendered to the approved housing body, there is an option there on the scheme for you to purchase the property back in the future if your circumstances improve. There are different formulas there for that.”

In terms of maintaining the house and how long you'd have that agreement for, how does that work out?

James Quinlan (MABS) on WLR FM:

“Normally it is about a 25-year lease. Now the really good thing for people in the house is the maintenance of the house becomes the responsibility of the body that's renting you the house. If down the line, your fascia, your soffit needs replaced it’s their responsibility. They’re not going to come and paint the front room for you but, they will replace the doors, the windows, and the heating boiler that is their responsibility.”

Claire Kelly (PIP) was asked on Q102 to give a real-life case study of someone who has a resolution as a result of coming to the Abhaile scheme. Note: names and some details have been changed to protect the identity of the client.

Claire Kelly (PIP) on Q102:

“We're looking at a family with a couple in their mid-30s, they have three young children. The father is working full time, the mother is working part-time. There's a situation whereby there's a lot of pressure on their household income in relation to bringing up their children, and there's a limited income coming in.

In this particular case, they had negative equity on their house to the value of about €100,000. The mortgage was about €270,000 and the house value was around €175,000. When we assessed it as we do for all of our clients, we looked at how much money's coming in, what they need day-to-day, before we can see how much they can afford on their mortgage. The amount that they could afford is actually quite low, it was about €370 per month, which most people will be aware would hardly rent you a single bedroom rather than a full house for a family.

However, what we were able to do with that particular family was talk to the bank. All of this is at no cost to the family because it is through the Abhaile scheme. We agreed with the bank, while at the moment, the couple were under a lot of financial pressure because they were quite young and in another 15-20 years, the children will be grown up and will become independent. At that stage, there will be a lot more available as a family to pay on the mortgage. We simply took it took this assessment of it, we wrote parts of it [the mortgage] off.

About €70,000 was written off, and that will never have to be repaid unless the house gets sold at an increased value in the future. We took the balance, which is around €200,000 and we split it into two parts. One they could afford and one which is sitting out there for a stage in the future, whereby the children have moved on and suddenly they have this extra money available to pay the mortgage. They've been able to live for the normal day-to-day stuff for their family, pay €370 per month, which is what they're paying probably for the next 30 years. But in about 15 years’ time when children are grown up, they'll have another €1000 per month that can start to pay down the mortgage.”

Information Sources:

Limerick’s Live 95 FM - Limerick Today with Joe Nash Episode 4 (4th June 2019)

Galway Bay FM - Galway Talks with Keith Finnegan Episode 4 (5th June 2019)

Dublin’s Q102 – Mornings with Liam and Venetia Episode 4 (5th June 2019)

WLR FM - Déise Today with Damien Tiernan Episode 4 (11th June 2019)

LMFM - The 11 – 1 Show with Sinead Brassil Episode 4 (12th June 2019)

If you or someone you know is affected by some of the topics raised in the above discussion, call the MABS dedicated Helpline on 0761 07 2000, or visit mabs.ie/contact to find your local office and to learn more about how Abhaile may help.