Brendan Griffin (Kerry South, Fine Gael)
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82. To ask the Minister for Finance if he will investigate the practice of the banking sector refusing to engage with lenders that find themselves in further difficulties after restructuring their loans; if the process of restructuring is reducing the cost to the borrower and taking into account future potential income difficulties; and if he will make a statement on the matter. [24705/13]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank’s statutory Code of Conduct on Mortgage Arrears (CCMA) sets out, inter alia, the 5 step Mortgage Arrears Resolution Process (MARP) that lenders must have in place for dealing with mortgage arrears cases. The 5 steps are as follows: Step 1: Communication with borrowers; Step 2: Financial information; Step 3: Assessment; Step 4: Resolution; and Step 5: Appeals.

A lender’s Arrears Support Unit (ASU) must base its assessment (step 3) of the borrower’s case on the full circumstances of the borrower including: a) the personal circumstances of the borrower; b) the overall indebtedness of the borrower; c) the information provided in the standard financial statement; d) the borrower’s current repayment capacity; and e) the borrower’s previous payment history.

Where an alternative repayment arrangement is offered by a lender (step 4), the lender must provide the borrower with a clear explanation, in writing, of the alternative repayment arrangement, including: a) the new mortgage repayment amount; b) the term of the arrangement; c) the implications arising from the arrangement for the existing mortgage including the impact on: (i) the mortgage term, (ii) the balance outstanding on the mortgage loan account, and (iii) the existing arrears on the account, if any; d) details of how interest will be applied to the mortgage loan account as a result of the arrangement; e) how the alternative repayment arrangement will be reported by the lender to the Irish Credit Bureau and the impact of this on the borrower’s credit rating; f) information regarding the borrower’s right to appeal the lender’s decision, including the procedure and timeframe for submitting an appeal, and g) the borrower must be advised to take appropriate independent legal and/or financial advice.

The Central Bank has informed me that the lender must monitor the arrangement that is put in place for a MARP case on an ongoing basis and formally review the appropriateness of that arrangement for the borrower at least every six months. As part of the review, the lender must check with the borrower whether there has been any change in his/her circumstances in the period since the arrangement was put in place, or since the last review was conducted. Where a borrower ceases to adhere to the terms of an alternative repayment arrangement, the lender’s ASU must formally review the borrower’s case, including the standard financial statement, immediately.

As set out in the Central Bank’s Mortgage Arrears Resolution Targets (MART) announced by the Central Bank in March 2013, when determining whether a proposal constitutes a sustainable solution, the lender needs to evaluate both the borrower’s actual and prospective affordability. Given this, it is affordability and sustainability that will help determine the most appropriate restructure type.