One-year stay on house repossessions for all lenders

 

THE MORATORIUM on house repossessions is being extended to 12 months for all lenders from today.

The change, ordered by the Financial Regulator, means that all lenders must wait at least a year from the time arrears first arise before applying to the courts for a repossession order.

It applies to mainstream institutions as well as subprime lenders, which account for more than 40 per cent of repossession orders coming before the courts. The 12-month requirement does not apply where a borrower is deliberately not engaging with the lender.

The Irish Banking Federation,describing the change as significant, said it had engaged a leading banker to explore the scope for further initiatives to provide more protection for borrowers.

However, the Oireachtas Committee on Social and Family Affairs called for the moratorium to be extended to 24 months. Up to now, it stood at 12 months for AIB and the Bank of Ireland and six months for all other lenders.

In a report, the committee said this was not an adequate timeframe and called on the Government to work with the banks on extending it.

The committee also indicated its intention to recall bank representatives as witnesses to press for the implementation of its recommendations.

Its report, on high levels of indebtedness in society, says lenders should be required to explore alternative payment proposals before having a right to bring legal proceedings for debt recovery.

It also calls for a ban on the charging of penalty interest on missed repayments, late repayments or accrued arrears.

The report also recommends: “Where lending has been reckless, all responsibility should not rest with the borrower but liability should be apportioned to the financial institution and, if necessary, the broker who arranged the loan.”. It says lenders should also display prominently on their websites all relevant information to assist customers who might be in arrears.

The committee says the Financial Regulator’s code of practice on mortgage arrears should be issued as a statutory instrument in its own right, which would give consumers the right to directly take court action for alleged breaches of the code.

The committee says those who avail of the code of practice should not have their credit rating damaged as a result.

An estimated 35,000 people are now in arrears, the report claims, while repossession orders sought by banks and other mortgage lenders doubled last year.

Figures compiled by the Courts Service show that 758 new applications for repossession orders were brought to the High Court in 2008, compared with 374 the previous year.