Expert group recommends mortgage resolution process

A new report on mortgage debt in Ireland has called for the introduction of an industry-wide resolution process to help home-owners in difficulty.

The interim report by the Mortgage Arrears and Personal Debt Expert Group has said all financial institutions should be part of the Mortgage Arrears Resolution Process (MARP) which would assist both borrowers and lenders to come to a solution that would allow property owners who are struggling to make mortgage payments to continue to live in their homes.

It also says that lenders should not be able to apply penalty interest or arrears charges on borrowers taking part the scheme.

The Government-appointed group, headed by insolvency accountant Hugh Cooney, calls for the Code of Conduct on Mortgage Arrears (CCMA) to be amended to allow for the MARP and to ensure that lenders do not encourage borrowers to change mortgage products if it would put them at a financial disadvantage.

The expert group also said the one-year moratorium on legal action in the code of conduct should not be extended.

It added that no legal action should be taken by financial institutions while mortgage interest supplement (MIS) is being paid and borrowers are continuing to cooperate with their lender.

In addition, it said the ban on paying MIS to a couple where one person is in full-time employment should be removed and a revised means test developed, a move which has been approved by the Government.

Lenders have also been urged to improve communication with borrowers so as to deal with difficulties in a more pro-active manner. It urges financial institutions to include a dedicated section of their websites for mortgage holders in difficulty and to provide information about State supports for borrowers in distress.

The group said all "at risk" mortgage holders should receive a periodic mailing from their lender detailing options for dealing with financial distress so as to encourage borrowers to deal with their difficulties as early as possible.

Taoiseach Brian Cowen welcomed the report and said its recommendations should minimise repossessions and help borrowers and lenders agree a solution which will allow the borrower remain in their homes.

Mr Cowen acknowledged the impact that increased unemployment and the collapse of the property market was having. “We fully recognise that the rise in unemployment and the fall in house prices means some people are in serious difficulty with their mortgages and we need to minimise the economic and social consequences from the problem of mortgage arrears,” the Taoiseach said.

Minister for Finance Brian Lenihan said any plan to help borrowers who can't meet their payments should not damage the banks.

"Any solution to the problems facing those borrowers who are facing more severe difficulties will need to be targeted and robust," Mr Lenihan said after the publication of the report. "We must also be careful to ensure that any proposed solutions do not reverse the significant progress we have made in repairing our banking sector and thereby putting at risk the taxpayers' investment."

The Financial Regulator said he will “act swiftly” to address the key priorities identified in the report and called on banks and lenders to take immediate steps to implement the recommendations relevant to them.

“I would also like to encourage consumers who feel they are in financial distress to contact their lender at an early stage before an arrears problem gets out of hand,” regulator Matthew Elderfield said. “Lenders must treat you fairly.”

The regulator said in May that 32,321 mortgages – 4.1 per cent of 791,000 mortgages in the State – were in arrears for more than 90 days during the first quarter of the year.