FIONA REDDANanswers questions on mortgage arrears
I am already in arrears - how will the report help me?
One of the biggest changes signalled in the report concerns the mortgage interest supplement regime, which provides short-term support to help borrowers meet their mortgage interest repayments.
At present, if your spouse is in full-time employment, or if your house is on the market, you are not eligible for the supplement.
In future, provided you pass a revised means test which must first be developed, you may be entitled to this benefit, albeit on a short-term basis. The group states that this support should not "act as a disincentive to seeking or retaining work".
Another very welcome change, if the group's recommendations are implemented, is that lenders will no longer be able to apply penalty interest or arrears charges to borrowers who are taking part in the mortgage arrears resolution process. All lenders must develop a specialist unit in every lending institution to deal with those in arrears.
If your situation becomes unsustainable, you should be facilitated in applying for social housing appropriate to your needs.
Can my property still be repossessed?
While the report says "repossessions should be minimised", it does not say they should be banned, going so far as to say that "voluntary surrender may be the best option for both borrower and lender". As such, borrowers need to continue to make every effort to meet their repayments.
Moreover, if you refuse to co-operate with your lender's arrears resolution process, you will not be entitled to the 12-month protection from legal action.
I just can't meet my repayments any more. Can I hand my lender back the keys?
Unlike some other jurisdictions, which allow borrowers to hand back the keys of their properties when they run into difficulties without incurring further liability, borrowers in Ireland have no such option.
They are still liable for any shortfall on a property when it is repossessed. The alternative is bankruptcy, but this process lasts 12 years.
The group says "urgent consideration" should be given to the implementation of comprehensive reform of both judicial bankruptcy proceedings and the establishment of a non-judicial debt settlement process.
Having lost my job, I am in danger of falling into arrears. What will the report's recommendations mean for me?
If, for instance, you fear losing your favourable tracker mortgage as a result of having to discuss your situation with your lender, the group's recommendations will be welcome.
They state that if you agree a deal with your bank - such as going interest-only or extending the term of your mortgage - you won't lose your tracker, which means you can continue to benefit from historically low interest rates.
Moreover, from the time you contact your lender to inform them you may be facing repayment difficulties in the near future, the code of conduct on mortgage arrears will apply. You should also be supplied with an information booklet detailing your lender's arrears resolution process, and should be encouraged to comply with it.
You should also receive a periodic mailing from your lender detailing options for dealing with your financial distress.
I borrowed too much. Will I have to pay it all back?
It had been hoped by those struggling with excessive mortgages that the group would recommend some element of debt forgiveness, or introduce debt-for-equity swaps, which would help them to reduce the overall size of their loan.
However, this report makes no such suggestions, although it should be noted that the report marks only the first stage of the group's work.
In a follow-up report, which is due to be completed by the end of September, the group indicated that it will address the issue of "borrowers with unsustainable mortgages".
I am stuck in negative equity. Is there any reprieve for me?
The interim report makes no recommendations aimed at relieving the situation hundreds of thousands of Irish homeowners now find themselves in, whereby the value of their home is now worth less than the mortgage they have taken out on it.
However, as mentioned, the report marks only the first stage of the group's work, and it may be addressed in the follow-up report.