Mortgage arrear statements to be scrutinised in repossessions

Mabs signals use of accountants to check legal fee and tax-relief calculation by lenders

Accountants are to be hired to examine mortgage arrear statements in repossession cases where lenders are alleged to have charged legal fees to homeowners in advance of court decisions.

They will also examine the documents to see if the way in which mortgage tax relief at source has been processed by lenders may have inflated the level of arrears.

The Money Advice and Budgetary Service (Mabs), which has flagged the concern in several cases in Waterford and Limerick, has said accountants can be hired under the Abhaile scheme, a service that helps homeowners find resolutions to mortgage arrears difficulties.

Mabs has also forwarded details of its concerns to its officers around Ireland, a move that may lead to further case files being identified and investigated.

The issue came to prominence earlier this week when three repossession cases were adjourned at Waterford Circuit Court to allow for further assessment of both issues.

‘Usurping’ of courts

Three lenders are alleged to have been applying legal costs to the mortgage balance of homeowners and charging interest before the court has determined the outcome of the case, a move Mabs said could be seen to be “usurping” the role of the courts.

The other issue involves mortgage tax relief at source (TRS) credits potentially not being correctly factored into mortgage arrears, resulting in those arrears levels appearing higher than they actually are.

It is understood the extent of such activity is not yet fully understood although the decision by the Waterford Circuit Court registrar to adjourn the cases is expected to lead to at least 40 being further scrutinised.

"What we've set in motion in Waterford and hopefully in the north Munster region is that the borrower will produce the statement, Mabs will look at it and if we have to look further into it we can get an accountant who can analyse it in more minute detail," explained Michael O'Doherty, Mabs manager for north Munster region.

Costs vs refunds

“If the TRS isn’t being applied correctly then there should be refunds and if costs are being applied before a court determination then equally there should be refunds as well.”

Mr O’Doherty said the issue of applying legal costs was intimidating to many of those fighting arrears cases.

Vivienne Burns of Share, a Waterford support group, agreed.

“If you’re going through a repossession case, and your TRS credit isn’t being applied correctly and means your arrears are appearing higher than they really are, that puts pressure on people,” she said. “This can be the difference for people who are to the pin of their collar trying to pay mortgages.”

Mark Hilliard

Mark Hilliard

Mark Hilliard is a reporter with The Irish Times