The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) is a statutory Code issued under Section 117 of the Central Bank Act 1989 and lenders are required to comply with the CCMA as a matter of law. The Central Bank's CCMA was revised last year and the revised Code came into effect from 1 July 2013. This followed an extensive consultation process where over 200 submissions were received from consumers, consumer representative bodies, industry and other representative bodies.
I am informed by the Central Bank that the CCMA provides an integrated and cohesive package of consumer protection measures for borrowers facing or in mortgage arrears. It 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.
The CCMA provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that sustainable arrears resolution is sought by lenders with each of their borrowers. The CCMA clearly sets out the conditions which lenders must satisfy before legal proceedings for repossession can be commenced.
Below is an excerpt from the CCMA:
"Where a borrower is in mortgage arrears a lender may only commence legal proceedings for repossession of a borrower's primary residence, where:
a) the lender has made every reasonable effort under this Code to agree an alternative arrangement with the borrower or his/her nominated representative; and
b) (i) the period referred to in Provision 45 d) or Provision 47 d), as applicable, has expired; or
(ii) the borrower has been classified as not co-operating and the lender has issued the notification required in Provision 29."
The CCMA does not limit a lender's discretion to re-engage and/or review the borrower's case where the borrower's circumstances improve after the lender has commenced legal proceedings. Paragraph 59 of the CCMA also provides that, where legal proceedings have commenced, a lender must continue to maintain contact with the borrower. If an alternative repayment arrangement is agreed between the parties before an order in relation to the repossession of the property is granted, the lender must seek an order from the Court to put the legal proceedings on hold for the period during which the borrower adheres to the terms of the alternative repayment arrangement.
It is important to point out, however, 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 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.
