Mortgage holders in arrears face earlier repossession under new code

Homeowners who fall behind with mortgage repayments this month could find themselves before the courts by Christmas and ultimately facing repossession under a new Central Bank Code of Conduct on Mortgage Arrears.

The new code, described by consumer protection advocates as “absolutely appalling”, removes a 12-month moratorium on legal action designed to protect homeowners vulnerable to repossession. Though it was unclear last night, this is also likely to apply to those already in arrears.

Due to be published next week, the code instead gives homeowners who have exited the Mortgage Arrears Resolution Process (Marp) two months before legal action can be taken against them.

There are now almost 144,000 mortgages in arrears, according to figures to be released by the Central Bank today.

The code also reduces the protection to homeowners from excessive contact from banks. While existing rules stipulate lenders can only contact borrowers three times a month, this has been dropped in favour of “proportionate” contact and lenders will be allowed to pay an unsolicited visit to a borrower’s home for the first time.

Tracker mortgages
Tracker mortgages, also protected under the current code, will now be vulnerable as part of the renegotiation process.

A presentation on the new code of conduct was given to several groups that had made submissions as part of a consultation process earlier this week. The meeting was described as “heated”.

David Hall, of the Irish Mortgage Holders Organisation, said submissions made by more than 230 interest groups were effectively ignored. The Central Bank had lost its credibility as consumer protectors, he said. He described the new code as "absolutely appalling . . . the most depressing meeting I was ever at".

Paul Joyce, of the Free Legal Aid Centres, said the new code was unfair. It was less favourable than the draft which was circulated to interested groups and less favourable than the current code.

“Either you comply with what the lender wants or you face repossession,” he said. “There is no independent appeal.”

Having to face the courts
He also criticised the dropping of controls on contacts with borrowers.

“The Central Bank doesn’t seem to understand, this is not a game of croquet on a manicured lawn,” he said.

The 12-month moratorium was put in place early in the recession to give homeowners additional time to find solutions to their difficulties before having to face the courts. It applied to all principal private residences provided borrowers were co-operating with the bank. Initially set at six months in 2009, it was extended to 12 in 2010.

Once implemented, the new code will require borrowers to enter the Marp process. They will be assessed by the lender and will either be offered a new arrangement, such as interest only repayments, or will be told their mortgage is unsustainable.

They may then appeal the decision in an internal process or accept it. Once any appeal is complete and there is no arrangement, they will be deemed to have exited the Marp process. They will then be given just two months before legal action can be commenced. The entire process from first default to legal action could take less than six months.

The introduction of the new code will coincide with significant changes in the area of debt and repossession.

All three changes are likely to produce a dramatic increase in the number of homeowners coming before the courts.