As Minister for Finance, I am committed to bringing forward legislation that protects consumers and whose loans are sold to unregulated entities. I have informed the House previously that the Government intends to bring forward legislation to ensure that, where a regulated financial entity sells its loan book to an unregulated entity, the protections afforded under the Central Bank codes will continue to apply. The Government has reiterated this commitment on several occasions.
In July and August of this year, my Department ran a public consultation seeking views on its proposed legislation to protect consumers whose loans are sold to unregulated entities. The Department of Finance received 19 submissions from a range of respondents from the financial services industry, consumer groups, public representatives and individuals and other stakeholders. These have been published on the Department's website at http://www.finance.gov.ie/what-we-do/banking-financial-services/consultations/responses-public-consultation-process-consumer. Officials in my Department have carefully considered the submissions and are working with the Office of the Attorney General to progress this legislation. It is anticipated that it will be published by the end of this year.
The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) sets out requirements for mortgage lenders when dealing with borrowers facing or in mortgage arrears. The CCMA applies to the mortgage lending activities of all regulated entities, except credit unions, operating in the State, and provides a strong consumer protection framework to ensure that borrowers struggling to keep up repayments on a mortgage loan which is secured on a primary residence 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. The Deputy will be aware that the 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 primary dwelling mortgage difficulty before any legal action is considered.
The CCMA also 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. Any bank proceeding to legal recourse with co-operating borrowers, in circumstances where an alternative sustainable arrangement is feasible and can be agreed, is not acting in a manner consistent with the Mortgage Arrears Resolution Process (MARP) process, or with the CCMA. Of course, the CCMA and MARP can only achieve positive results 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 conclusion for the respective parties. It should also be noted however, that even if the MARP process has concluded and where legal proceedings have commenced, the CCMA requires that a lender must continue to maintain contact with the borrower (and/or his nominated representative) periodically to see if an alternative repayment arrangement can be agreed even at that late stage.
The Deputy will be aware that even if a repossession case has commenced in the legal system, the 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 Central Bank has informed me that it has communicated to firms its preference that the outcome of any sale of mortgage books by regulated entities would ensure continuity of borrower protections under the relevant Codes and also that the purchaser would have relevant policies and procedures, systems and control checks to appropriately manage a mortgage loan book. It is in the best interests of unregulated firms that acquire loans to have the residential mortgage books serviced in compliance with the CCMA, as following the CCMA is in the ultimate best interests of both their business and their customers.
The strong view of the Government is that, in respect of co-operating borrowers under the MARP, repossession of a person's primary home should only be considered as a last resort. Every effort should be made to agree an acceptable arrangement as an alternative to repossession. Regretfully, however, it must also be accepted that due to the individual circumstances, not all mortgages can be made sustainable and that in these limited circumstances, it will be in the best interests of both parties to resolve the situation in a fair manner.
Indeed I was pleased to note in the mortgage restructures publication for August published by my Department that there was a significant increase of almost 5% in the number of permanent mortgage restructures over the July data. This is, in my view, a clear indication that cognisance is being taken by lenders of the need to ensure that the family home is protected in accordance with the terms of the CCMA.
