Less than 1% have used advice service on mortgage arrears

Less than half of 1 per cent of those in mortgage arrears have used an independent financial advice service set up by the Government last year to tackle the crisis, a new report has revealed.

Minister for Social Protection Joan Burton set up a panel of 2,000 accountants to offer borrowers independent financial advice on the long-term resolution proposals by lenders, such as a split mortgage, mortgage-to-rent or long-term interest only.

Under the system lenders have to pay €250 to a professional of a borrower’s choice from the panel. However, a review of the Independent Financial Advice Service (IFAS) of the Mortgage Arrears Information and Advice Service published yesterday shows that just 200 invoices have been sent to lenders since the service began in June.

More than 100,000 people are now in mortgage arrears in the Republic.

The review says there will be time delays between the issue of the long-term forbearance offer, the meeting with the accountant, and the receipt by the lender of an invoice.

Borrowers
Ms Burton accused the banks of failing to make all borrowers aware of the service.

“I’m particularly concerned at submissions stating that the Independent Financial Advice Service is not being offered to all eligible borrowers, which suggests the banks have not done all they can to make borrowers aware of the service. I will be taking that issue up with the banks.”

Ahead of any discussions between the Minister and the banks, arrangements have now been made with the Irish Banking Federation for a comprehensive information leaflet on all elements of the Mortgage Arrears Information and Advice Service to be sent out with annual mortgage statements to all mortgage holders.

'Mortgage difficulty'
"I want to see this service deliver for those in mortgage difficulty, and as an interim but important step to drive awareness we have ensured that mortgage holders will get a comprehensive leaflet on the service when they receive their annual mortgage statement," the Minister said.

The review, conducted by a working group chaired by Ms Burton’s department, highlighted a number of issues, including a lack of awareness and low take-up of the service.

It recommends that information to borrowers about the service should be standardised and stand-alone, and should specify that the service is confidential and independent, that no additional fee will be charged, and that the lender recommends that the borrower avail of the service.

It says the scope of the advice should be broadened to include advice on other mortgage-debt resolution options and, in that context, consideration be given to increasing the funding for financial advice from €250 to €500.