Mortgage to rent a guide for local authority borrowers

Mortgage to Rent A Guide for Local Authority Borrowers

OCTOBER 2013

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

Contents

1. What is the Mortgage to Rent Scheme? ................................................ 3 2. What are the benefits of the Scheme?................................................... 3 3. Who provides the Scheme? ................................................................... 3 4. Do I qualify for the Scheme? .................................................................. 4 5. How do I apply for the Scheme? ............................................................ 5 6. If I join the Scheme, how will it affect me? ............................................ 5 7. What do I do if I get an offer from my Arrears Support Unit for the Scheme? .................................................................................................. 6 8. What documentation must I include with my application for Social Housing Support? ................................................................................... 8 9. What happens if my application for Social Housing Support is successful?.............................................................................................. 8 10. What happens if my application is not successful or I decide not to take part in the Scheme? ............................................................. 9 11. How is the Market Valuation of my property agreed? .......................... 9 12. How is my tenancy and rent agreed? .................................................... 9 13. Final Offer and Cooling Off Period ........................................................ 9 14. Completion of Mortgage to Rent process ........................................... 10 15. Frequently asked questions ................................................................. 10 16. Contacts ................................................................................................. 12

2

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

1. What is the Mortgage to Rent Scheme?

The Mortgage to Rent Scheme (Scheme) is a Government Initiative to help homeowners who are at risk of losing their homes due to mortgage arrears. The Scheme is an option for borrowers who have been engaging in the Mortgage Arrears Resolution Process (MARP) with the Arrears Support Unit of the Local Authority.

Under the Mortgage to Rent Scheme, you will transfer ownership of your home to your Local Authority. You will no longer own your home but you will continue to live in it as a tenant of the Local Authority. You will pay an income related rent set by the Local Authority.

Your participation in the Scheme will have significant implications for your tenure, so you should give it careful consideration.

Your Local Authority has a trained Arrears Support Unit to support you during the process.

2. What are the benefits of the Scheme? 

You will have the peace of mind that you and your family will remain living in your home without disruption to your family life, despite being in a difficult financial situation.



You will pay a rent calculated in line with the Differential Rent scheme or similar Local Authority scheme.



The proceeds from the transfer of ownership of your home to the Local Authority will go towards your mortgage debt and you will come to an arrangement with the Arrears Support Unit for the repayment of any outstanding debt.



You will have the option to buy back your home after a period of five years if your situation improves.



The Local Authority will be responsible for certain property maintenance issues.

3. Who provides the Scheme?

This is a Government Scheme, which is overseen by the Department of the Environment, Community and Local Government.

The Citizens Information Board is operating a Mortgage Arrears Information

3

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

Helpline which is available between the hours of 9.30am and 5pm on Tel. 076 107 4050 and provides general information to potential applicants. You can also obtain information on their website www.keepingyourhome.ie.

You will be advised to

contact your lender (Local Authority Arrears Support Unit) to find out if you qualify for the Scheme. The Arrears Support Unit will be your main point of contact and will discuss with you if the Scheme is a possible solution to your situation.

If the Scheme is an option for you, the Arrears Support Unit will provide you with all the documentation required to apply for the Scheme.

4. Do I qualify for the Scheme?

To qualify for the Mortgage to Rent Scheme, your mortgage, property and household must meet the criteria below:

Mortgage a. You must be unable to make the repayments on your Mortgage Loan and your Arrears Support Unit has determined that this situation is unlikely to change in the future. b. You must be engaging with the Arrears Support Unit. c. You must be engaging in or have completed the Mortgage Arrears Resolution Process (MARP) with the Arrears Support Unit.

Property d. Your property must be in negative equity. e. You must not own any other property. f.

You must be living in a property that suits your needs i.e. not be over or underaccommodated, in accordance with Local Authority guidelines.

g. You must be living in a property of a value no more than €220,000 in the Greater Dublin area and €180,000 in the rest of the country.

Household h. You must be eligible for Social Housing Support from the Local Authority. i.

