Fianna Fáil Finance Spokesperson Michael McGrath has today published new legislation to close a troubling loophole exposed in the Supreme Court on home repossessions. The Central Bank (Code of Conduct Bill) 2015 expands the protection for borrowers facing repossession proceedings.
The issue came to light in May of this year when the Supreme Court held that, although banks are legally obliged to abide by the Code of Conduct on Mortgage Arrears, the only basis on which the courts could reject an application for repossession was where the bank had failed to comply the length of time it must wait before initiating legal action. Currently this is set at 3 months after a “warning letter” is issued or 8 months after the arrears arose, whichever date is later. Crucially, failure to comply with other provisions of the Code cannot be cited by a borrower as grounds for the courts to turn down a repossession order.
The urgency of the situation was highlighted in June when the Central Bank found that seven lenders had violated the Code of Conduct on Mortgage Arrears including undue delays in progressing cases, failure to provide relevant information to the borrower and making demands for ad hoc payments when a revised repayment schedule had already been agreed.
Deputy McGrath stated, “It is absurd that a lender is legally obliged as a matter of law to comply with the Code, but is still entitled to a repossession order where they have flouted the provisions of the Code. The Code of Conduct on Mortgage Arrears was designed to provide essential protections to homeowners struggling to stay in their family home. It is now essentially redundant as a barrier to home repossessions. For example, the Code requires a lender to make ‘every reasonable effort’ to agree an alternative arrangement with a borrower before initiating repossession proceedings, but a Court can no longer use this as a reason for refusing a repossession order.
“In addition the CCMA also requires that unsolicited communications with the borrower must be “proportionate” but even where it is demonstrated in court that a bank has engaged in aggressive tactics the borrower can still face an order being granted for repossession. The fact that a lender would have to answer to the Central Bank for any significant breach of the Code is of no comfort whatsoever to a family that has lost their home as a result of a lender failing to comply with the Code.
“In my view it is unacceptable that the Government has failed to introduce the necessary legislation to deal with this issue. In his ruling in May, Judge Clarke commented that the courts do not have a role in determining the reasonableness of a lender’s mortgage arrears policies and the application of those policies to an individual case. Clear legislation would be needed for this. He effectively put it up to the Oireachtas to resolve the issue.
“This government has failed time and time again to rebalance the scales between the banks and borrowers. Fianna Fáil is now taking the initiative to bring forward legislation to bring clarity to the situation.
“This Bill would require a lender to show that they had materially complied with the Code of Conduct on Mortgage Arrears and the relevant Mortgage Arrears Resolution Process (MARP) before it became entitled to seek a court order for the repossession of someone’s home.
“The legislation envisages that the courts would dismiss a repossession application where it concludes that a lender has not complied with the relevant Code of Conduct or MARP. It would also apply to so-called “vulture funds” who buy mortgage books from lenders.
“It is my firm belief that this issue must be addressed as a matter of priority when the Dáil resumes,” concluded Deputy McGrath.