Dáil Éireann Debate, Thursday - 3 July 2014
58. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department and the Central Bank of Ireland continues to monitor the issues of mortgage arrears with particular reference to the use by some lenders of voluntary sale or surrender as a first rather than a last resort; and if he will make a statement on the matter. [28918/14]
View answerThe Central Bank's Code of Conduct on Mortgage Arrears (CCMA) sets out requirements for mortgage lenders dealing with borrowers facing or in mortgage arrears. 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 long term resolution is sought by lenders with each of their borrowers in genuine mortgage difficulty. In that context, provision 39 of the CCMA provides that, in order to determine which options for alternative repayment arrangements are viable for each particular case, a lender must explore all of the options for alternative repayment arrangements offered by that lender. Such alternative repayment arrangements may include:
a) interest only repayments on the mortgage for a specified period of time;
b) permanently reducing the interest rate on the mortgage;
c) temporarily reducing the interest rate on the mortgage for a specified period of time;
d) an arrangement to pay interest and part of the normal capital amount for a specified period of time;
e) deferring payment of all or part of the scheduled mortgage repayment for a specified period of time;
f) extending the term of the mortgage;
g) changing the type of the mortgage;
h) adding arrears and interest to the principal amount due;
i) equity participation;
j) warehousing part of the mortgage (including through a split mortgage);
k) reducing the principal sum to a specified amount; and
l) any voluntary scheme to which the lender has signed up e.g. Deferred Interest Scheme.
However, 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 CCMA requires that the lender must provide the reasons, on paper or another durable medium, to the borrower and also provide the further information set out in provision 45 of the CCMA including the other options available to the borrower in such circumstances such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower. The same information must be given to the borrower if he/she does not accept the alternative repayment arrangement offered by the lender.
Furthermore, under the Mortgage Arrears Resolution Targets (MART) process, the Central Bank is requiring the main lenders to work through their mortgages in arrears (both primary dwelling and buy to let mortgages) of more than 90 days and, where possible, to "propose" and "conclude" sustainable solutions with their borrowers in arrears. The Deputy will be aware that the Central Bank has now set quarterly targets to the end of 2014 by which time the relevant banks will be required to "propose" sustainable solutions to 85% of customers over 90 days in mortgage arrears and for "concluded" solutions to reach 45%. The latest data from the Central Bank on the ongoing MART process, which is in respect of the period to end 2013, is at the following link: http://www.centralbank.ie/press-area/speeches/Documents/30%20April%202014%20Oireachtas%20Committee%20accompanying%20chart.pdf.
Any bank proceeding to legal action or otherwise seeking the loss of ownership with co-operating borrowers, in circumstances where a sustainable alternative repayment arrangement is feasible and can be agreed, is not acting in a manner consistent with the MART process, or with the CCMA. Of course, the CCMA and MART can only achieve positive results in circumstances where the borrower and lender cooperate and engage with the process. If a borrower is not happy with the way that their lender is dealing with them, or if they think they are not complying with the CCMA, the borrower can make a complaint to their lender. Borrowers can also make an appeal to the lender's Appeals Board if they are not happy with the alternative repayment arrangement offered, or if the lender declines to offer an alternative repayment arrangement or if they believe they have been wrongly classified as not co-operating. If the borrower is not happy with the outcome of the appeal/complaint made to the lender, they can refer the matter to the Financial Services Ombudsman (FSO). Further information on how to make a complaint to the FSO is available at www.financialombudsman.ie.
The Central Bank has informed me that, through the MART process, the relevant statutory codes (such as the CCMA) and through regulatory engagement with the individual banks, it continues to monitor progress in dealing with mortgage arrears. As part of this engagement process, the Central Bank has also indicated that it intends to commence a review of mortgage lenders' compliance with the CCMA later this year.
