Monday 29 December 2014

Mortgage arrears: Banks should not be allowed to send legal letters - committee

Published 08/07/2014 | 13:40

A POWERFUL Dail committee has called for greater protections for mortgage holders who are in arrears.

Banks should not be allowed to send legal letters to people who are behind on their payments and claim that this action is a “sustainable solution” under Central Bank rules, the Oireachtas Finance Committee has recommended in a report on arrears.

Targets have been set by the Central Bank for six main domestic banks to hit by offering long-term solutions to homeowners who are in arrears.

This are an attempt to lower monthly repayments and get troubled mortgage holders back on track.

But banks that feel homeowners have lost so much income that they will never be able to meet even revised payments have been sending out thousands of legal letters threatening to initiate repossession proceedings.

The banks have been allowed to count these legal letters as offers to consumers and use the letters to meet their targets.

The Oireachtas Finance Committee, which is chaired by Labour’s Ciaran Lynch, said the rules should be changed.

The committee said “legal letters should not be regarded as satisfactory solutions”.

Banks should also be forced set out in writing what alternative they are offering to repossession.

And banks were told to test if borrowers who are in arrears,  who are offered a solution by their bank, could cope with higher interest rates.

In “almost all cases” a borrower that has agreed to sell their home should not continue to be burdened with debt, the committee said.

In the past a number of recommendations made by the committee have been taken on board by the Central Bank.

Meanwhile, Fianna Fáil Finance spokesperson Michael McGrath has described as entirely inadequate the level of information being supplied by the Department of the Environment in respect of local authority mortgage arrears.

The most recent figures on the department’s website show that 31% of local authority mortgages are in arrears with 6,135 customers now more than 90 days behind in payment.

Mr McGrath said the data is not provided for the number of households who are in arrears for periods of more than 180 days leaving a major gap in understanding the trend.

“We cannot accurately appreciate the extent of the problem if we are operating in an information vacuum,” he said.

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