The protection of borrowers in arrears is a key priority of this Government and the Central Bank of Ireland. The Central Bank's approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that regulated entities have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears 2013 (CCMA) is a statutory Code that ensures that lenders have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears. Within this process, due regard must be given to the fact that each 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.
The CCMA applies to a mortgage loan secured by a borrower’s primary residence. A split mortgage, as referred to in the Deputy’s question, is considered to be a type of alternative repayment arrangement (ARA) under the CCMA. A regulated entity must ensure that the Mortgage Arrears Resolution Process (MARP) framework, as set out in the CCMA, is applied not only to cases where a mortgage account first enters into arrears or pre-arrears, but also where an ARA put in place breaks down or where the term comes to an end. The MARP includes obligations to assess the borrower’s case based on the full circumstances of the borrower, and to explore all of the options for ARAs offered by that regulated entity in order to determine which options for ARAs are viable for a particular case. When the term of an ARA comes to an end, the regulated entity must re-assess the borrower’s case in accordance with the MARP.
The MARP also requires that a regulated entity must review an ARA at intervals that are appropriate, including at least 30 calendar days in advance of the ARA coming to an end, or at any time if requested by the borrower. Where there has been a change in the borrower’s circumstances, the regulated entity must request an updated standard financial statement from the borrower and must consider the appropriateness of the ARA for the borrower. Where an ARA is offered to the borrower, the regulated entity must provide the borrower with a clear explanation of how the ARA works and the reasons why it is appropriate and sustainable for the borrower’s individual circumstances. The Central Bank has communicated its expectations that regulated entities must also provide the borrower with information on how the borrower’s case was assessed, and the reasons why ARAs considered, but not offered to the borrower, are not appropriate and not sustainable for the borrower’s individual circumstances.
The regulated entity must have in place an appeals process which allows the borrower to appeal certain decisions, including where an ARA is offered but the borrower is not willing to accept, and where no ARA is offered.
The Central Bank carries out its supervision of regulated entities in a number of ways, which includes both desk based and on-site reviews of various activities. In early 2018, I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible. This Report was published late last year and found that for borrowers who engaged with the process, the CCMA is working effectively as it is intended in the context of the sale of loans by regulated lenders. Amongst one of the findings in the Report was that when a loan is sold by a bank, any existing ARAs in place with a borrower under the CCMA continues to be honoured until the agreed term of the ARA ends. There was no evidence that borrowers, whose circumstances have not changed, were being moved off existing ARAs during the term of the ARA.
In August 2019, the Central Bank wrote to banks, retail credit firms and credit servicing firms to set out its expectations of all firms in respect of loan sales (the industry letter). The industry letter sets out clear expectations of firms, in particular where a cooperating borrower is complying with the terms of an ARA and their loan is sold, that the new regulated entity cannot unilaterally change the ARA. Additionally, the letter outlined that the new regulated entity should continue to honour an ARA until review, expiry or by agreement, as appropriate, including honouring timelines and terms and conditions for reviews of the ARA. In cases where the borrower’s circumstances have changed, any change to the ARA must comply with the CCMA and be appropriate, sustainable and proportionate to any change(s) in the borrower’s circumstances.
The industry letter is available on the Central Bank’s website
Finally, as at end-June 2019, 21,291 PDH mortgage accounts were in a split mortgage restructure. 85.4 per cent were deemed to be meeting the terms of this restructure type - Table 2
of public statistical release
Source: Mortgage Arrears and Repossessions Statistics dataset and webpage