Regulator to investigate treatment of those in arrears
BANKS and building societies are to be investigated over how they deal with people who are in arrears.
The Financial Regulator has begun the probe to make sure lenders are observing the code of conduct on mortgage arrears, it has been learned.
The statutory code was amended in February requiring banks, building societies and sub-prime lenders to wait a year before moving to repossess a home.
More than 6,400 homeowners are threatened with eviction as they have failed to pay their mortgages for a year or more. They are thought to be among the 5,000 mortgage holders who have been issued with a formal demand to return their property to their lender.
More than 28,600 people have not paid their mortgages in three months or more, recent figures from the Financial Regulator have shown.
Financial Regulator Matthew Elderfield said: "We recently amended our code (on mortgage arrears) to give homeowners more time -- now 12 months -- to work out a solution to an arrears problem before legal action can be taken by their bank.
"We will be conducting a review to check up on how banks are complying with this and other aspects of the code," he said.
Homeowners are under such pressure that close to 3,000 mortgages a month are being restructured, it has been estimated.
Lenders are showing forbearance by allowing borrowers to take a payment holiday, pay interest only or extend the term of the mortgage.
The mortgage arrears code only applies to people's principal private residence.
Under the code, lenders have to write to homeowners as soon as they are in arrears. A plan to clear the arrears has to be agreed with the borrower.
However, if a homeowner fails to engage with their lender, then the bank, building society or sub-prime lender is free to issue legal action to repossess the home.
Last November banks and building societies were given a stark warning against breaching the code of conduct. In a stern rebuke to mortgage lenders, the Master of the High Court Edmund Honohan said the message had to go out that the code was a matter of law.
"It is not an option, it is mandatory. The code is not a hollow formula. You must verify it because without that, evidence will not proceed." He urged lawyers who lined his packed courtroom in the Four Courts to "take note".