Pearse Doherty (Donegal South West, Sinn Fein)
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65. To ask the Minister for Finance if his view on the legal enforceability of the code of conduct on mortgage arrears has changed following the Supreme Court's ruling on the issue; and if he will make a statement on the matter. [34870/15]

Pearse Doherty (Donegal South West, Sinn Fein)
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66. To ask the Minister for Finance his plans to amend or introduce legislation to put the code of conduct on mortgage arrears on a statutory footing; and if he will make a statement on the matter. [34871/15]

Pearse Doherty (Donegal South West, Sinn Fein)
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67. To ask the Minister for Finance if he will discuss with the Central Bank of Ireland whether changes are required to the code of conduct on mortgage arrears following the recent Supreme Court ruling on the matter of the legal enforceability of the code; and if he will make a statement on the matter. [34872/15]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 65 to 67, inclusive, together.

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.

Where breaches of any regulatory requirements occur, firms and/or individuals can expect vigorous investigation and follow through by the Central Bank. The Central Bank regularly conducts themed inspections to ensure compliance with all of its codes of conduct, including the CCMA.  Breaches of regulatory requirements are dealt with using appropriate supervisory powers, including Administrative Sanctions powers, where appropriate.

There is no legal issue, therefore, over whether or not regulated entities are to comply with this statutory code.  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 precise issue that arose before the Courts was the extent to which non-compliance with the CCMA could be adjudicated by the Courts in a repossession case between a lender plaintiff and a borrower defendant.  In that regard, the Supreme Court found that where a breach of the CCMA involves a failure of the lender to abide with the moratorium referred in the CCMA, but in no other circumstances, non-compliance with the CCMA affects a relevant lender's entitlement to obtain an order for possession.  Following on from this, a breach of any other aspect of the CCMA does not in itself adversely affect a lender's contractual right to possession in the circumstances of mortgage default.    

The Supreme Court found that the CCMA prohibited lenders from seeking an order for possession where the moratorium was not complied with but that it did not prohibit the seeking of an order for possession in other circumstances. The Supreme Court has therefore ruled that where the Code of Conduct prohibits the seeking of an order for possession the Courts will enforce that prohibition. To quote from the judgement of the Supreme Court:

"A financial institution which, entirely ignoring the provisions of the Code in that regard, simply went ahead and sought possession as soon as it was legally entitled so to do would be doing the very thing which the Code is designed to prevent. For a court to entertain an application for possession which was brought in circumstances of clear breach of the moratorium would be for a court to act in aid of the actions of a financial institution which were clearly unlawful (by being in breach of the Code) and in circumstances where the very act of the financial institution concerned in seeking possession was contrary to the intention or purpose behind the Code itself."

Where the code does not so prohibit and where it is not illegal for an order of possession to be sought then it is not a matter in which the Courts will intervene. I am pleased to note that the Supreme Court decision has in fact recognised that the CCMA forms part of the law and that a regulated financial institution is obliged, as a matter of law, to obey it. However, it should also be noted that in a repossession case before the Courts a borrower's rights are not confined to the provisions of the CCMA.   

The 2013 Land and Conveyancing Law Reform Act has provided a new statutory avenue to borrowers in a repossession case involving a primary dwelling to seek an adjournment of the repossession case to allow the borrower the opportunity to consider and, if so decided, to propose a Personal Insolvency Arrangement (PIA) to creditors in order to resolve an unsustainable debt position.  If this is approved by the Court, the debtor would then be in a position to formally propose an alternative and sustainable payment arrangement irrespective of whether or not the primary home lender considered or rejected such an arrangement under the CCMA.  Also, under a PIA there is an onus on the personal insolvency practitioner to, insofar as is reasonably practicable, formulate a proposal on terms that will not require the debtor to dispose of an interest in, or cease to occupy, a private principal residence.  Even if such a PIA proposal is rejected by creditors, the Personal Insolvency Act has now been amended to provide that the proposal can then be submitted to a Court for adjudication.

I appreciate the genuine concerns Deputies may have regarding the implications of the particular decision for borrowers in genuine difficulty with a mortgage on their own home.  While the full implications of the decision can be considered further by my own officials and the Central Bank, as I have already noted, the Central Bank has powers to both supervise and enforce that Code.  In any event the recent changes to the Land and Conveyancing Act and the Personal Insolvency Act has given a statutory right to a borrower to propose a sustainable solution to creditors, or failing that a court, as an alternative to repossession.