Dáil Éireann Debate, Tuesday - 24 January 2023
72. Deputy Rose Conway-Walsh asked the Minister for Finance the assessments that have and will be undertaken with regards to the Code of Conduct on Mortgage Arrears, CCMA, including the suite of alternative repayment arrangements; his plans to give the code full legal effect; and if he will make a statement on the matter. [3100/23]
View answerWill the Minister outline the assessments that have and will be undertaken with regard to the code of conduct on mortgage arrears, including the suite of alternative repayment arrangements? What are the Minister's plans to give the code full legal effect?
The Central Bank code of conduct on mortgage arrears, CCMA, is the key consumer protection measure for borrowers experiencing difficulty with a mortgage secured on a primary residence. This statutory-based code, which is issued by the Central Bank under section 117 of the Central Bank Act 1989, sets out how regulated mortgage creditors must treat borrowers in or facing mortgage arrears. Regulated entities are required to comply with all aspects of the CCMA as a matter of law and as such it has full legal effect.
The objective of the CCMA is to ensure that regulated entities have fair and transparent processes in place to deal with their borrowers who are facing mortgage arrears. Due regard must be given to the fact that each mortgage case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.
In particular, the CCMA provides that, in order to determine which options for alternative repayment arrangements are viable for each particular case, the regulated mortgage creditor must explore all options for alternative repayment arrangements offered by that creditor. Furthermore, if a borrower is not satisfied with the decision of the regulated entity regarding this matter, such as if he or she is not happy with the particular alternative repayment arrangement offered by the mortgage creditor to address the particular mortgage repayment difficulty or if the mortgage creditor declines to offer an alternative repayment arrangement, the CCMA provides that an appeals process must be in place to allow for the matter to be reconsidered. That appeals procedure must also inform the borrower of his or her right to refer the matter to the Financial Services and Pensions Ombudsman.
The Central Bank carried out a review of the CCMA in 2018 to ensure it remains as effective as possible. The review found at that time that, for borrowers who engage with the process, it was working effectively and as intended. The Central Bank keeps its consumer protection framework under review and, as the Deputy will be aware, the Central Bank is currently reviewing its consumer protection code and a discussion paper on this is now open for public consultation.
I thank the Minister. There are serious problems in how what the Minister's spoke about is being adhered to and how it is being enforced. The issues are well-documented in the Free Legal Advice Centres, FLAC, From Pillar to Post series published in the last number of years. As the Minister said, it is crucial to ensure that the CCMA is fit for purpose, especially in the context of the rising interest rates, which we are seeing more of today. For those who are having repayment difficulties, this is becoming more and more prevalent. There is limited data on the type of restructures that take place between the lender and borrower. The data shows that the longer a mortgage is in arrears, the more difficult it is to get a restructure, with the minority of mortgages in arrears having received a restructure.
There is also concern regarding the premature classification of borrowers as non-co-operating which immediately removes the borrower from the protection of a mortgage arrears resolution process. We have to ask if there is a need for greater supervision by the Central Bank of lenders prematurely classifying borrowers as non-co-operating, given its stark and immediate consequences for them.
I thank the Deputy, who has raised very important issues. I know that the Central Bank takes them very seriously. The review of the consumer protection code is a very important body of work which is currently under way. I encourage all Members of the House to engage in the process and to share the real-life experience of constituents, which has been conveyed to us, so that the Central Bank is fully aware of what is happening on the ground and in reality.
It is worth putting on the record that the level of mortgage arrears in Ireland has fallen very significantly. For the quarter ending September 2022, slightly over 45,700 primary dwelling mortgages were in arrears and, when those mortgages which were in very short-term arrears were excluded, some 30,800 were in arrears of more than 90 days. That is approximately 4.3% of principal dwelling house mortgages. Back in 2013, that was almost 13%. That said, there is no room for complacency. We know that interest rates have risen and are likely to rise further and that, of course, has an impact on the affordability of mortgage repayments for customers. We do not want to see the progress that has been made in respect of mortgage arrears going into reverse. The types of issues that the Deputy has raised are very important. I know that they will be considered very carefully by the Central Bank in respect of its regulatory function.
We need this to work for homeowners. There is clear evidence, as the Central Bank has warned on many occasions, that the waterfall of alternative repayment arrangements has not been sufficiently worked through by lenders. The easy reflex option of sale to third parties and vulture funds has been used, rather than finding sustainable solutions for borrowers. There is a cohort of borrowers whose loans were sold and are now owned by the vulture funds, with interest rates suddenly rising sharply. They are refusing to engage with the borrowers, offer fixed rates or consider sustainable solutions. There is a real problem here for those who are caught in the trap of mortgage arrears.
Can I clarify something with the Minister? The programme for Government committed to assess the CCMA, including the available suite of alternative repayment arrangements, and to ensure it has full legal effect. Is the Government going to do that or is it just saying that the Central Bank is carrying out a piece of work that will take us up to 2025? This is a far wider consumer protection piece of work and is very important. Is the Government going to fulfil its commitment under the programme for Government? There is an issue in respect of the alternative repayment arrangements and the suite which is available. As I said earlier when we were talking about mortgage interest relief, tracker mortgage customers who were paying 3.5% in June are now being forced to pay a 7% interest rate. There is no option for them to fix. The Minister says that the CCMA has full legal effect but when a vulture fund only offers a customer to pay his or her interest or mortgage, where does a borrower go in those circumstances?
I am aware that not all loan owners - non-bank lenders, in particular - offer a fixed rate option, which can be a very attractive one for many borrowers. We have seen the run rate recently. Approximately 92% to 93% of new mortgages being issued in Ireland are fixed-rate in nature because it gives certainty to the borrower about the nature and the level of their repayment for a period of time. It is the case under the CCMA that the mortgage creditor has to explore all of the options for an alternative repayment arrangement offered by that lender, that the Central Bank has to ensure that such an assessment has been properly done, that every possible repayment arrangement is being explored and that the most appropriate one is being offered to a borrower in these circumstances. There is an appeals process in place also to address that issue.
