MORTGAGE LENDERS must not seek the repossession of properties until every reasonable effort has been made to agree an alternative repayment schedule, according to the new statutory mortgage arrears code issued by the Financial Regulator.
The Code of Conduct on Mortgage Arrears, which will come into effect on February 27th, sets out a framework within which mortgage lenders must operate in relation to arrears.
The code states that mortgage lenders must adopt flexible procedures for the handling of arrears cases, and that such procedures must be aimed at assisting the borrower as far as possible in his/her particular circumstances.
The code also details the waiting period for commencement of legal action on repossession, agreed as part of the Government’s recapitalisation plans.
Under the code, lenders must wait at least six months from the time arrears first arise before applying to the courts to commence enforcement of any legal action on repossession of a borrower’s primary residence.
However, the mortgage lender may seek repossession in the absence of any engagement with the borrower, where it is clear that the borrower is deliberately not making contact with the lending agency.
Where legal action is being taken to obtain an Order for Repossession, the lender must endeavour to maintain contact with the borrower or his/her nominated representative, according to the code.
The regulator said it had published the code on mortgage arrears, along with a code on lending to small and medium enterprises, in line with the Government’s announcement on recapitalisation arrangements.
The business lending code will require banks to offer annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints.
Where a customer gets into difficulty the banks will seek to agree an approach to resolve problems and provide reasonable time and appropriate advice.
The code which applies to all regulated banks and building societies will also facilitate access to credit, promote fairness and transparency, and ensure that banks will assist borrowers to meet their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner.
Both codes can be found on the Financial Regulator’s website, www.financialregulator.ie