Ask The Expert: Week 8 Show Notes - Best Bits
Personal Insolvency Practitioner’s and MABS staff cover a variety of topics on week 8 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 for playback.
- Will "vulture funds" consider different options that you propose to them?
- How does the Mortgage to Rent (MTR) scheme work?
- When setting up an insolvency plan for somebody, what sort of expenses do you consider as Reasonable Living Expenses?
- What is the application for a Personal Insolvency Arrangement (PIA)?
- A question was sent in by a listener “I have a house worth €250,000, my mortgage is now €300,000. My income is €3,000 per month and I can’t afford the repayments, what options do I have?”
Louise O’Brien on WLR FM:
“The truth of it is, is that the "vulture funds" want their money back at the end of the day. They want to see that they're going to get as big return as they possibly can for their clients. They will try and come to an arrangement with somebody, and they will look at the full suite of options, the same as the banks do.
If they feel that they're not going to and there are some cases where it is quite difficult, that somebody cannot afford the mortgage, they will look at Mortgage to Rent. They may take a legal route. But once a debt is in court, it's the same process as it is for the banks. I've heard people talk about the last few weeks, especially when Ulster Bank sold their debts. "Oh the houses are going to be taken". But they may go to court, that's very slow process to try and get a repossession order in place. They would have to go through the exact same process that any financial institution would have to go through.”
Has a 'fund' recently bought your mortgage? Watch our short videothat contains information about funds and how Abhaile can help.
How does the Mortgage to Rent (MTR) scheme work?
Yvonne Bogdanovic on Live 95:
“Under the scheme, you voluntarily surrender ownership of your property to the mortgage lender that you've been dealing with, then an approved housing body or private companies that have been approved by the Department of the Environment come along and can evaluate your home with a view to buying it after you voluntarily surrender.
It's not a given that a housing body or one of these companies would buy your house, they express interest. If the house meets their criteria for purchase, then they might go ahead and make an offer on it. Things like a house being in a very, very bad state of repairs can sometimes rule it out of being purchased if it were sometimes a very large house on its own, some of the housing bodies might not be interested. But now that there are some private entities in that, they are more flexible, and they might look at houses that the housing bodies wouldn't have in the past.
If your approved housing body becomes your landlord, you become the tenant on a week by week basis in the same way as any local authority or social housing tenant would be a tenant. The rent will be set based on whatever the total household earnings are. If a private housing company buys your house, as opposed to an approved housing body. The private company leases your house to the local authority for 25 years and you become a tenant of the local authority and, you are then house after that by the local authority.”
When setting up an insolvency plan for somebody, what sort of expenses do you consider as Reasonable Living Expenses?
Claire Kelly on Q102:
“When looking at affordability, the key thing is the difference between what the household income is and the reasonable living expenses. That’s critical in terms of getting these right for any family. There are guideline costs involved that have been set up by Insolvency Service of Ireland, understanding what families need to live. They are designed to not make you live at a poverty level; they are designed that you can bring your kids out at the weekend, that's no problem. They're not a luxury level of living because anybody who's under financial pressure doesn't have that ability just to go and buy lots of nice things. But they are designed to make you have enough money to participate in the community so that you’re not at home alone every night. That's important for people's mental health.”
You can calculate your households RLEs using the Insolvency Service of Irelands RLE calculator.
“Initially it is done through a PIP. It is essential that the debtor meets with the PIP in person so that they'd have a meaningful meeting to discuss their options. That's a requirement of the legislation. Any debtor should never settle for a telephone conversation; they should always meet with the PIP in person.
Once they've decided to pursue this process, an application is made by the PIPs office for a protective certificate that's granted by court. Once this protective certificate is granted, it puts people at ease; there's no need for the debtor ever to attend Court. There's a period of 70 days in which a person's creditors are legally prevented from ever contacting them, or enforcing any Court order. That gives them time and space in which to allow a PIP develop a proposal, and hold a creditors meeting to allow the creditors to vote on the proposal.
After the 70 days, a creditors meeting is held. If the arrangement is approved, it will become live for the length of the arrangement. If it's not approved, it may qualify for an appeals process; what’s known as the Personal Insolvency Court Review Service.
A question was sent in by a listener “I have a house worth €250,000, my mortgage is now €300,000. My income is €3,000 per month and I can’t afford the repayments, what options do I have?”
James Morgan on LMFM:
“I don't have all the information needed to propose all the possible solutions in this case, but from what I have, there may be a remedy under personal insolvency where the value of the home is written down to the current market value. The Personal Insolvency Practitioner could write down the value of the property to €250,000 and see if there's the affordability of that level. I'd imagine though, based on the limited information that even that might be a stretch for the client, even with a term extension, the mortgage would come in at €1338 per month.
But it's still a lot less than the €1600 a month it would cost if the mortgage were €300,000. But I would look at this one perhaps under the mortgage to rent scheme, it's a possible solution for people who could afford the mortgage when they took it out. But due to a myriad of reasons, they cannot now afford the mortgage.
In those circumstances where it's unlikely that they'll be able to afford full mortgage repayments in the near future. An approved housing body will review the property, they will purchase it from the lender and rented back to the family. There are a number of criteria to satisfy with regard to this scheme. It's certainly worth exploring. The thresholds for the scheme have gone up.”
WLR FM - Déise Today with Damien Tiernan Episode 8 (6th August 2019)
Dublin’s Q102 – Mornings with Liam and Venetia Episode 8 (14th August 2019)
Limerick’s Live 95 FM - Limerick Today with Joe Nash Episode 8 (13th August 2019)
LMFM - The 11 – 1 Show with Sinead Brassil Episode 8 (21st August 2019)
C103 - Cork Today with Patricia Messenger Episode 8 (21st August 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.