Mortgage Arrears Information
Unfortunately, in the current recession, the problem of mortgage arrears has become very common.
What should I do if I have fallen into arrears or if I think I will fall into arrears with my repayments?
Firstly, it is extremely important that you make your mortgage lender aware of the reasons for an arrears problem as soon as possible and this should be done in writing. Any telephone conversations where agreements are made should be followed up in writing. It is crucial that you do not ignore any contact from your lender. It is vitally important that you keep copies of all correspondence between you and the lender and from the lender to you. Borrowers are afforded protection when engaged with their lender, under the MARP (Mortgage Arrears Resolution Process) initiative. Borrowers should endeavour to complete the standard SFS (Standard Financial Statement) as accurately as possible and return them to the lender in a timely fashion, when requested to do so.
You may be eligible for Mortgage Interest Supplement (MIS). A person who is unemployed or working part time (29 hours or less) may be entitled to this support payment. In the case of a couple, if one is in full time employment (i.e. working 30 hours or more), both will be excluded from the payment. MIS may be claimed from the Community Welfare Officer at the local Health Services Executive Office. A number of conditions apply to obtain this payment, e.g. that the mortgage was affordable in the first place, that the interest being paid is reasonable to meet residential needs of the applicants and that the house is not up for sale at the time of applying for the MIS. It is hoped that some of these conditions will be relaxed in the future. More details of the scheme are available from the Department’s website. If your application for MIS is refused, you may appeal to the HSE Regional Appeals Officer. If this is then refused, you may appeal to the Social Welfare Appeals Office.
What are the implications of negative equity?
Negative equity occurs when the amount of money you owe your mortgage lender is greater than the current estimated value of the property concerned. A question from many people in serious mortgage arrears is whether they would be better off handing back the keys of the property right now (also known as voluntary surrender) rather than waiting for a repossession case to be brought against them, given the legal costs involved.
There is no easy answer to this question.Generally speaking, in Ireland the mortgage lender will look to be paid the difference between what is owed and what the house sells for if the latter is less, i.e. negative equity. When the borrower is not able to pay the shortfall, he/she may be sued separately for this amount. A court may grant a judgment for this sum and the lender may then pursue repayment of it. Also, when the house is voluntarily surrendered, the borrower loses control over the sale, added to which the costs of sale (solicitors, auctioneers etc) are generally greater than if the borrower were trying to sell it himself / herself. It is also likely that the lender will get less for the house. Thus, what you gain in not incurring legal fees, you may lose in other costs.
Another question surrounds what would happen if the borrower abandoned the property and emigrated, leaving it all behind. Some commentators have speculated that this might be a possible course of action. However, it should be noted that it is now much easier to enforce court judgments across borders within the European Union, including the UK. It must also be remembered that a person will have personal and family ties in this country and may want to return to Ireland at some point in the future, but may still be liable for the debt or debts concerned. This is therefore not a course of action that should be taken lightly. It is always reccomended that clients take relevant professional advice before making decisions in respect of their borrowings.