Banks fight mortgage code
Major lenders lobby Regulator in bid to dilute protection for homeowners
Published 08/10/2010 | 05:00
BANKS are fighting to keep the pressure on hard-pressed homeowners by resisting proposed new rules to protect mortgage holders.
They have written to the Financial Regulator claiming that mortgage holders will abuse the code he is planning to impose on financial institutions.
Under the proposals there are guarantees that homeowners who do a deal with their lender won't have their homes repossessed. The code also prevents banks taking customers off trackers mortgages and putting them on more expensive variable rates.
The banks' submissions to the Regulator -- seen by the Irish Independent -- will provoke fury from customers who face swingeing cutbacks and tax rises in the next four Budgets as part of the price of bailing out the banks.
Major lenders -- including AIB and Bank of Ireland -- are among those demanding that the new proposed code on mortgages be diluted.
The banks have told the Financial Regulator that homeowners in trouble may deliberately default on their repayments -- to prevent their trackers being taken away from them.
The estimated 400,000 customers on tracker mortgages are costing the banks millions. Tracker mortgages can only be increased when the European Central Bank (ECB) interest rate increases.
The lenders are also resisting moves to restrict the number of times they can contact a mortgage holder in arrears. They also say some cash-strapped customers will make spurious complaints to stop lenders trying to repossess their homes. Others will agree to repayments deals and then break them, the lenders claim.
Regulator Matthew Elderfield has yet to decide whether to accept the banks' arguments and change the proposed code.
There are currently 36,400 mortgage holders who are in arrears, having missed three months of payments. The revelation of the lenders' concerns come as the ECB yesterday left interest rates unchanged at 1pc for the 17th month in a row. Economists do not expect the ECB to begin to increase interest rates until the end of 2011.
Despite low interest rates, thousands of Irish mortgage borrowers are struggling to meet their repayments. One in 20 mortgage holders are in arrears -- up 40pc on last year.
The revised code forces lenders to wait a year before taking a homeowner to court to repossess their home if a new repayment arrangement has been agreed.
But lenders say they fear that some mortgage holders will agree a repayment deal to give themselves 12 months protection from repossession, break the arrangement, and then agree a new deal. This will mean the clock will start again on a new 12-month moratorium.
The Irish Congress of Trade Unions, in its submission, called for a limited form of debt forgiveness for families that are in negative equity and are unable to make repayments.
State debt advisory body MABS (Money Advice and Budgeting Service) said people who took out jumbo mortgages should be able to claim irresponsible lending as a defence.
"Where proven, the remedy to borrowers being that the sale of the mortgaged property results in the full and final settlement of the amount outstanding," MABS said.