The Code of Conduct on Mortgage Arrears 2013 (CCMA) provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner. Banks, retail credit firms and credit servicing firms are all required to comply with the CCMA.
The CCMA sets out the Mortgage Arrears Resolution Process, (MARP), a four-step process that regulated entities must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrower’s circumstances; and
Step 4: Propose a resolution
Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA does not prescribe the solution which must be offered and lenders are not required to offer a particular solution to a borrower. The CCMA also provides that a lender must prepare and make available to borrowers, an information booklet providing details of its MARP, which must include an explanation of all ARAs available from that lender and any other options offered by the lender (other than alternative repayment arrangements), such as mortgage to rent, voluntary surrender, voluntary sale, and trading down, and a statement that the availability of these options are subject to an individual assessment of each case and meeting the lender’s (or a third party’s) criteria.
Provision 45 of the CCMA provides that 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 the reasons, on paper or another durable medium, to the borrower. In these circumstances, the lender must inform the borrower of other options available to the borrower, such as mortgage to rent, voluntary surrender, trading down, or voluntary sale and the implications of each option for the borrower; and his/her mortgage loan account.
At the end of the MARP, regulated entities are required to provide a three-month notice period to allow co-operating borrowers time to consider their options, such as voluntary surrender or an arrangement under the Personal Solvency Act, before legal action can commence.
The CCMA does not prescribe the solutions which must be offered and lenders are not required to offer a particular solution to a borrower and so the question of compliance with Provision 45(a) of the CCMA does not arise in the circumstances outlined by the Deputy in his question.