Mortgage-to-rent firm raises €75m to buy distressed loans

The funding, secured from London asset manager LCM Partners, will allow Home for Life to raise up to €160m more through an existing deal with AIB.

The new funding will be used to facilitate mortgage-to-rent deals with banks and funds for homeowners facing potential repossession due to serious arrears difficulties. Under such deals, an approved housing body can purchase the home and set up a long-term social housing style lease with a local authority, to clear the debt and allow families to remain in their property.

Home for Life is currently the only private company approved to facilitate such deals.

Chief executive Paul Cunningham told the Sunday Independent that of the 27,000 homeowners in long-term arrears, amounting to €2.4bn of debt, 9,000 are suitable for mortgage-to-rent.

"Our aim is to facilitate as many of these as we can with a mortgage-to-rent solution so that they avoid the court process, which does not work," he said.

Home for Life is currently working with 460 homeowners at various stages of the mortgage-to-rent process, but to date has only completed six deals.

But, Cunningham said, the new fundraising deal, which was facilitated by Davy Corporate Finance, will allow for a major acceleration in the number that it can bring to fruition. The company hopes to soon begin completing up to 100 such deals a month.

Cunningham said that the acceleration of mortgage-to-rent as a solution to some of the most difficult arrears cases would be driven by international funds that have bought a growing number of Irish mortgages from the banks. "This is a very attractive solution for these funds," he said. "The mortgage debt in long-term arrears is not declining, it's actually plateauing. This is a difficult, intractable problem but these funds are open to innovative solutions."

Irish banks now have a strategic policy to move mortgages that are in arrears on to credit servicers, and this would likely further accelerate as the banks look to draw a line under the arrears problem, said Cunningham.

"The banks have put huge resources and a huge amount of time into trying to solve this issue over the past 12 years but they have probably taken it as far as they can at this stage,” Paul Cunningham said.

“The credit servicers and funds that are acquiring these mortgages are looking for certainty for themselves and for the people who are in arrears, and the court process does not work in this regard,” he added. “They are now very much pushing mortgage-to-rent as a solution for borrowers that have no ability to pay and who cannot benefit from a loan restructuring.”

Many of the people that are suitable for the mortgage-to-rent scheme are in vulnerable circumstances due to issues such as family break-ups or, increasingly, because they are approaching retirement age with large debts that they will be unable to pay on a state pension.

LCM said in a statement that it was “a strong supporter of the mortgage-to-rent scheme”.

The scheme “aligns the interests of all stakeholders — Government, local authorities and lenders — but most importantly customers, whose well-being is central to this initiative”, it said.