Fianna Fáil Finance spokesperson Michael McGrath has welcomed the reports that the Central Bank is to review the Mortgage Arrears Targets Programme (MART) and has called on the Central Bank to ensure that the banks put the focus on proven, workable solutions in dealing with long term arrears cases.
Deputy McGrath was speaking after the Central Bank Governor Patrick Honohan confirmed to him in correspondence that he “continues to have concerns that some restructures offered may not be sustainable.”
Deputy McGrath stated “I firmly believe that the banks are using restructuring options with a poor success rate, such as arrears capitalisation, in too many mortgage arrears cases. This has been done merely in order to meet the required number of offers of a sustainable solution under the MART Programme.
“For example, over a quarter of mortgage restructurings at the end of September 2014 involved the arrears being capitalised but, of these, nearly a third (32%) have re-defaulted, i.e. the arrears balance has increased since the arrangement was put in place. In essence, arrears capitalisation is proving to be only a sticking plaster solution in many cases and is being overused by the banks.
“It is essential that the banks are forced to re-open these long term arrears cases as they are quite likely to be in the firing line for repossession. The banks must not be able to hide behind claims that they have attempted to put a solution in place when it is now clear that the nature of the solution put forward was entirely inadequate in many cases. There has been a significant step up in legal action on the part of banks since the start of the year with warnings of a wave of repossessions coming in the months.
“The other major issue that needs to be addressed as part of this review is the need for a clear definition of what constitutes a ‘sustainable solution’. At present, it is essentially left up to the banks to decide whether a proposed solution is sustainable or not. This is a completely inadequate approach and has contributed to the very poor success in dealing with long term arrears cases.”
You can download the Central Bank’s response to Deputy McGrath here