Thursday, 23 June 2016
Ceisteanna - Questions - Priority Questions
Code of Conduct on Mortgage Arrears
2. To ask the Minister for Finance his plans to implement the programme for Government commitment to deal with the mortgage crisis by working with the Central Bank to amend the code of conduct on mortgage arrears to include an obligation on providers of mortgage credit to provide a range of sustainable arrears solutions and to put the code of conduct on a statutory basis. [17748/16]
My question this month is similar to the question we put down last month. It relates to the specific plans and the timeframe to implement the commitment that was made in the programme for Government regarding those in mortgage distress and the calls that have been made by myself and my party, along with others, that it should be mandatory for lenders to offer certain solutions to those in mortgage arrears. The Minister said he was willing to make it mandatory for lenders to provide a more effective range of options, so can he tell us what progress there has been and when we will see a draft of the proposal?
The code of conduct on mortgage arrears, CCMA, is a statutory code issued under section 117 of the Central Bank Act 1989. The CCMA applies to all regulated mortgage lenders operating in the State when dealing with borrowers facing or in mortgage arrears on their primary residence, including any mortgage lending activities outsourced by these lenders. The CCMA provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent way by their lender and that long-term resolution is sought by lenders with each of their borrowers. Lenders are required to comply with all aspects of the CCMA and non-compliance with the CCMA is enforceable against regulated entities by the Central Bank.
The CCMA sets out a process called the mortgage arrears resolution process, MARP. The MARP is a four-step process that lenders must follow. The steps are as follows: communicate with the borrower; gather financial information; assess the borrower's circumstances; and propose a resolution. Bank and non-bank lenders offer a range of options for borrowers, including term extension, arrears capitalisation, split mortgage, mortgage-to-rent, etc. The CCMA states that in each case, a lender must explore all of the options for alternative repayment. A lender must document its considerations for each option examined, including the reasons that the option or options offered to the borrower is or are appropriate and sustainable for the borrower.
A lender must also document why some options are not appropriate for the borrower.
The numbers in mortgage arrears have been steadily declining. Data released by the Central Bank on 10 June shows that, to the end of the first quarter 2016, the number of mortgage accounts in arrears for principal dwelling houses has declined for the last 11 quarters. Some 120,447 principal dwelling house accounts were also classified as restructured. It is clear that where a borrower actively engages with their lender under the CCMA with a view to agreeing a sustainable arrangement to address their mortgage arrears, it is more likely that an equitable arrangement will be found and that the borrower will be able to remain in their family home. It is important to note also that the commencement of the court process is not a signal that a repossession will occur. It may often be the case that the process then prompts borrowers to re-engage with their bank and to find a solution. Often these cases are adjourned. I raised the issues in the Deputy's question with the Governor of the Central Bank in a recent meeting with him.
The last five or six words were the only part of the answer that addressed my question. I know we are running out of time but we are supposed to be in a different situation now, one in which we get to the nub of issues rather more quickly.
The Minister has made commitments and said he would review the code of conduct to make it mandatory on lenders to provide a more effective range of options. The two options highest on the agenda are split mortgages and mortgages to rent. People want to know when they will be able to say to AIB, Bank of Ireland or Permanent TSB that they are among the customers in mortgage arrears and to ask them where is the split mortgage or mortgage-to-rent offer.
I ask the Minister to outline the process. Is he saying the Government does not have the power to do this? Is he saying it is an issue for the Governor of the Central Bank, who is independent of Government? There is a commitment to do this in the programme for Government so can the Minister tell us the process involved in implementing it? Does the Minister have agreement from the Governor of the Central Bank to its commitment, whether with legislation or something else, to make it mandatory for financial institutions to offer certain solutions to their customers?
The position is that the code of conduct is statutory, having been introduced under section 117 of the Central Bank Act 1989. The issue that arose when we were negotiating the programme for Government was whether the range of options that were on offer from the regulated banks applied to the unregulated institutions that acquired mortgages. In my meeting with the Governor, I asked him if he had data showing what the practice was with the unregulated operators, who are now under the control of the Consumer Protection Act which we put through the Dáil last year. He is to come back to me with the information I requested. Then we will see whether it is necessary to extend the code of conduct to make it a statutory obligation on the unregulated institutions to increase the range of options they offer to mortgagees.
I was not part of the programme for Government discussions but I would say that some people who were would have a different interpretation of the discussions the Minister has just outlined. It is in the programme for Government and the Minister said of the code of conduct on the record of the House last week: "I am willing to review it again to make it mandatory on lenders to provide the more effective of the range of options that are now in the system to their borrowers." There was no talk last month that this was for unregulated entities. There is a clear commitment. The Minister went on to say that split mortgages and mortgages to rent were two of the more prominent options and were discussed in the programme for Government meetings.
I am asking a clear question because it seems the Minister is announcing a major U-turn on his commitment. Is it the intention of Government to make it mandatory on lenders to provide either split mortgages, mortgages to rent or other options to borrowers in mortgage distress? If it is, does the Government have the power to do it? If it does not, does the Governor support the move?
The position is that there is a statutory obligation on the banks to make a range of offers, including those described by the Deputy, to people in arrears with their mortgages. The question that arose was whether the obligation to offer the full range also obliged the previously non-regulated entities to make the same range of offers. I have had discussions with the Governor of the bank, which has data which I do not have. It is examining the data to identify the exact scope of the problem. My commitment to this remains and if it is necessary we will amend the code of conduct so that all beneficial offers to those in arrears are made on a statutory basis and those who have mortgage books are obliged, under law, to make the offers.
No, the Minister is not. It is a complete and utter U-turn. The Minister said last month that he would make it mandatory on lenders to offer two options, spilt mortgages or mortgages to rent, but he is saying now that he is not going to do that.