Mortgage code could lead to speedier repossesions - S&P

Standard and Poor's has said the Central Bank of Ireland's revised code of conduct for mortgage arrears could potentially slow the increase in mortgage arrears, and may allow lenders to start repossession proceedings sooner.

On July 1st, the Central Bank introduced a revised code of conduct for lenders, governing how they must deal with borrowers in arrears. The revised rules remove the limit on how often lenders are allowed to contact delinquent borrowers, clarify when they can treat borrowers as uncooperative, and potentially reduce the time it takes lenders to start repossession proceedings.

The ratings agency said the clarifications around the definition of uncooperative borrowers, along with the warning letter which borrowers will now receive before the lender classifies them as “not cooperating”, could also prompt faster responses from borrowers, accelerating the arrears resolution process.

“In some cases, this could also lead to speedier repossessions,” the company said in a statement this morning.

The agency said rising repossessions could also increase the housing supply, possibly depressing house prices further in the short term.

It also said the removal of the limit on the number of times per month that lenders can contact borrowers in arrears could allow lenders to manage arrears cases more flexibly, adding this slow the rise in arrears.

While the balance of mortgages in arrears of more than 90 days continues to rise in Ireland, exceeding 16 per cent in the first three months of this year from about 5 per cent three years ago, repossessions remain scarce.