I am advised by the Central Bank of Ireland that within the remit of their responsibilities for safeguarding stability and protecting consumers, its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. It is a statutory Code first introduced by the Central Bank in February 2009, with the current CCMA becoming effective from 1 July 2013. The 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 overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It 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 that they offer, 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.
The CCMA also sets out a procedure that lenders must follow where the following circumstances arise:
- where a lender classified a borrower as not co-operating (provision 29), or
- where a lender concludes that an alternative repayment arrangement is unlikely to be appropriate (provision 45), or
- where a borrower is not willing to enter into an alternative repayment arrangement offered by the lender (provision 47)
Again, the procedure to be followed by the lender in any of these circumstances is that it must inform the borrower on paper or another durable medium of other options available to the borrower, such as mortgage to rent, voluntary surrender, trading down, or voluntary sale, and the implications of these for the borrower and the borrower’s mortgage loan account.