ALMOST 14,000 mortgages were more than three months in arrears at the end of June this year, according to new figures compiled by the Financial Regulator.
The figure, which represents 1.4 per cent of residential mortgages, is up from the end of December 2006 when 11,252 mortgages, or 1.2 per cent of all mortgages, were in arrears.
Launching the findings yesterday, Mary O’Dea, the consumer director of the Financial Regulator, called on mortgage lenders to continue to engage with borrowers who are in financial difficulties and willing to enter into revised arrangements to repay their mortgages.
As part of a study by the regulator into procedures for handling arrears, it found that lenders accepted revised repayments when a mortgage-holder was in financial difficulty and was willing to repay the debt.
“Our examination clearly shows that lenders want to engage with you and that even if you fall into arrears, if you engage with your lender, it is unlikely that your house will be repossessed,” Ms O’Dea said.
“We urge consumers to contact their mortgage providers as soon as they become aware that they will experience difficulty in meeting their mortgage repayments.”
The study also found that mortgage lenders generally had procedures in place for handling arrears and repossessions which clearly stated that repossession of a residential property was a last resort.
Figures for repossessions by court order show there were a total of 128 by court order between January 2005 and June 2008.
This is out of a total of almost one million mortgage accounts reported to be held at the end of June 2008.
The reasons given for residential mortgage accounts falling into arrears included unforeseen circumstances such as marital/relationship breakdown, unemployment or illness.
Other reasons cited were financial mismanagement or poor cash management.
The Financial Regulator has written to all regulated mortgage lenders with feedback from its study, setting out the best way to deal with customers who fell into arrears.
Where a mortgage was drawn down prior to the introduction of the code, it advised lenders to assess carefully each original mortgage application before initiating legal action for possession.
It also said special consideration should be given to those consumers who were unable to repay a mortgage on a principal private residence and whose difficulty in repaying their debts was due to unforeseen circumstances
Before a lender agreed revised repayments with a consumer, it should ensure that the arrangement was realistic and affordable and based on the borrower’s ability to pay.
“Repossession of a residential property should remain a last resort for lender,” Ms O’Dea said.
She said those who had fallen into arrears should not ignore the problem as lenders were willing to work through difficulties with consumers rather than pursue legal actions.
The Financial Regulator said its statutory consumer protection code has applied to credit institutions since July 1st, 2007, and was extended to other lenders on June 1st, 2008, immediately after the Financial Regulator assumed regulatory responsibility for them.
This requires lenders to act honestly, fairly and professionally in the best interests of their customers and the integrity of the market.
Further information in relation to dealing with mortgage arrears is available on the Financial Regulator’s website www.itsyourmoney.ie