Code of conduct on mortgage arrears: all you need to know

According to figures published last week, the number of mortgages more than three months in arrears is continuing to rise and 12.3 per cent – or close to 100,000 mortgages – have now fallen behind in payments for more than 90 days. Photograph: Frank Miller/The Irish Times

According to figures published last week, the number of mortgages more than three months in arrears is continuing to rise and 12.3 per cent – or close to 100,000 mortgages – have now fallen behind in payments for more than 90 days. Photograph: Frank Miller/The Irish Times

 

A code of conduct on mortgage arrears? Don’t we already have one?
Yes. In 2010, the Central Bank published just such a code and it was supposed to address the mortgage arrears crisis.


So how did that work out?
Not brilliantly. According to figures published last week, the number of mortgages more than three months in arrears is continuing to rise and 12.3 per cent – or close to 100,000 mortgages – have now fallen behind in payments for more than 90 days. All told, the total number of home loans in short and long-term arrears is more than 142,000.


That’s not good, is it?
No, which is why the Central Bank has come up with its new code. Over the last 12 months the regulator has repeatedly expressed its concern over lenders’ failure to deal with the mortgage arrears crisis, which has got worse with each passing month. For their part the lenders have claimed the code as it stands has made it difficult to tackle the arrears crisis in any kind of meaningful way because it gives borrowers too much protection.


But the Central Bank doesn’t believe anything our bankers say, does it?
Actually it seems to. One of the main aims of the code seems to be to get at those borrowers who the banks claim are wilfully refusing to engage with them when it comes to mortgage arrears. A number of new clauses in the code should make it easier for banks to compel these “rogue borrowers” to come to the table by allowing lenders to engage in practices which up until now were forbidden.


Oh, that doesn’t sound good.
No, it doesn’t and critics of the new code said it is anything but good. Under the changes the current moratorium on legal action, which protects homeowners vulnerable to repossession for at least 12 months after they fall into arrears, is to be removed and anyone in arrears who leaves the Mortgage Arrears Resolution Process (MARP) – essentially the process of dialogue with their bank – will have between three and eight months before legal action can be taken against them.


Anything else?
Yes. Lots. The old code said banks could only make three unsolicited contacts with someone in arrears each month. This is being removed and the new rules will allow “proportionate” contact.


What does that mean?
Who knows? The Central Bank certainly doesn’t. When asked by The Irish Times yesterday what it thought “proportionate” might mean, it hummed and hawed and accepted that the absence of clarity in the definition is a “concern”.


The idea that some banker can come round to my house and hassle me because I have fallen behind in my mortgage is a concern too.
It is. Under the new code lenders can now pay an unsolicited visit to a borrower’s home . They can only do this if all other attempts at contact have failed and they must give the borrower at least five working days’ notice of such a visit.


I do know what a tracker is. Can they take that away from me?
Ultimately, the answer to this is yes, although the Central Bank has put some rules in place. A lender can take someone off a tracker only when they conclude that none of the options that would allow the borrower to retain it are “appropriate and sustainable for the borrower’s individual circumstances”. If they do take someone off a tracker they must offer an alternative repayment arrangement that is affordable and sustainable in the long term. Again the wording here is vague but the Central Bank said these arrangements would have to involve debt write-down or split mortgages.