Your net household income must not exceed €25,000*, €30,000* or €35,000* a year, depending on what part of the country you live in (net household income is the household income after taxes and social insurance (PRSI) have been taken off). (*Additional allowances for children will apply).

4

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

j.

October 2013

You cannot have capital assets worth in excess of €20,000.

k. You must have a long-term right to remain in Ireland.

5. How do I apply for the Scheme?

The Arrears Support Unit may identify you as a potential applicant for the Scheme and discuss the option with you.

If the Arrears Support Unit considers that you may qualify for the Scheme, they will meet with and present the Scheme to you and you will be given a Mortgage to Rent Pack. This pack includes two copies of a ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’. This letter describes how the Scheme will affect you.

Once you get this letter, you will have 28 days to consider the offer from the Arrears Support Unit. During this time you must get independent legal and debt advice.

In order to proceed with the Scheme you will be required to: a. Complete and submit the Mortgage to Rent and Social Housing Support application forms (along with all required supporting documentation) and a copy of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’ to the Housing Section of the Local Authority. b. Sign the ‘Letter of Offer to Participate in Mortgage to Rent Scheme’ and return one copy to the Arrears Support Unit.

Note: You must complete and submit the Mortgage to Rent and Social Housing Support application forms to the Local Authority within 14 days of receipt of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’.

In addition please note that the signing and returning of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’ to the Arrears Support Unit is not binding on you to complete the Mortgage to Rent Scheme. You and the Local Authority reserve the right to withdraw from the Scheme at any stage in the process.

6. If I join the Scheme, how will it affect me? a. You will have to transfer the ownership of your home in exchange for a Tenancy Agreement. b. You will stay living in your home as a tenant rather than as an owner. c. You will pay a rent calculated in line with the Differential Rent scheme or similar Local Authority scheme. The Local Authority will review the rent each year based on your income. If, over time your income increases your rental payments will

5

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

increase accordingly. Increased household income will not require you to move out of your home. d. If you are in receipt of Mortgage Interest Supplement (MIS), payment of MIS must cease and you should notify Social Welfare. e. The Arrears Support Unit will arrange with you for repayment of the outstanding part of your Mortgage Loan, if an amount remains. This outstanding amount is called the Residual Debt.

7. What do I do if I get an offer from my Arrears Support Unit for the Scheme?

You have a total of 28 days (Action Period) from the date of receipt of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’ to consider the implications of the Scheme and to complete the actions required of you in the first step of the process.

ACTIONS Legal and Debt Advice: You must get independent legal and debt advice within the 28 day action period.

Social Housing Support: You have 14 days from the date of receipt of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’ to complete the Mortgage to Rent and Social Housing Support application forms and submit them to your Local Authority.

Please ensure that you submit all of the relevant information required by the Local Authority to assess your application. You should also ensure that you submit your application to the nominated person within the Housing Section of the Local Authority as advised by the Arrears Support Unit. When your Local Authority receives your completed application form for Social Housing Support together with all the documents required, they will carry out a full assessment of your need for Social Housing.

Decision to Participate: If you decide to proceed with the Scheme you must return one copy of the ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’ to your Arrears Support

6

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

Unit, signed by you and counter-signed by your solicitor before the 28 day action period expires. You should keep a copy of this letter for your own records.

28 DAY ACTION PERIOD Letter of Provisional Offer to Participate in Mortgage to Rent Scheme is received from the Arrears Support Unit

You have 14 days to complete and submit Mortgage to Rent and Social Housing Support application forms accompanied by unsigned copy of the Letter of Provisional Offer to Participate in Mortgage to Rent Scheme

You have a further 14 days to seek independent legal and debt advice upon which you must make a decision to participate in the Scheme.

To proceed, you must sign and return the Letter of Provisional Offer to Participate in Mortgage to Rent Scheme counter-signed by your solicitor to the Arrears Support Unit

7

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

8. What documentation must I include with my application for Social Housing Support?

You must include the following documentation with your application for Social Housing Support: 1. Your application for Social Housing Support.

