A JUDGE has refused an order allowing Irish Life & Permanent (ILP) repossess a family home which was mortgaged for €258,000.
The bank had failed to comply with the Financial Regulator's Code of Conduct requiring banks to engage with borrowers over mortgage arrears, Mr Justice Gerard Hogan said in the High Court.
Malcolm and Susan Duff, faced losing their home at The Square, Collon, Co Louth, next month but Mr Justice Hogan granted their appeal against a Circuit Court order permitting ILP secure possession on February 28 next.
Mr Justice Hogan said his judgment may have implications for "general relationships" between mortgage lenders and borrowers, particularly those with ILP mortgages. He told the sides before the case he had a mortgage with ILP but no objection was raised to his hearing it.
A central issue in the case was the couple's claim ILP failed to comply with the Central Bank Code of Conduct by not engaging with them about their capacity to repay mortgage arrears.
The Duffs took out a 25 year mortgage with ILP in 2003 for €258,000 related to registered and unregistered lands. Their home was on registered land and the garden was on unregistered land.
They were required to make monthly repayments of €1,300 and had arrears of €63,000 in February 2012 when the Circuit Court made a repossession order but deferred that to February 2013.
Mr Duff, a self-employed building contractor whose business suffered heavily after 2007, claimed ILP never offered the couple alternative repayment arrangements, a "mortgage holiday", deferred payments, interest only payments or recapitalisation.
The Duffs also objected to being classified by ILP as "non co-operating borrowers".
Mr Justice Hogan found the case was governed by the 2009 Code of which Clause 6 stated a lender must not seek repossession until "every reasonable effort" has been made to agree an alternative repayment schedule.
Where a borrower was deliberately not engaging with the lender, or other circumstances so justified, the lender could seek repossession, Clause 6 also stated.
Mr Justice Hogan noted Mr Duff's sworn statement he had offered ILP interest only repayments in 2009 but was rebuffed.
ILP had not complied with Clause 6 prior to seeking repossession as it could not say every reasonable effort was made to agree an alternative repayment schedule in discussions between the Duffs and ILP in 2009, he ruled.
It could not be said the Duffs were non co-operating borrowers in 2009, whatever about subsequently, he found. They seemed to have been "frank and forthcoming" with ILP about facing acute financial difficulties and sought "some way out of the dreadful financial circumstances into which they, like so many others, had been plunged".
The judge also rejected arguments by ILP he could make a possession order on the basis of a contractual agreement between the sides.
While going on to find the court has jurisdiction to grant possession of the unregistered land, and the arrears in this case would normally justify that, he refused such an order due to ILP's failure to comply with the 2009 Code.
Nothing in his judgment prevented ILP taking further steps as it considered appropriate to realise its security, he stressed.
The bank could independently sue for an order deeming it had a valid charge over the house and ask the court to exercise its inherent power of sale, he also noted.