Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 175: To ask the Minister for Finance if and when the recommendations of the expert group on mortgage arrears will be implemented and in particular the following recommendations, a mechanism should be put in place to allow repossessed borrowers to remain in their homes for a time, allowing the housing authority time to source appropriate accommodation, lenders should consider facilitating borrowers in negative equity who wish to trade down to a more affordable home and that bankruptcy legislation should be introduced. [9779/11]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that the Mortgage Arrears and Personal Debt Expert Group produced two reports, an Interim Report which was published in July 2010 and a Final Report which was published in November 2010. Since the publication of the reports, the Central Bank has revised its Code of Conduct for Mortgage Arrears (CCMA) to reflect many of the recommendations of the Expert Group. As a result, all regulated lenders will have to have in place a standardised Mortgage Arrears Resolution Process, borrowers in arrears who co-operate with the resolution process will not be charged penalty interest charges, harassment of borrowers through unsolicited communications will be outlawed and borrowers in financial difficulties but not in arrears will be allowed to come under the Mortgage Arrears Resolution Process. When a lender is determining the 12-month period it must wait before applying to the courts to commence legal action, it must exclude any time period during which a borrower complied with the terms of an alternative repayment arrangement, made an appeal to the internal appeals board or made a complaint to the Financial Services Ombudsman under the CCMA.

The revised CCMA was published on 6 December 2010 and came into effect on 1 January 2011. The revised CCMA can be accessed at www.centralbank.ie. Lenders are required to comply with the CCMA as a matter of law but have been given a period of six months grace ending on 30 June 2011 to put in place the requisite systems and training of staff necessary to support the implementation of the Mortgage Arrears Resolution Process. In addition, the Central Bank has also written to lenders to issue directions under section 149 of the Consumer Credit Act 1995 which will mean that lenders cannot impose arrears charges or penalty interest on borrowers who are co-operating with the resolution process. The expert group's recommendations are intended to benefit lenders and borrowers. It is expected that lenders will co-operate and implement the recommendations or variations of them as soon as possible. Failure to comply with the revised CCMA may result in sanctions under the Central Bank's administrative sanctions framework.

The Deputy may wish to note that, in addition to the recommendations being implemented through amendments to the CCMA, other recommendations will require legislative support involving my Department and the Departments of Social Protection, Environment, Community and Local Government and Justice and Equality. In the case of my own Department, a recommendation concerning the scope and the admissibility in court of the CCMA will need further examination and advice from the Attorney General. The recommendation of the group to amend the local authority needs assessment process has been implemented by the Department of the Environment, Community and Local Government. I am informed that local authorities have been provided with clear guidance on the treatment of applicants for social housing support whose mortgages have been deemed unsustainable. I have also been informed that discussions are ongoing between the Department of the Environment, Community and Local Government and the Irish Bankers Federation to enable borrowers whose properties are to be repossessed to remain in their homes for a period of time, pending the sourcing of appropriate accommodation by the housing authority. Changes to both primary and secondary legislation will be required to implement the recommendations relating to the mortgage interest supplement scheme. I am informed that the Department of Social Protection is finalising an implementation plan that will set out a framework for the future of the mortgage interest supplement scheme.

The final report of the expert group contained the following recommendation:

The Group notes that, for some mortgage holders who are in negative equity, trading down would produce a reduction in mortgage debt and more affordable monthly payments. The Group recommends that further consideration should be given by lenders to facilitating trading down by borrowers in this situation. Such options would have to meet relevant prudential standards, with appropriate controls in place and be in the customers' best interest.

Trading down means selling a current property and buying a cheaper one. Trading down may be an option to reduce the level of mortgage repayments, resulting in more affordable monthly repayments. This recommendation is aimed at helping mortgage holders to remain as home owners while reducing their level of repayments. There will be situations in which mortgage holders in negative equity may wish to move home, for example, to take up new employment opportunities. There is merit in facilitating house moves by those in negative equity in certain situations and subject to certain criteria set down by the Central Bank. Ultimately, these are matters for lenders and for the Central Bank to decide upon. Any lender planning to provide a negative equity type product must notify the Central Bank in advance to ensure that appropriate measures and controls are taken as the Central Bank must be satisfied that such a product meets relevant prudential standards and does not lead to consumers being over exposed to debt.

As regards changes to personal bankruptcy law, the legislative programme for the Department of Justice and Equality includes a Personal Insolvency Bill that will provide for a new framework for the settlement and enforcement of debt and for personal insolvency. The Bill will take into account the recommendations of the Law Reform Commission in its Report on Personal Debt Management and Debt Enforcement of December 2010. The Civil Law (Miscellaneous Provisions) Bill, is in the course of being drafted by the Department of Justice and Equality with a view to publication as soon as possible this year. It will also contain some interim measures in relation to reform of the law on bankruptcy.