I have been advised by the Central Bank of Ireland (Central Bank) that in line with its mission of safeguarding stability and protecting consumers, the Central Bank's work on mortgage arrears spans its consumer protection, prudential supervision, and financial stability roles. Within the remit of the Central Bank’s responsibilities, the approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework while ensuring banks are sufficiently capitalised, hold appropriately conservative provisions, and have appropriate arrears resolution strategies and operations.
Since the Central Bank first introduced the Code of Conduct on Mortgage Arrears (CCMA) in 2009, there have been 23 inspections specifically to test compliance with the CCMA. However, this is just one aspect of our supervisory approach to protecting borrowers in arrears.
2010 Themed Inspection of CCMA
In 2010, the Central Bank undertook a themed inspection across five mortgage lenders to ensure the CCMA had been implemented and was being complied with.
2011 Mortgage Arrears Resolution Strategies
In late 2011, the Central Bank further intensified its engagement with lenders with regard to mortgage arrears resolution. To press banks to remediate these shortcomings and ensure appropriate board-level focus, in October 2011, mortgage lenders were required to submit to the Central Bank board-reviewed and approved mortgage arrears resolution strategies (MARS). The purpose was to ensure the fair treatment of borrowers, supported by detailed implementation plans to deal with their stock of arrears cases as well as new inflows.
2011 Themed Inspection of CCMA
In 2011, the Central Bank published the findings of a themed inspection of six mortgage lenders which examined compliance with the requirements of the revised CCMA specifically relating to charges on mortgage accounts in arrears.
2012 Operational Capability Assessments
The introduction of the CCMA in 2009 set out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre arrears.
One additional provision of the CCMA in 2011 mandated lenders to establish a centralised arrears support unit (ASU), which must be adequately staffed, to manage cases under the Mortgage Arrears Resolution Process (MARP). The focus in early 2012 centred on further examining and challenging banks’ operational capacity to resolve NPLs, and pressing banks to remediate shortfalls identified during their MARS assessments. Blackrock Solutions was commissioned to undertake an independent Distressed Credit Operations Review (DCOR) focusing on residential mortgage and SME distress management.
During the latter part of 2012 and throughout 2013, the Central Bank continued to challenge banks regarding their operational capabilities and undertook a number of different inspection related activities to review banks ASUs to assess if meaningful progress was being made in their approach to resolving distressed loans. While progress was being made, gaps were identified particularly in the 2012 and early 2013 inspections.
2013 Mortgage Arrears Resolution Targets
In early 2013, the Central Bank introduced the Mortgage Arrears Resolution Targets (MART) framework. Through MART, the Central Bank imposed quarterly quantitative targets on the six main mortgage lenders (accounting for approximately 90 per cent of the Irish mortgage market) on Republic of Ireland principal dwelling home/primary residence and buy-to-let mortgage portfolios. The targets were focused on resolving arrears greater than 90 days.
The Central Bank also introduced enhanced supervisory reporting requirements to monitor and challenge progress by banks in implementing sustainable solutions. On-site credit inspections by the Central Bank examined samples of these sustainable solutions during the MART programme.
2015 Themed Inspection of the CCMA
In 2015, the Central Bank published the outcome of a themed inspection of seven lenders’ compliance with the CCMA. https://www.centralbank.ie/docs/ccma-themed-inspection
Formal supervisory requirements, with specific timelines for remediation, were imposed on those lenders where the Central Bank identified risks to borrowers.
No firm has been sanctioned for a breach of the CCMA to date.
2018 Inspections of the CCMA
In 2018, the Central Bank undertook five inspections in relation to the CCMA including some that contributed to the review into the effectiveness of the CCMA (Section 6(a) Report).
In addition, the Central Bank has also conducted and published research on consumers’ experience of the Mortgage Arrears Resolution Process. Consumer explainers and guides on the CCMA have also been published by the Central Bank.