Reprieve on house arrears

REPOSSESSIONS:MORTGAGE HOLDERS have secured a 12-month window under the recapitalisation proposals before Allied Irish Bank or Bank of Ireland will take legal action over arrears – but only for their main home.

Minister for Finance Brian Lenihan last night announced that the two banks would not start court proceedings to secure repossession of a principal private residence for a full year after arrears begin to appear.

The commitment is dependent on customers co-operating “reasonably and honestly” with the bank in addressing arrears.

He added that the two banks now recapitalised had “a good record in these areas”.

“The recapitalised banks have, in addition, assured Government that in the normal course of events they will make every effort to avoid repossessions, as has been evidenced by the low level of repossessions by them to date,” he said.

The statement from the Department of Finance last night made no mention of the situation in regard to mortgages drawn down to acquire investment properties or holiday homes.

Mr Lenihan said that the financial regulator would publish a statutory code of practice for mortgage arrears in relation to principal private residences by the end of the week.

It will stipulate that any mortgage lender will not be permitted to seek repossession “until every reasonable effort has been made to agree an alternative repayment schedule with the borrower”.

In any event, the code will ensure that mortgage lenders other than AIB or Bank of Ireland will not be able to instigate court proceedings for six months after arrears arise.

Aside from arrears, Mr Lenihan said that, under the code, lenders would have to hold annual review meetings with borrowers and would have to explain in detail the reasons why particular decisions were made.

Separately, Mr Lenihan said the Government was examining the possibility of extending the State bank guarantee. This would happen as part of the six-month review of the guarantee scheme which is expected to be completed by mid-April.