I propose to take Questions Nos. 238 and 239 together.
The Deputy will be aware that the Mortgage Arrears and Personal Debt Expert Group (Expert Group) have now completed their work having submitted an Interim Report to me on 5th July 2010 and their Final Report on 16th November 2010. Both Reports were brought before Government. The Expert Group's Reports are available at www.finance.gov.ie and a complete list of all the recommendations is included in Chapter 2 of the Final Report.
Following a consultation process, the Central Bank published a revised Code of Conduct on Mortgage Arrears (CCMA) on 6th December 2010. The revised CCMA closely follows the recommendations of the Expert Group and applies to the mortgage lending activities of all regulated entities, except credit unions, operating in the State, including a financial services provider authorised, registered or licensed by the Central Bank of Ireland. This applies to subsidiaries which fall into this category and Haven Mortgages which the Deputy refers to.
The revised CCMA came into effect on 1 January 2011. Lenders are required to comply with the CCMA as a matter of law however they will be allowed a six month period of grace, ending on 30 June 2011, where the Central Bank of Ireland will be cognisant of issues relating to systems development, required staff training and other difficulties. Failure to comply with the revised CCMA may result in sanctions under the Administrative Sanctions Framework.
The most significant changes in the revised CCMA include:
Lenders will be prohibited from moving borrowers in arrears of existing tracker mortgages;
Borrowers in arrears who co-operate with the Mortgage Arrears Resolution Process (MARP) will not be charged penalty interest;
Harassment of borrowers through unsolicited communications will be outlawed;
Borrowers in financial difficulties, but not in arrears, will be allowed to come under the MARP.
Clarifying the existing 12 month moratorium on legal action in arrears cases.
Lenders representing the majority of the market have already indicated their willingness to implement the Expert Group's proposals for a Deferred Interest Scheme (DIS) or a variation of it and the remaining participants will be requested to do so. The Deputy will be aware from media reports that AIB, Bank of Ireland, EBS, and Irish Life and Permanent are reported to have signed up to the DIS. The DIS is to apply to those homeowners unable to pay full interest on their mortgages but able to pay at least 66%.
I understand that ‘normal interest accrues on a mortgage, even it is is in arrears. Provision 9 of the CCMA states that lenders are restricted from imposing charges and/or surcharge interest on arrears arising on a mortgage account in arrears to which the CCMA applies in respect of which a borrower is co-operating reasonably and hoestly with the lender in the MARP.
Full details of the DIS are in the Final Report at pages 22 to 25, where the Deputy will note in relation to interest charges that deferred interest accumulates in a non-interest charging deferral account. While the DIS is voluntary for all lenders, those who have signed up in support of the scheme will be monitored by the Financial Regulator to ensure compliance. The Expert Group's recommendations are intended to be of benefit to both lender and borrower and it is assumed that lenders will cooperate and implement the recommendations or variations of them as soon as possible.
The Deputy may also wish to note that in addition to those recommendations being implemented through amendments to the CCMA, other recommendations relating to home owners with mortgage arrears will require legislative support involving my Department, the Departments of Social Protection (DSP), Environment, Heritage and Local Government (DEHLG).
In the case of my own Department, recommendations to do with the scope and the admissibility in Court of the CCMA will be examined in the context of the preparation of the second Central Bank Bill.
In order to implement those recommendations in relation to the mortgage interest supplement scheme (MIS) changes to both primary and secondary legislation will be required. The Department of Social Protection is currently developing an implementation plan that will set out a framework for the future of the scheme.
New regulations and guidance are currently being developed by DEHLG in the context of the social housing reform programme to provide that housing authorities could disregard the household's current accommodation for the purposes of determining eligibility for social housing support. I am informed that work is ongoing on the development of a new needs assessment process which will allow an earlier trigger point for the social housing needs assessment process to take place where a case has been determined to be unsustainable in the long term, following exploration of all other options.