New deal to block bank home seizures
Compulsory code of conduct to stop thousands losing property
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Friday February 06 2009
THE Government is finalising a new deal to protect recession-hit homeowners from losing their property.
The country's two biggest banks will agree to a new mortgage code of conduct as part of the recapitalisation deal to boost their funds with €8bn of taxpayers' money.
Taoiseach Brian Cowen last night confirmed the code of conduct will be mandatory and will include all mortgage providers, including sub-prime lenders.
Finance Minister Brian Lenihan threatened to bring in legislation if all mortgage providers did not sign up.
Mortgage holders are also set to benefit from a welcome drop in their monthly repayments after the European Central Bank (ECB) signalled a further 0.5pc cut in interest rates next month.
A half percentage cut means a homeowner with a €300,000 mortgage, borrowed over 30 years, would enjoy a fall in their monthly repayments of around €80.
The new measures to protect the thousands of people most at risk of losing their homes were confirmed following another black day on the jobs front.
Telecoms giant Ericsson announced it will lay off 300 high-end workers over the next 18 months at its Dublin plant.
Hundreds more workers were told their jobs were gone after a series of closures were announced across the country.
The mandatory mortgage code is expected to be announced along with the recapitalisation programme in the coming days.
It won't go as far as trade unions' demands for a two to three year window where repossessions would not be allowed.
But it will commit banks to working with the homeowner who has gone into arrears, trying to reschedule payments, referring them to budget advisers and delaying the start of legal proceedings, the Irish Independent has learned.
Mr Cowen last night said the aim of the code is to help people who have mortgage problems and who may become unemployed in the immediate term.
"We are committed to moving from a voluntary code of practice, as it is at the moment, to a wider statutory code of practice," he said. "I think when you have a comprehensive programme, it will provide protection to everyone in those circumstances," he said.
Difficulty
Mr Lenihan said the Government had raised the issue with the country's two biggest banks as part of the new recapitalisation deal.
And he warned other institutions -- including sub-prime lenders -- that the Government will not tolerate attempts to repossess homes.
"The real difficulty relates to other institutions that do not subscribe to the code of practice on repossessions. The work of the regulator is targeted at those institutions and at bringing them within a compulsory scheme.
"In the absence of full agreement by those institutions to comply with any scheme, I will bring in legislation if necessary," he said.
On a positive front, homeowners can look forward to reduced monthly repayments after the ECB signalled a further cut in rates next month.
Next month's expected cut will drive down interest rates to a record low of 1.5pc.
The Bank of England cut rates to 1pc yesterday, the lowest level since its foundation in 1694. The US Federal Reserve has also dropped rates to almost as far as they can go.
Latest figures show around 14,000 homeowners were in arrears on their mortgage repayments.
But the Financial Regulator's statistics only gave a limited picture as it didn't cover all lenders and related to the position last June.
The acceleration in job losses since then is expected to have put tens of thousands more homeowners under threat.
The Government's revised scheme for the regulation of mortgage arrears was criticised though as "too narrow" by legal rights organisations helping homeowners to fight repossessions.
The Free Legal Advice Centres (FLAC) has written to the Financial Regulator raising questions about the code's failure to address how those who are in arrears or in negative equity should be dealt with.
- Fionnan Sheahan and Dearbhail McDonald
