The Central Bank has now concluded a review of the Code of Conduct on Mortgage Arrears, CCMA, following a public consultation process, with in excess of 230 submissions received. The revised CCMA was published on 27 June 2013 and came into effect on 1 July 2013. The submissions made, as well as feedback document outlining the Central Bank’s response to some of the main issues raised, are available on the Central Bank’s website, www.centralbank.ie. The CCMA provides an integrated and cohesive package of consumer protection measures for borrowers facing or in mortgage arrears. It reflects the current mortgage arrears situation and seeks to deliver on the following principles, to:
- ensure appropriate resolution of each borrower’s arrears situation;
- ensure that lenders deal with borrowers in a fair and transparent manner;
- support and facilitate meaningful engagement between lenders and borrowers; and
- ensure borrower awareness of the benefits of co-operating with their lender, and the consequences of not co-operating.
With regard to the moratorium, to clarify, the 12 month moratorium applied from day 31 after arrears first arose and did not take into account any time taken by the lender to gather information from the borrower, complete an assessment or make an offer. The revised CCMA requires a lender to wait at least eight months from the date the arrears arose, before legal action can commence against a co-operating borrower.
Separately, regardless of how long it takes the lender to assess a case, and provided that the borrower is co-operating, the lender must give three months’ notice to the borrower before they can commence legal proceedings where:
- the lender does not offer an alternative repayment arrangement; or
- the borrower does not accept an alternative repayment arrangement offered by the lender.
This will give co-operating borrowers time to consider other options that may be available to them, such as voluntary surrender, voluntary sale or a personal insolvency arrangement. The combined effect of the protection period and the notice period is that, for a co-operating borrower, legal proceedings may not commence until three months from the date the letter is issued (where lender declines to offer an arrangement or where the borrower does not accept an arrangement offered) or eight months from the date the arrears arose, whichever date is later. The revised CCMA also sets out a requirement for lenders to draw up a contacts policy that will apply to all communications with borrowers in arrears or pre-arrears, and must be approved by the lender’s board of directors.
To mitigate against the risk of harassment resulting from the removal of the limit on contacts, provision 22 of the revised CCMA will require lenders to ensure that:
a) communications with borrowers are proportionate and not excessive, taking into account the circumstances of the borrower, including that unnecessarily frequent communications are not made;
b) communications are not aggressive, intimidating or harassing;
c) borrowers are given sufficient time to complete an action they committed to, before follow up communication is attempted; and
d) steps are taken to agree future communication with borrowers.
In relation to appeals, the Central Bank does not have the power to require lenders to delegate commercial decisions in relation to debt restructuring to independent parties. A complaint may of course be made to the Financial Services Ombudsman, FSO, including in respect of an appeal. The FSO will consider whether the lender complied with the CCMA in reaching the decision and may direct a lender to re-assess the borrower’s case.
The Deputy will also be aware that the new Personal Insolvency Act provides new statutory insolvency frameworks to allow debtors, through the utilisation of a professional personal insolvency practitioner, and creditors, to consider an arrangement to resolve unsustainable mortgage and personal debt. The legislation provides a legal framework for the resolution of mortgage arrears, as well as other personal debt, and it will provide certainty for borrowers and lenders alike about the consequences of non-payment and failure to reach agreement. The effect of this legislation is to rebalance the relationship between debtors and creditors and to offer more accessible and effective options to debtors to deal with debt difficulty.
Also, in preparing a Personal Insolvency Arrangement which can include mortgaged assets, there is an onus on a personal insolvency practitioner to formulate a proposal, insofar as reasonably practicable, on terms that will not require the debtor to dispose of an interest in or cease to occupy a principal private residence. The Insolvency Service of Ireland, which will oversee the operation of the new insolvency frameworks, has now been established and will shortly begin accepting applications for the new personal insolvency processes.