Banks failing to help distressed mortgage-holders, says Phoenix Project

A charity that helps people in debt has called on banks to offer more permanent solutions to homeowners in financial difficulties.

The Phoenix Project, based in Portlaoise since 2008, also criticised banks for poor communication with borrowers in distress, and said it believed lenders are breaking the Central Bank code of conduct on dealing with people in mortgage arrears.

Founder of the charity William Prior said people are angry, frustrated and stressed when they first visit the project, which offers free financial and legal advice as well as counselling and social welfare advice.

One of the central problems they experience is trying to speak to one individual in their bank. They are passed from one person to another and get calls from different people.

“You can’t go in and talk to your bank manager any more,” he said.

Ineffective communication
"That would be hard enough, but now you are ringing a call centre. You never get to talk to the same member of staff and the letters from the banks are all standard letters. This is a huge breakdown in the banking system."

He set up the Phoenix Project because he became aware of people suffering from depression and other serious psychological illnesses due to debt problems.

The charity is 90 per cent funded from donations and gets a small amount from the National Lottery. All services are free.

The number of home mortgage accounts in arrears fell slightly in the three months to the end of September, according to the most recent figures from the Central Bank.

But accounts in arrears for more than 90 days grew to more than 99,000, driven by those in arrears for more than two years.

The Central Bank told lenders in December that it expects them to have provided “sustainable solutions” to 75 per cent of their mortgage arrears customers by the end of next June and “concluded solutions” to 35 per cent of them by that date.

Phoenix Project solicitor Julie Sadlier complained that permanent solutions were not being offered to borrowers. Cases are being constantly reviewed, which puts people under a lot of pressure, she said.

Broken code of conduct
She also said that, in many of the cases the charity has seen, lenders have been breaking the Central Bank code of conduct on how banks should treat people in mortgage arrears. And when homes are repossessed or surrendered, houses are often "sold for a song", she said.

Counsellor with the charity Amanda Grace said a common thread in cases she saw was that banks had failed to factor in the complexity of individual situations. There is also a lack of meaningful communication, which is compounding the problems.

“No one is hearing them,” she said.

Customer loss and grief
People in financial difficulties may be suffering a huge sense of loss and grief because of the position they find themselves in, and for some the grief is similar to "post-traumatic stress disorder".

“They need a lot of support and help,” she said.

In a statement, the Irish Banking Federation said its member banks shared the Central Bank's objective to return as many loans as possible to performing status.

“Over 80,000 mortgage accounts have now been restructured, with more than three quarters of these meeting their repayment terms,” it continued.

The number of distressed customers who are offered longer-term sustainable resolutions can be expected to increase, she said.

However, “the transition from short-term forbearance to these resolutions requires sensitive management of a myriad of situations where borrowers have to consider the resolutions proposed”.

The federation also said banks were “extremely mindful of the impact of the resolution process on individual borrowers and their families” and devoted “considerable resources” to supporting borrowers in difficulty.

The Phoenix Project can be contacted at 1850 203040 or support@phoenixproject.ie