I propose to take Questions Nos. 59, 60 and 96 together.
The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) provides that each bank must put in place a formal Mortgage Arrears Resolution Process (MARP) to deal with its mortgage customers who are in arrears or pre-arrears and for the establishment of dedicated arrears support units and appeals processes to handle such cases. The CCMA places an onus on the lenders, in respect of a co-operating borrower, to explore all the options for an alternative repayment arrangement offered by the lender to address a private dwelling mortgage difficulty.
The Central Bank has advised 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 having assessed the borrower's financial circumstances using the borrower's Standard Financial Statement (SFS). Such alternative repayment arrangements may include:
- an interest-only arrangement for a period of time;
- extending the term of the mortgage;
- adding the arrears and interest to the mortgage, so that they are collected over the remaining term;
- warehousing part of the mortgage, as well as other options outlined in the CCMA.
While lenders must consider such arrangements, they are not obliged to offer a borrower in arrears any arrangement or any particular arrangement.
If a borrower is offered an alternative repayment arrangement, the lender must give the borrower a clear explanation of the proposed arrangement and how it works, including the reason why the lender considers it to be appropriate for the borrower. The lender must also provide the borrower with the advantages of the offer and explain any disadvantages.
If the lender is not offering the borrower any alternative repayment arrangement, the lender must set out the reasons in writing. The lender must also inform the borrower that a copy of the most recent SFS is available on request, and provide the borrower with details, in writing of:
- other options available;
- the borrowers right to make an appeal to the lenders internal Appeals Board;
- the website of the Insolvency Service of Ireland.
The same information must be given to the borrower if he/she does not accept the alternative repayment arrangement offered to by the lender.
Section 55 of the CCMA provides that complaints relating to the lender's treatment of the borrower's case under the MARP process and the lender's compliance with the requirements of the CCMA must be dealt with in accordance with the complaints provisions set out in the Consumer Protection Code 2012. This provides a detailed complaints resolution framework which seeks, in the first instance, to resolve matters directly between the consumer and financial institution but, failing that, the matter can be referred to the independent Financial Services Ombudsman.
The Central Bank has informed me that it does not publish the number of non-co-operating borrowers. However paragraph 29 of the Central Bank's CCMA does provide the following:
"where a lender has classified a borrower as not co-operating, following a period whereby the borrower has been given the opportunity to co-operate (in line with provision 28), the lender must notify the borrower on paper or another durable medium that he/she has been classified as not co-operating and inform the borrower of the following:
a) that legal proceedings can commence immediately;
b) that the borrower is now outside of the MARP and the protections of the MARP will no longer apply;
c) other options that may be available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower and his/her mortgage loan account, including:
(i) an estimate of the associated costs or charges, where known, and where it is not known, a list of the associated costs or charges;
(ii) the requirement to repay outstanding arrears, if this is the case;
(iii) the anticipated impact on the borrower's credit rating; and
(iv) the importance of seeking independent advice in relation to these options;
d) the borrower's right to appeal the lender's decision, including that the borrower must make the appeal in writing and set out the grounds for the appeal; and
e) the borrower's right to consult a Personal Insolvency Practitioner, notwithstanding the fact that the classification as not co-operating may impact on the borrower's eligibility for a Personal Insolvency Arrangement. "
It should also be noted 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 Central Bank has also informed me that it does not track the number of borrowers covered under the MARP but does track the number of mortgage accounts in arrears and the number of alternative arrangements put in place across the regulated industry and which are published quarterly by the Central Bank. The latest data published by the Central Bank for end December 2013 can be accessed on the Central Bank's website, http://www.centralbank.ie/press-area/press-releases/Pages/ResidentialMortgageArrearsandRepossessionsStatisticsQ42013.aspx.
Furthermore, the Deputies may also wish to note, that according to information collected by my Department for the 6 main lenders, in the case of private dwelling homes some 51,000 mortgage accounts in difficulty have been the subject of permanent restructuring following engagement between borrower and lender. A further 21,000 mortgage accounts in difficulty have been the subject of temporary restructures. The data published by my Department and the Central Bank would appear to demonstrate some success by the lenders in addressing the accounts in early arrears and putting in place appropriate measures to prevent borrowers from going into arrears.
Taken together, the necessary framework is in place to enable banks to work with distressed homeowners to reach sustainable solutions for dealing with their personal indebted situations. However, early and effective engagement between borrowers and lenders is key to resolving the cases of mortgage difficulty. Where there is effective and meaningful engagement by all parties regarding a mortgage difficulty, the data shows that an increasing number of durable long term mortgage restructures is being put in place. However, it is accepted that it will be necessary for lenders and borrowers to continue to build on this.