I propose to take Questions Nos. 158 and 184 to 186, inclusive, together.
The strong view of the Government is that, in respect of co-operating borrowers under the Mortgage Arrears Resolution Process (MARP), repossession of a person's primary home should only be considered as a last resort and that every effort should be made to agree a sustainable arrangement as an alternative to repossession. I can assure the Deputy that both my Department and I have expressed this view to the lenders and are keeping in regular contact with them on this important issue.
The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) places an onus on the banks, in respect of a co-operating borrower, to explore all the options for an alternative repayment arrangement offered by the lender to address a mortgage difficulty before any legal action is considered. Furthermore, under the Mortgage Arrears Resolution Targets (MART) process, the Central Bank is requiring the main lenders to work through their mortgages in arrears of more than 90 days and, where possible, to propose and conclude sustainable restructures with their borrowers in arrears.
Of course, the CCMA and MART can only work in circumstances where the borrower cooperates with the lender and engages with the process. Where this does not happen, the lender may have no other option but to go down the legal route to deal with an arrears case. However, if that course of action leads the borrower to commence a constructive engagement, this can lead to a more favourable outcome for the respective parties.
The Central Bank has advised that under the MARP, if a lender does not offer a borrower an alternative repayment arrangement, for example, where it is concluded that the mortgage is not sustainable and an alternative repayment arrangement is unlikely to be appropriate, the lender must provide reasons on paper or in another durable medium, to the borrower. In these circumstances, the lender must inform the borrower that s/he is now outside the MARP and that the specific protections and provisions of the MARP no longer apply.
The lender must also inform the borrower of the following:
a) other options available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower and his/her mortgage loan account including:
(i) an estimate of associated costs or charges where known and, where not known, a list of the associated costs or charges;
(ii) the requirement to repay outstanding arrears, if that is the case,
(iii) the anticipated impact on the borrower's credit rating, and
(iv) the importance of seeking independent advice in relation to these options;
b) the borrower's right to appeal the decision of the lender not to offer an alternative repayment arrangement to the lender's Appeals Board;
c) that legal proceedings may commence three months from the date the letter is issued or eight months from the date the arrears arose, whichever date is later, and that, irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case;
d) that the borrower should notify the lender if his/her circumstances improve;
e) the importance of seeking independent legal and/or financial advice;
f) the borrower's right to consult with a Personal Insolvency Practitioner;
g) the address of any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act 2012; and
h) that a copy of the most recent standard financial statement completed by the borrower is available on request.
However, it should be noted that even if the MARP process has concluded and a repossession case has commenced in the legal system, the recent Land and Conveyancing (Law Reform) Act 2013 now provides a power to the Court to adjourn a repossession proceeding in relation to a principal private residence to enable the borrower to consult a personal insolvency practitioner (PIP) and, where appropriate, to instruct the PIP to make a Personal Insolvency Arrangement (PIA) proposal. In formulating a proposal for a PIA, the Personal Insolvency Act 2012 places an onus on a PIP to do so on terms that, shall not insofar as reasonably practicable, require the borrower to dispose of an interest or cease to occupy a principal private residence.
The latest available Central Bank mortgage arrears and repossession data shows that during the third quarter of 2013, legal proceedings were issued to enforce the debt/security on a principal dwelling house mortgage in 1,830 cases. However it is accepted that the legal repossession route is not the preferred option and that engagement by the borrower, even at a late stage, can indeed provide a better alternative. However, if there is no engagement about a mortgage problem, there may be no alternative available option. Overall therefore early and effective engagement between borrowers and lenders is key to resolving cases of mortgage difficulty. Where there is effective and meaningful engagement regarding a mortgage difficulty, the data shows that an increasing number of durable long term mortgage restructures is being put in place.
As the Deputy is aware, my Department has requested the six main banks operating in Ireland, and who fall within the Central Bank Mortgage Arrears Resolution Targets (MART) process, to provide data on the restructuring situation in relation to all primary dwelling mortgages, both in arrears and not in arrears, on a monthly basis. This process is separate from the Central Bank quarterly data collection and publication process and is intended to provide certain data on the level of mortgage restructures on a more timely basis. It should be noted that these are voluntary and unaudited returns by the relevant banks, and given the short timeframe in which the lenders provide this information to my Department and more frequent reporting requirements, they have not gone through the lenders quality control process for regulatory return purposes. However, it is considered to be a desirable development to place more timely and frequent mortgage restructuring data into the public domain.
It is accepted that the issue of mortgage arrears is a major problem that needs to be resolved, not only for an individual borrower and lender, but also for the long term economic and social health of the country and the Government will ensure that the comprehensive strategy is has put in place to tackle the problem is now fully implemented by all the parties involved in the process.