Investment Funds are Key to our Future as a Society

Last week Ireland sold an inflation linked bond worth €609 million euro. The buyers of this bond will get a return of 0.25% for 23 years. As inflation goes up or down the return will follow.

Think about this for a second.

International investors are willing to give Ireland huge sums of money at tiny returns. The funds are secured by nothing more than Ireland’s word – we will pay the coupon and we will return the funds in 23 years’ time.

Now look at our need for infrastructure – housing, hospitals and water systems to name but a few. Each of these is mission critical – in that we absolutely need the infrastructure. The welfare of our society is dependent on it.

Ireland is constrained in what it can borrow due to proper (in my view) rules preventing governments from borrowing recklessly. Governments do borrow recklessly by the way!

But pension funds and other investors can place money into mission critical infrastructure and where the State is involved, even tangentially, the rates will be low. Semi state bodies or local authorities are the State acting at arm’s length.

Imagine an arm of the State (not the State itself) were to borrow money on the markets to put into real infrastructure – social housing for example.

Housing, built properly, will last for 100 years, and more. At current rates the average house (€250,000) at 3.5% would cost the State €730 per month. Taking a family living on social welfare only, the household income will be conservatively €2000 per month. It is generally expected that the family will pay 10% of their household income on rent meaning the overall cost to the State in providing a €250,000 home to that most vulnerable family could be as low as €122 per week.

This situation for the State becomes even more improved by the fact that over decades the property will increase in value so that the State body becomes asset rich meaning more funds to provide more housing. All the while pension funds receive a return on their investment – and if those pension funds are Irish, the benefits are directed into the economy.

The biggest problem we face is ideological, which generally comes from people not willing or able to think beyond a cliché.

As with the water debacle there is a populist view that taxation can pay for everything – even though we know from bitter experience that this is false. Extra taxes cause a drag on the economy and when downturns come – as they do – the money dries up and there is no investment.

But pension funds, endowment funds, insurance funds, and the rest, are looking for homes. Ireland has, if nothing else during the crash, proved that we will pay our debts and so we can borrow at low rates.

These funds provide a huge opportunity to create the infrastructure we need – delivered today and paid over long periods of time.

The so-called vulture funds which, ironically, are financing most of the developments in Dublin today, are monies from ordinary people in far flung parts of the world. We could and should be doing this ourselves.

The harsh reality is that if we continue to be burdened with 19th century thinking we are going to get 19th century infrastructure.

Our thinking needs to change.

Mortgage to Rent – The New Beginning Offering

Mortgage to Rent is a system where a person whose mortgage has been deemed unsustainable can continue to live in their home on a permanent basis.

It works like this:

The borrower agrees to surrender their property to the lender who then sells the property to an Approved Housing Body (AHB). The AHB then rents the home to the former owner and the former owner pays an affordable rent.

The former owner has an option to buy back the property should their circumstances change.

Even though so many people are in mortgage arrears there have been very few cases completed under the Mortgage to Rent scheme.
One of the reasons for this is that in many cases the AHB does not want the property or cannot agree a price with the lender.
This is where New Beginning fits in.

Under a new government pilot, New Beginning can offer our own Mortgage to Rent programme to borrowers with unsustainable mortgages.

If you have been deemed eligible for Mortgage to Rent and were refused by the AHB or your case was not processed, why not contact us – we may be able to help you enter the Mortgage to Rent scheme where you have security of tenure in your home with affordable payments every month.

Avoid Receivers at All Costs

Receivers are appointed in Ireland without the involvement of a Court.

When somebody enters into a mortgage type agreement with a lender, and where the secured property is not a family home, the borrower gives the lender a right to appoint a receiver when the borrower has defaulted on the loan.

The bank will first call in the loan which involves making a demand for full payment within a period of time. Often this can be a very short period – in some cases even hours. If payment is not made within the time allowed the lender will appoint a receiver. The receiver can then take over the property, change the locks, and any tenant will then be required to make any rental payments to the receiver.

