Homeowners a priority for regulator -- not just banks
WHILE Matthew Elderfield is best known for dealing with the billion-euro problems facing Irish banks, he's keen to point out that he's just as concerned with the smaller-scale problems facing Irish householders.
Earlier in the week, Mr Elderfield's new rules governing how banks deal with householders in arrears came into force, and the Financial Regulator wants to make sure the public gets the full benefit of them.
"I want to send a message directly to homeowners -- they should know that as of the beginning of this year there are new standards in place to help protect them if they fall into arrears on their mortgages," he said.
The new protections include banning banks from badgering customers whose loans are in arrears, forcing banks to publish all their arrears options online and banning penalty interest.
The banks say these are all measures they've been taking anyway, but Mr Elderfield begs to differ. "I think limiting banks to three unsolicited contacts a month was very unpopular, and no penalty interest is something they're certainly not doing."
He hopes that some homeowners will be able to use the new rules to "buy time" so they can make lower repayments until their circumstances improve.
"For some, the terms of their mortgages can be stretched out, others can go from principal payments to interest only, those who can't even make all their interest can roll up some of it," he says. "It's not a panacea, at some stage you have to pay the principal down, but it will keep people in their homes."
Mr Elderfield admits, however, that some people are in "unsustainable" situations where it "may make sense to cut your losses and have a voluntary surrender of the home".
He doesn't hold out much hope for widespread debt forgiveness in these cases, since that would impose a capital hit on the banks which many banks simply can't fund.
Instead, he wants the Government to urgently review bankruptcy laws so those who surrender their homes won't be stuck with residual debt for 12 years.