Wednesday, 1 April 2015
Mortgage Arrears Proposals
10. To ask the Minister for Finance if there are limits to the powers of local branches of banks in negotiating and seeking a resolution for borrowers who are in mortgage arrears; and if he will make a statement on the matter. [13120/15]
I have listened to much debate on the different aspects of mortgage problems this morning. As it stands, matters relating to mortgage arrears and negotiations are governed by the Central Bank's code of conduct on mortgage arrears. These are weighed overwhelmingly in favour of the lender and removing local branches from the decision-making process further weighs against the borrower and makes it a bit more difficult. It does not do much for the borrower getting a fair deal.
Borrower engagement with a bank, including the local branch, is very important in dealing with mortgage arrears. I am informed by the Central Bank that under the code of conduct on mortgage arrears, CCMA, lenders must establish a centralised, dedicated and adequately staffed arrears support unit, ASU, to manage cases under the mortgage arrears resolution process. It is the responsibility of the lender's arrears support unit to carry out certain functions under the code of conduct on mortgage arrears. For example, the lender must pass the completed standard financial statement to its arrears support unit immediately on receipt and provide a copy of the standard financial statement to the borrower; a completed standard financial statement must be assessed in a timely manner by the lender's arrears support unit; a lender's arrears support unit must formally review the borrower's case, including the standard financial statement, immediately where a borrower ceases to adhere to the terms of an alternative repayment arrangement; and a lender must allow the borrower a reasonable period of time to consider submitting an appeal to the appeals board, which must be at least 20 business days from the date of notification of the decision of the lender's arrears support unit.
The code of conduct on mortgage arrears also requires that each branch or office in the case of a lender who does not operate a branch network must have at least one person with specific responsibility for dealing with arrears and pre-arrears cases and for liaising with the lender's dedicated arrears support unit in respect of these cases. Therefore, while the code of conduct on mortgage arrears requires that a lender's arrears support unit, as opposed to the branch, is charged with managing cases under the mortgage arrears resolution process, the code of conduct on mortgage arrears does not preclude a borrower from liaising with the lender's arrears support unit through the branch staff member with specific responsibility for dealing with arrears and pre-arrears cases and for liaising with the lender's dedicated arrears support unit in respect of these cases.
While I realise the Government has introduced initiatives which should help borrowers in their negotiations with lenders, the reality is a little more difficult for the lender. Sadly, despite the initiatives the Minister has introduced, there is very weak compellability on the lender to treat the borrower in a fashion that is 100% fair. I have found the banks inconsistent in their approach to distressed loans, commercial or private and, unfortunately, this is leading to repossessions. If a borrower wants to have the mortgage to rent scheme applied to his or her situation but the lender is against it, the borrower will find it impossible to make it happen, no matter how much he or she argues for it. While the Minister referred to the appeal process, given that the lender is not obliged even to inform the borrower of its decision making process, it is very difficult to appeal a decision.
The arrears support unit, ASU, in accordance with the code of conduct on mortgage arrears, CCMA, has responsibility to assess a borrower's standard financial statement, SFS, and recommend the most appropriate course of action to eliminate mortgage arrears over time. The CCMA requires each branch to have at least one person with specific responsibility for dealing with arrears and pre-arrears cases and liaising with the lender's ASU. Borrowers may use this channel to seek assistance, for example, completing the SFS or dealing with any queries that may arise. There is a specific role for a designated branch member within the overall rules. Borrowers should insist on going that way if it suits them best.
While I am aware of that, would the Minister not agree that it worked much better when banking was less centralised, local managers knew the clients with whom they were dealing and it was much easier to build a relationship? It is very difficult for somebody from the country to get a fair deal when dealing with a centralised authority in Dublin. When properties were further underwater, there was more interest on the part of the banks in considering solutions such as mortgage to rent, parking part of the mortgage and taking the borrower's capacity on board. Since asset values have recovered, there has been less appetite on the part of the banks to engage in these solutions, the goal posts have been moved and the banks are becoming more aggressive. While the Minister cannot control them completely, he has the potential to put manners on them in this area.
We are continuing to review the position, and we review it on an ongoing basis. The essential element of restructuring is agreement between the two sides. If there is no agreement, there can be no restructuring. There is a menu of arrangements available, not all of which are working as well as others. The enormity of the problem was such that it could not have been resolved at local level. Because of the scale of the problem, it had to be centralised. General rules had to apply and it had to be centralised to make progress. As I said earlier, 115,000 mortgages have been restructured. The local contact is built into the procedure and a person must be designated in each branch to deal with mortgage arrears. This point of contact is still available at a local level and it should be used by the kinds of people the Deputy has described.