The Irish Mortgage Holders Organisation (IMRO), an association set up in 2012 to help mortgage holders in arrears, has signed an agreement with Allsops Space, the auctioneers, under which Allsops will no longer auction off repossessed family homes.

Irish Mortgage holders Allsop

The move might be construed as a setback for banks as they swoop on mortgage defaulters following new government legislation to make repossessions easier, but it could be a short-lived victory for mortgage holders.

Irish Mortgage Holders agreement

The agreement comes after an Allsops auction in June was halted as a result of protests against the sale of repossessed homes. Irish Mortgage Holders Organization says it will be seeking similar commitments from other auctioneering firms. David Hall, co-founder of the organization, said:

‘There needs to a system where debt is renegotiated in advance of a sale. Then, if a property is sold and the hammer comes down, you will not be celebrating the sale of your home but you will at least have certainty.’

Different banks are taking different approaches when it comes to resolving cases of mortgage arrears, leaving indebted mortgage holders bewildered about what will happen as a result of their debt burdens.

Cracking down on defaulters

Urgent talks between the Irish Mortgage Holders Organization and Allsops took place when the main banks sent 15,000 legal letters to borrowers in arrears. Another 2000 letters were sent to struggling mortgage holders suggesting they sell their homes on a ‘voluntary’ basis.

Almost 100,000 residential mortgages in Ireland were in arrears at the end of the second quarter in 2013 and long-term arrears are continuing to rise. Repossessions are still low, but that’s all expected to change now that the government has closed a legal loophole hampering banks from making repossessions. That was made abundantly clear by the CEO of Allied Irish Banks PLC (ADR) (OTCMKTS:AIBYY), David Duffy who said:

‘There is no rent-free option available anymore. And that needs to be understood.’

But whose side will the government take?

Hall said the agreement with Allsops is not anti-bank and that it was to encourage more deals between banks and borrowers in the light of legislation, making it easier for banks to repossess homes or force mortgage holders into the new insolvency system.

‘The process must change and there needs to be a deal done on both sides. We have many clients whose family home mortgage is unsustainable because of their situation and who need to trade down.’

All well and good, but the government has done little to stop the banks doing what they want in the past and with stress tests planned for Irish banks in 2014, it’s not hard to envisage a situation whereby the banks come looking for additional capital from the state.

To complicate matters further, the Central Bank has issued tougher rules to banks on mortgage arrears following negotiations between state officials and the Troika. These include repossessing 15 percent of households 90 days in debt by the end of the year. As the Irish public know only too well, the government doesn’t like to upset the Troika, so could take action to prevent further attempts by the Irish Mortgage Holders Organization to interfere with legal process and the inevitable repossessions that will follow.