Dáil Éireann Debate, Thursday - 3 October 2013
15. Deputy Mary Lou McDonald asked the Minister for Finance the reason banks relied 62% on legal letters to meet the Central Bank’s MARTs; and if he will review the targets and the definition of a sustainable arrangement. [41506/13]
View answer19. Deputy John Halligan asked the Minister for Finance his plans to put pressure on banks to arrive at more permanent and sustainable solutions for distressed mortgage holders; and if he will make a statement on the matter. [41473/13]
View answer34. Deputy Pádraig Mac Lochlainn asked the Minister for Finance if he will make it clear to the Central Bank of Ireland that letters threatening repossession do not constitute sustainable offers of sustainable conclusions under the mortgage arrears resolution targets. [41505/13]
View answer53. Deputy Aengus Ó Snodaigh asked the Minister for Finance if he will confirm target of 25% of concluded mortgage solutions under the MARTs for Q1 2014 can include repossessions; and at what point of the repossessions or legal process would be considered concluded. [41509/13]
View answerI propose to take Questions Nos. 15, 19, 34 and 53 together.
The Central Bank has advised that its Mortgage Arrears Resolution Targets (MART) publication of March 2013 clearly defines the criteria by which a sustainable solution can be reported. Where a borrower relies on legal action to address an arrears situation it must be able to demonstrate that “an arrangement could not be reached or is not appropriate” and therefore it is pursuing legal action as a restructure of the mortgage is either not possible or not an adequate solution.
It is a key responsibility of financial institutions to do more to assist those in severe financial difficulty. Letters threatening repossession or legal action could not in my opinion be considered a sustainable solution under the mortgage arrears targets, and should only ever be considered after every possible avenue for solution has been exhausted. This is consistent with the Central Bank’s MART document. It should be noted that the Code of Conduct on Mortgage Arrears (CCMA) provides that lenders may only commence legal proceedings for repossession where they have already made every reasonable effort to agree an alternative arrangement with a cooperating borrower.
The MART document sets out three modes of generating a sustainable solution. The first and most preferred type of solution is an arrangement where payments are re-established on the original, or an agreed revised schedule. The second mode is where the borrower opts for a Personal Insolvency Arrangement and the third mode is where an arrangement could not be reached or is not appropriate and ultimately involves surrender or repossession of the property.
In his appearance at the Joint Committee on Finance, Public Expenditure and Reform, the Governor of the Central Bank acknowledged that more than sixty per cent of the end June proposals by the relevant banks were in the third mode. The Governor also informed the Committee that the Central Bank has commenced the audit of the banks’ returns on the end of June target and the Central Bank will have initial results of the audit in November (and will publish data in December). This will ensure that the mortgage modifications proposed by the lenders are in fact sustainable. The MART document also outlines the Central Bank’s position and powers in this regard. The two specific measures the Central Bank can take relate to imposing additional provisioning and capital requirements on firms. From 2014 the present value of future mortgage cashflows will be set at zero for the purpose of calculating impairment provisions where loans that are in arrears for greater than 90 days have not been subject to a sustainable solution.
In the targets set by the Central Bank, repossession of a property can be counted as a conclusion once the case has progressed to the lodgement of the Civil Bill with the Circuit Court. The Central Bank has also informed me, however, that to count as a conclusion, the institution must be able to demonstrate that all regulatory requirements have been adhered to, in particular the CCMA obligation to ensure that repossession is a last resort.
The Central Bank does not expect that repossession will be the lender’s preferred solution to mortgage difficulties and in most cases engagement by the borrower will make the legal course unnecessary. However in circumstances where the borrower does not engage with a lender to address a mortgage difficulty and, subject to fully complying with the Code of Conduct on Mortgage Arrears, then there may be no other option for the lender but to commence legal proceedings.
