Repossessions set to rise as Coalition prepares to close loophole

The Government is set to close a legal loophole, which has prevented banks from taking repossession of properties.

Taoiseach Enda Kenny
Taoiseach Enda Kenny

Referred to as the ‘Dunne Judgement’, the legal anomaly has prevented banks from taking action against mortgage holders in extraordinary arrears on their mortgage repayments. Justice Elizabeth Dunne had found that a failure to change aspects of old laws before the Land and Conveyancing Law Reform Act 2009 was introduced meant that lenders could only repossess registered homes where borrowers had defaulted if they demanded full repayment before December 1, 2009.

The Coalition is expected to shortly have a new law ready to deal with a legal loophole.

According to the most recent data published by the Central Bank, just over 86,000 residential mortgage holders are now 90 days or more in arrears on their mortgage repayments. This equates to roughly 11 percent of all mortgages. Additionally, almost 18pc of all buy-to-let mortgages are in arrears.

The Government has been under intense pressure from the EU-IMF bailout team to address the question of distressed mortgages and indebtedness. In response, the Government has passed new personal insolvency laws, but the Dunne Judgement has remained a critical block in the area of non-performing mortgages.

Neither the Coalition or the Central Bank are expected to directly interfere in how mortgage lenders deal with severe mortgage arrears cases or solutions to reach a definitive solution, even when this requires repossession.

However, there are indications that where repossession take place, lenders may be willing to offer some degree of debt write-down.

Legislation to deal with the repossession loophole is expected to be published next month.

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