The Group has considered the MIS scheme in terms of its policy objectives, administrative arrangements, legal issues and the scheme‟s overall efficiency and effectiveness. The basic purpose of MIS, when established, was to ensure that a person who suffered a short-term loss of income would not have the family home repossessed due to an inability to meet the mortgage repayment. This objective remains valid even though recent forbearance policies ensure that repossessions are far less likely in the current climate.
The Group consulted with a wide range of interested parties and has carried out extensive analysis of the scheme and its role within the broader housing area. The Group notes that MIS is only one element of the range of supports required by those in difficulty, and in this context has consulted with, and been informed by, the work of the Mortgage Arrears and Personal Debt Review Group.
The Group sets out a number of recommendations for fundamental reform of the MIS scheme. This reform aims to deliver significant customer improvement by ensuring that State support for those unable to deal with mortgage arrears is better targeted, consistent and easily understood. It also seeks to ensure that lending institutions and borrowers share responsibility with the State in a balanced way.
The key findings and recommendations for reform are set out below and described more fully in Chapter 7 of this report, with references to the main text as appropriate. Chapter 7 also includes a number of the wider housing policy issues for consideration of the Expert Group on Mortgage Arrears and Personal Debt. The Group acknowledges that these wider issues are outside its terms of reference but could have direct impact on the future efficiency and operation of the MIS.
1. The MIS provides a valuable State support to those experiencing mortgage difficulties.
2. The scheme has grown very substantially since 2007, both in terms of numbers which increased by 268% to the end of 2009, and expenditure which will be almost €64 million in 2010, an increase of 424%.
3. Evidence suggests that a high number of claimants are not contacting their lenders to renegotiate the terms of their mortgages in advance of applying for MIS support.
4. MIS could act as a disincentive to seeking or retaining employment due to high replacement rates.
5. The overall objective of the scheme to provide short-term income support remains valid in the current mortgage market and economic conditions, even with current forbearance policies.
6. Expenditure on MIS is still relatively low when compared to other State supports for housing such as rent supplement and local authorities spend.
7. The rules governing entitlement to MIS are too complex and can lead to lengthy delays in decisions.
8. The scheme as currently operated does not deliver a consistent and equitable approach to customers and requires both changes to the scheme rules and the way in which it is administered.
9. Some people may not be able, even with MIS support, to sustain their mortgage in the longer-term. In these cases, other housing solutions appropriate to their need must be found. This matter is being explored by the Expert Group on Mortgage and Personal Debt.
10. The current data collection does not provide adequate statistical and management information to monitor the effectiveness of the scheme.
Key Proposals for Reform
The proposals put forward in this review are intended to be revenue neutral. For example the cost of expanding the scheme to include couple households where one person is working should be offset by a 6 month period of forbearance and a standard rate of interest for mortgages where MIS is provided by the State. However, it is recognised that there is potential for costs to increase, particularly if the conditions regarding time limits are not introduced. Any changes will require careful monitoring and a flexible approach. The key proposals are as follows:
1. The rule preventing payment of MIS to couples where one person is working in excess of 30 hours should be removed on the basis that:
a. the person suffered a substantial loss of income due to an observable change in circumstances;
b. a revised means test is developed; and
c. MIS will be a time bound support
2. The rule excluding MIS where a property is offered for sale is unduly restrictive in the current market and should be suspended and re-introduced when the housing market recovers.
3. MIS should not be provided where repayments of the capital element of the loan are being made to the lender. This will insure the borrower is not placed under additional financial stress.
4. The applicant must renegotiate a six month period of forbearance with the lender before the State intervenes in providing MIS.
5. An overall time limited period in the region of 2 years should be introduced to ensure that MIS does not impact on behaviour in terms of seeking or retaining work and that it remains as a short term scheme
6. The current provision that allows for payment of an exceptional rate or amount of interest for a 12 month period will be reconsidered in light of any recommendations from the Expert Group in relation to standardising the rate of interest provided by the State or in light of any future State support solutions.
7. MIS should not be payable in respect of any housing loans of other State agencies or housing authorities
8. MIS support should not become a medium or long term housing solution.
9. Successful applicants must be assisted to ensure that their long term housing support needs, if any, are met prior to the cessation of MIS payment.
1. The minimum contribution amount should reflect individuals‟ financial circumstances and be consistent with the differential rent calculations established by local authorities for social housing supports.
2. The current legal definition of mortgage interest to mean interest on loans for the purchase, repair or essential improvement of the sole or main residence of the person should remain
3. There should be no extension of MIS to cover interest payments other than those related to the principal private residence of the individuals concerned. The current capital assessment model should be augmented to include an income / expenditure calculation for MIS applicants with investment properties
4. The capital element of the mortgage repayment should not be taken into account in calculating the amount of supplement payable. MIS will remain a payment in respect of the interest portion of the mortgage
5. The MIS assessment process will be amended to ensure, whereby applicants have 'positive net worth' in properties other that their principal private residence, this will be taken into consideration when determining any amount of MIS payable
6. The exemption of home help earnings from the MIS means test should be removed.
1. MIS should be integrated as part of a single income support scheme.
2. A centralised MIS Approval and Payments Unit should be established within the Department of Social Protection
3. The eligibility conditions regarding ability to meet loan repayments when the mortgage was commenced should be revised
4. Guidance on the issue of ownership needs to be revised to reflect the diversity of ownership and to deal with circumstances where couples are separating and where the future ownership of the property is uncertain
5. There should be a significant improvement in the collection and analysis of data
6. Any amendments in relation to the conditions for MIS must be provided for, as appropriate, in primary legislation.
Other Areas of Work
The Group also consulted with the Expert Group on Mortgage Arrears and Personal Debt in order to ensure MIS coherence in relation to the Code of Conduct on Mortgage Arrears and the mortgage arrears assessment process. Specific areas examined include:
1. Postponement of legal action by the lender while MIS is in payment
2. Development of a Standard Financial Statement to be used by lenders and the State
3. The standardising of the rate of interest provided by the State
4. The payment of MIS directly into the mortgage account of the borrower.