Focus group urges banks to help Mica homeowners to avoid mortgage defaults

Thousands of homeowners in Donegal affected by defective blocks are at risk of defaulting on their mortgages unless banks offer tailored assistance.

The Banks and Insurance Focus Group, formed in Donegal as part of the Redress Focus Groups to aid homeowners, has reviewed standard mortgage terms and conditions and is ‘alarmed’ at its findings.

The group notes that if a property is materially depreciated then a lender has the right to call in the loan.

In some instances , the legal terms and conditions of a mortgage state that demolition of the mortgaged property is an automatic and enforceable demand event.

. The group is concerned about the anomaly which means that the demolition of a property - even those demolished under the State’s redress scheme - could be deemed as a default and see them liable for a full repayment of the mortgage.

The group has met with TDs in Donegal and a spokesperson told Donegal Live that the Central Bank has committed to meeting with their representatives. 

There is widespread anger among members that the Government failed to flag up the issue.

“Banks are not offering any tailored financial solutions or assistance outside of their ‘business as normal lending criteria’,” the group says. “There has been a disturbing lack of dedicated and trained staff within banks to assist and provide funding support.”

The Housing Minister, Darragh O’Brien, is understood to have written to Insurance Ireland and the Banking and Payments Federation (BPFI) on the matter. 

They say that some homeowners have had to supplement grant drawdowns using funding from family members, emergency savings or credit unions ‘as banks failed to engage meaningfully’.

“There are thousands of homes and mortgages impacted by defective blocks and therefore banks need to recognise they have a significant problem on their hands,” the Banks and Insurance Focus Group say. 

“Their own terms and conditions place them at the centre of the problem and therefore they need to become part of the solution. As a working group, we are at a loss as to how the government has failed to bring the banks to the table given their security is being remediated.

“We are stunned at the failure of the government and banks to protect homeowners and ensure banks have dedicated staff and processes and interim finance products in place to assist homeowners.

“We would question whether banks have adequate provisions and operational risk management processes in place given the scale of this problem, which requires each impacted homeowner to negotiate a very complex scheme on their own.”

The group says that the matter ‘requires immediate and urgent focus at the highest levels of government’. They have accused the Government of ‘failing to protect the homeowners’ and have implored the relevant people to put in place ‘a 100 percent end-to-end and project managed scheme’.

Minister O’Brien met with the BPFI earlier this year, but the focus group has become increasingly worried. The Minister is believed to have sought assistance and has urged the insurance and banking groups to underwrite affected houses at the standard terms.