Written answers

Tuesday, 11 February 2014

Department of Finance

Mortagage Arrears Resolution Process

Photo of Brendan GriffinBrendan Griffin (Kerry South, Fine Gael)
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138. To ask the Minister for Finance the assistance available to home owners who are under threat of repossession from banking institutions; and if he will make a statement on the matter. [6207/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that the Central Bank's Code of Conduct on Mortgage Arrears (CCMA) places an onus on the banks in respect of a co-operating borrower, to explore all the options for offering an alternative repayment arrangement to address a mortgage difficulty, before any legal action is considered.  The CCMA is a statutory Code issued under Section 117 of the Central Bank Act 1989 and lenders are required to comply with the CCMA as a matter of law.

The CCMA sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. This framework is known as the Mortgage Arrears Resolution Process (MARP) which sets set out the steps which lenders must follow:

Step 1: Communicate with borrower;

Step 2: Gather financial information;

Step 3: Assess the borrower's circumstances; and

Step 4: Propose a resolution.
The CCMA provides an integrated and cohesive package of consumer protection measures and it seeks to deliver on the following principles, to:
- ensure appropriate resolution of each borrower's arrears situation;

- ensure that lenders deal with borrowers in a fair and transparent manner;

- support and facilitate meaningful engagement between lenders and borrowers; and

- ensure borrower awareness of the benefits of co-operating with their lender, and the consequences of not co-operating.
The Central Bank has advised that, where a borrower believes that his/her lender has not complied with or in any way disregarded the Code of Conduct on Mortgage Arrears, he/she may make a complaint to the lender.  The lender must seek to resolve the borrower's complaint in line with the complaints handling process set out in provisions 10.7 to 10.12 of the Central Bank's Consumer Protection Code.  If the borrower remains dissatisfied following the outcome from the complaints or appeals process, he/she may then refer the matter to the Financial Services Ombudsman who deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers. In addition to the protections provided by the CCMA, under the Central Bank's Mortgage Arrears Resolution Targets (MART) process, the Central Bank is requiring the main lenders to work through their mortgages in arrears of more than 90 days and, where possible, to propose and conclude sustainable restructures for their borrowers in arrears. 

Of course, the CCMA and MART can only work in circumstances where the borrower cooperates with the lender and engages with the process.  Where this does not happen, the lender may have no other option but to go down the legal route to deal with an arrears case.  However, if that course of action leads the borrower to commence a constructive engagement, this can lead to a more favourable outcome for the respective parties. The Deputy may wish to note, that according to information collected by my Department, in the case of private dwelling home some 50,000 mortgage accounts in difficulty have been the subject of permanent restructuring following engagement between borrower and lender.  A further 23,000 mortgage accounts in difficulty have been the subject of temporary restructures.

However, even if the MARP process has concluded and a repossession case has commenced in the legal system, the recent Land and Conveyancing (Law Reform) Act 2013 now provides a power to the Court to adjourn a repossession proceeding in relation to a principal private residence to enable the borrower to consult a personal insolvency practitioner (PIP) and, where appropriate, to instruct the PIP to make a Personal Insolvency Arrangement (PIA) proposal.  In formulating a proposal for a PIA, the Personal Insolvency Act 2012 places an onus on a PIP to do so on terms that shall not insofar as reasonably practicable, require the borrower to dispose of an interest or cease to occupy a principal private residence.

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