2. The ‘Letter of Provisional Offer to Participate in Mortgage to Rent Scheme’.

3. Your application for Mortgage to Rent.

In addition you must submit: 4. Photographic identification (current passport or Irish driving licence).

5. Birth certificates for all household members.

6. PPS Numbers for all household members.

7. Marriage certificates for all household members, where applicable.

8. Proof of current address (utility bill / mortgage loan statement).

9. Proof of citizenship or that you have a long term right to remain in Ireland.

The Local Authority will advise on the documentation required here.

10. Evidence of income: a. If you are an employee: an up-to-date P60 and/or a minimum of 4 out of the last 6 payslips. b. If you are Self-Employed: a minimum of 2 years accounts with an Auditor’s Report, or an Auditor’s Report along with an up-to-date tax balancing statement and preliminary tax receipt. c. If you get Social Welfare: a recent statement from the Department of Social Protection of all social insurance benefits and social assistance payments, allowances and pensions that household members are receiving.

9. What happens if my application for Social Housing Support is successful?

You will receive a letter from the Local Authority confirming that you qualify for Social Housing Support. A copy of this letter will also be sent to the Arrears Support Unit.

The Arrears Support Unit will arrange for a representative of the Local Authority to visit your home to complete a condition/structural survey and a market valuation. You must also arrange to have the property independently valued. The Local Authority will pay a contribution for Estate Agent fees on the production of an invoice for services completed.

8

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

10. What happens if my application is not successful or I decide not to take part in the Scheme?

You will receive a letter from the Local Authority confirming that you do not qualify for Social Housing Support. A copy of this letter will also be sent to the Arrears Support Unit. You will need to discuss the alternative options available to you with the Arrears Support Unit.

You may, like any other unsuccessful applicant for Social Housing Support, appeal the decision to the Ombudsman.

11. How is the Market Valuation of my property agreed?

The Arrears Support Unit will arrange for a representative of the Local Authority to visit your home to complete a condition/structural survey and a valuation. You must also arrange to have the property independently valued. The Local Authority will pay a contribution for Estate Agent fees on the production of an invoice for services completed.

The Arrears Support Unit will issue to you a Market Valuation offer letter. If you are in agreement with this offer amount you will sign and return the offer letter.

When the Market Valuation is agreed this will set the Transfer of Ownership Price for the property. The Arrears Support Unit will give you a letter that outlines the transfer of ownership details and the outstanding debt (Residual Debt), if any, on your Mortgage Loan account. The Arrears Support Unit will also outline how the Residual Debt will be dealt with and what repayment arrangements will apply. The Arrears Support Unit will also outline the Transfer of Ownership process to you and give you the documentation required.

12. How is my tenancy and rent agreed?

The Arrears Support Unit will arrange a Rent Assessment meeting for you with the Local Authority. On foot of this meeting you will receive a Tenancy Agreement which will detail the terms and conditions of your tenancy and the rent payable (which is based on your income).

13. Final Offer and Cooling Off Period The Arrears Support Unit will issue to you a ‘Final Letter of Offer for Mortgage to Rent Scheme’ in duplicate. This letter confirms the Mortgage to Rent transaction

9

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

details. From date of issue of this letter you have 28 days (the ‘Cooling Off’ period) to decide to proceed with the transfer of ownership of your property to the Local Authority and become a Social Housing tenant.

A suite of legal documents

necessary for the transfer of ownership will be sent to your solicitor.

You are advised to revisit your independent legal and debt advisors with your ‘Final Letter of Offer for Mortgage to Rent Scheme’ before making your decision.

If you decide to proceed with the Scheme you must sign and return one copy of your ‘Final Letter of Offer for Mortgage to Rent Scheme’ to your Arrears Support Unit.

14. Completion of Mortgage to Rent process On receipt of a signed ‘Final Letter of Offer for Mortgage to Rent Scheme’ from you, the Arrears Support Unit will activate the transfer of ownership process.

