Key reforms to the Code of Conduct on Mortgage Arrears, the Personal Insolvency Service and the Mortgage to Rent scheme can play a crucial role in resolving many of the long-term mortgage arrears cases, according to Fianna Fáil Spokesperson on Finance Michael McGrath.
Deputy McGrath was commenting on a Central Bank paper on ‘Resolving Non-Performing Loans in Ireland’, “The only hope those in long term arrears have of securing an arrangement with their lender is by engaging with them and by paying what they can towards their mortgage. I would always encourage borrowers – no matter how difficult a predicament they are in – to engage fully with their lender, to obtain independent advice and to make every effort to pay their mortgage.
“While engaging with the lender can be a tortuous process for some borrowers, it is a necessary step and at least offers some hope of a resolution. Many of the long-term arrears cases involve complex individual stories and we should not be judgmental. It is also not the case that engagement is always up to the standard on the part of the lender.
“While some may use today’s figures to defend the sale of loans to vulture funds by Permanent TSB and other banks, the reality is that mortgages which have been restructured following engagement by the borrower and where the terms of that restructure are being fully honoured are also being lined up for sale in the same basket as loans where nothing has been repaid for many years.
“I suspect that many of the mortgages in long term arrears have been deemed to be unsustainable by the lender, and the borrower has only been offered the option of voluntary surrender or voluntary sale as a way of avoiding Court action for repossession.
“The government needs to urgently reform the mortgage to rent scheme as an effective backstop for people facing the prospect of losing their home. In addition, the insolvency process is being frustrated by lenders in too many instances and legislative reforms are needed to prevent banks from blocking sensible insolvency arrangements being agreed. In the past year, 48% of all insolvency proposals involving secured debt were either rejected by the creditor or the protective certificate expired.
“We also need to ensure that the Code of Conduct on Mortgage Arrears is revised so that a bank has to explore all possible Alternative Repayment Arrangements and not just the solution types it offers,” conclude McGrath.