Sunday 17 December 2017

Central Bank extends code of conduct to halt repossessions

Charlie Weston Personal Finance Editor

A bid by banks and building societies to water down a code protecting borrowers in arrears on their mortgages has been rejected by the Central Bank.

Instead, the code of conduct on mortgage arrears has been extended to protect homeowners who fear they may be about to go into arrears.

The Central Bank has revised the original mortgage code, published in February 2009, bringing in changes it said would give more protection to those at risk of losing their homes.

Head of regulation at the Central Bank Matthew Elderfield had proposed major changes to the code earlier this year and sought submissions before a final decision on the new rules.

Major lenders -- including AIB and Bank of Ireland -- responded by writing to Mr Elderfield seeking to have the code diluted.

Almost all lenders had resisted attempts to restrict them to just three unsolicited contacts a month to homeowners behind on repayments.

But Mr Elderfield has decided to stick with his original plan to limit lenders' contact with mortgage-holders.

Some 40,000 homeowners are three months or more behind on their home-loan repayments. Another 30,000 people have renegotiated their repayments.

The new rules mean lenders will not be able to take legal action to repossess a home if a homeowner who is in arrears is co-operating with the bank.

The code suggests lenders offer cash-strapped homeowners one of the following: the option to pay the interest only; a deal allowing for the repayment of the interest and some of the capital; a payment holiday; an extension of the term of the mortgage; a change in the type of mortgage, say, from a fixed rate to a variable one; adding the arrears to the overall amount borrowed; or deferring some of the interest payments, if the bank has signed up for this scheme.

Lenders have been banned from removing valuable trackers from homeowners as part of any deal to restructure repayments.

This move had been resisted by some lenders, who claimed some unscrupulous mortgage-holders would deliberately go into arrears to protect their tracker.

Under the new code, lenders will not be able to impose penalty fees and charges on those in arrears if the homeowner works with their bank to come up with a repayment deal.

However, this ban on penalty charges on those in arrears will not apply to people who refuse to engage with their lender when they get behind on repayments.


The updated code forces lenders to wait 12 months before going to the courts to repossess a home if the mortgage-holder agrees to a new payments schedule, known as a mortgage arrears resolution process.

A mortgage-holder who rejects the new payment solution offered by their lender will be able to appeal this to the bank, and if they are still not satisfied they will be able to appeal the decision to the financial services ombudsman.

A number of lenders had claimed this would lead to some distressed homeowners "playing the system" by making an appeal to the ombudsman.

However, lenders will still be able to repossess homes of mortgage-holders who fail to co-operate or who have an "unsustainable mortgage".

An unsustainable mortgage is one where more than 18 months' interest has gone unpaid and it is not considered that the homeowner will be able to clear the arrears.

The new codes come into effect on January 1, but banks have been given six months to put the new provisions in place.

A spokesman for the Irish Banking Federation would not comment on suggestions that the attempts by banks to have the code watered down had been largely ignored.

"Nobody wants to dwell on that because lenders will be too busy trying to make this code work," the spokesman said.

Irish Independent

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