At a date to be agreed by all parties you will: a. complete the Deed of Transfer of your property to the Local Authority b. sign a Tenancy Agreement with the Local Authority c. sign a Residual Debt (Repayment) Agreement with the Arrears Support Unit You will continue to live in the property for as long as you wish provided that you meet the terms and conditions of your Tenancy Agreement with the Local Authority.

15. Frequently asked questions a. Who do I send the Mortgage to Rent application form to?

You send the Mortgage to Rent application form (with your Social Housing Support

application form) to the contact details provided to you by the Arrears

Support Unit.

b. Who can I get financial advice from?

This advice can be provided by a panel of accountants drawn from members of the main accountancy institutes in Ireland who have agreed to participate in the independent service. The Arrears Support Unit will pay €250 excl. VAT to the accountant of your choice for the provision of this service.

The

list

of

Accountants can be found on www.keepingyourhome.ie. Alternatively you can contact the Money Advice and Budgeting Service (MABS) who will assist you.

c. What can I do if the Arrears Support Unit refuses my request for inclusion in the Scheme?

You can appeal the decision to the Arrears Support Unit Appeals Committee, which is established under the Mortgage Arrears Resolution Process in the Local

10

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

Authority.

d. What happens if I decline participation in the Scheme?

You will have to discuss with the Arrears Support Unit if there are other options available to you to resolve your mortgage arrears situation.

e. What happens if my property is not suitable for the Scheme?

You will have to discuss with the Arrears Support Unit if there are other options available to you to resolve your mortgage arrears situation (Mortgage to Rent may be your final opportunity to stay in your home).

f. What happens if my Arrears Support Unit and I cannot agree terms for the transfer of ownership?

You will have to discuss with the Arrears Support Unit if there are other options available to you to resolve your mortgage arrears situation.

g. What happens to the proceeds of the transfer of ownership?

The amount of money raised by the transfer of ownership is offset against your mortgage loan debt.

h. What happens to any outstanding mortgage debt I owe?

The Arrears Support Unit will discuss this debt (Residual Debt) with you and come to an arrangement with you for repayment.

i. How long can I live in my home?

The Local Authority aims to create secure tenancies. Many tenants stay in their Local Authority home for their entire lives, subject to compliance with their Tenancy Agreement.

j. How much rent will I pay?

The rent that you pay as a tenant is called a ‘differential rent’. The calculation of the rent you will pay is based on your income. The rent is assessed every year to take account of changes in your income. If your income reduces, your rent may be reduced and similarly, if your income increases, your rent may be increased.

This will be explained in detail in the Local Authority Tenant Handbook.

k. What happens if I miss a rent payment?

Non-payment of rent may result in a household losing their tenancy.

l. Who will be responsible for repairs?

The Local Authority operates a repair service. The terms of the repair service will be contained within the Tenant Handbook.

m. If my financial situation changes, can I buy my home back?

Yes. If your financial situation changes after five years and you can raise the

11

Mortgage to Rent Scheme - A Guide for Local Authority Borrowers

October 2013

finance, you may buy your home from the Local Authority. The property price will be set by a market valuation and cannot be less than what the Local Authority paid for the property.

n. What happens when I become a tenant?

1. The Local Authority will explain your rights and responsibilities to you.

2. You will be given the name and contact details of your Housing Officer who will be your main contact point in the Local Authority.

3. You will sign a Tenancy Agreement with the Local Authority.

4. You will sign a Residual Debt (Repayment) Agreement with the Local Authority.

5. You will pay a weekly rent based on your income to the Local Authority.

16. Contacts Citizens Information www.keepingyourhome.ie Mortgage Arrears Information Helpline Tel: 076 107 4050 (Monday to Friday from 9.30am to 5.00pm) Money Advice and Budgeting Service (MABS) Helpline: 1890 283 438 (Monday to Friday from 9.00am to 8.00pm) www.mabs.ie or www.keepingyourhome.ie

Arrears Support Unit

Arrears Support Officers 071-91-11303/11309/11322 Sligo County Council/Sligo Borough Email: marp@sligococo.ie or marp@sligoborough.ie

12