The receiver will be responsible for the property and the borrower is effectively shut out. In cases where the borrower resists or impedes the receiver an application will be made to the High Court for an order restraining such conduct and if the borrower does not comply he will find himself in contempt of court and facing severe penalty.

In most cases the receiver will sell the property at a time of his choosing. The proceeds of sale will be used to pay the receiver’s costs and any other charges on the property such as property taxes or management changes and the balance will be remitted to the bank. Receiver’s costs can be substantial and often receivers will fire sell, meaning that the borrower loses out. This is because any remaining debt after the sale has been complete and all the costs have been paid will be borne by the borrower.

Borrowers often bitterly complain abut the conduct of receivers and while their complaint carries much moral weight, the legal position is very much set against the borrower.

In some cases receivers have been discharged by the Court for procedural or other irregularities but this is very much the exception. The best advice for borrowers is to avoid the appointment of a receiver at all costs.

 

Email us at  info@newbeginning.ie or call us on 01-5240000 to discuss options that might be of help to you.

New Personal Insolvency laws starting to work for home owners.

April has been an important month for the Personal Insolvency regime. In the first of the new Personal Insolvency appeals cases to come before the High Court, Ms Justice Baker approved an application which sought to overturn the rejection of a PIA proposal by Pepper as agent for a US fund.

The High Court held that the Personal Insolvency regime was a “unique” piece of legislation designed by the Oireachtas to limit the veto of creditors. The whole intent of the new law is to keep a family in their home by making the mortgage sustainable.

In this particular deal a borrower owed more than €2.8 million on his home and other investment properties. The proposal involved a write off of almost €1.4 million and meant the family of 5 held on to their home. The fund objected to the proposal but the borrower appealed. The High Court upheld the appeal and the family are now paying a secure and affordable mortgage.

This High Court decision will give guidance to over 50 cases now before the Circuit Court where homeowners will be secured in their homes with sustainable and affordable mortgages.

The general effect of this change in the law means that anybody who can afford a mortgage based on the current value of the home should be in a position to have their loan restructured on a long term sustainable basis. Deals that we could not have done last year are now being done and that is to everybody’s advantage.

Finally, the ISI released its quarter 1 2016 figures last week and as expected there is a surge in applications for Personal Insolvency. This is a very welcome fact and marks the beginning of a sustained process to deal with mortgage debt once and for all. At this stage over 1000 PIA’s are complete and we expect thousands more over the coming months.

If you would like more information regarding this please call us on 01-5240000 or emailinfo@newbeginning.ie today.  

Update on New Beginning

We have been very busy this month on the debt resolution side of New Beginning.

Through our regulated debt management firm we negotiate directly with creditors without going through a formal process. Our philosophy is never to kick the can down the road. Payments can continue over time – but there must always be an agreed final resolution.

Earlier in the month we had a client who had an unsustainable mortgage of €280,000 on a home valued at €100,000. A member of our client’s family had a sum of money which they were willing to make available. We offered €85,000 in settlement and finally agreed on a payment of €90,000 in full and final settlement of all liability. Our client is now debt free with the fund accepting a write down constituting over 68% of par value. What we really liked about this deal was the speed at which it could be done.

Another client was facing repossession but agreed to reduce their mortgage by €40,000 through a lump sum available to them after which we agreed a long term restructure on an affordable basis. After 5 years of being hounded our client went to a full resolution in a matter of 3 weeks.

We agreed the resolution of a commercial portfolio which included our client being permitted to refinance aspects of the portfolio with funds sourced by New Beginning. The properties critical to our client’s business have been protected and now are on a sustainable footing. Other properties were sold and a contribution was made in settlement of the shortfall.

We are delighted to welcome Noreen Kavanagh Solicitor on board who, along with Eugene Carley, provides the excellent legal back up we need to bring deals to speedy conclusion.

Finally our Personal Insolvency practice continues to grow. Time and again we see families getting restructured mortgages on their homes and resolution on all their other debts allowing them to have the New Beginning that they deserve. We expect this trend to continue as word finally begins to get out – there are great solutions out there – you just need to ask!

If you would like more information regarding our services please call us on

01-5240000 or email info@newbeginning.ie today.