Code deemed to be working effectively and as intended for borrowers who engage with the process
Earlier this year, in March, arising from concerns in relation to loan sales, the Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, requested the Central Bank of Ireland, under Section 6A of the Central Bank Act, 1942 (as amended), to carry out a review of the Code of Conduct on Mortgage Arrears (CCMA) to ensure it remains as effective as possible.
The key finding of the Report is that for borrowers who engage with the process, the CCMA is working effectively and as intended in the context of the sale of loans by entities regulated by the Central Bank*.
The Central Bank will continue to assertively supervise regulated firms’ compliance with the Code and will track how long and short-term arrangements are being applied to borrowers over time.
Although strategy, commercial decisions and contractual rights of entities regulated by the Central Bank cannot be interfered with, the Central Bank has committed to investigating any patterns of behaviour it becomes aware of that suggest the CCMA is not being followed. It will engage with industry on providing more information to borrowers on the assessment of their case and the reasons why arrangements considered, and not offered to the borrower, are not appropriate and not sustainable for the borrower’s individual circumstances. Consequently, the Central Bank is not proposing any changes to the Code of Conduct on Mortgage Arrears in the immediate future.
Minister Donohoe said: ‘I would like to thank the Central Bank for its detailed and comprehensive Report on the effectiveness of the Code of Conduct on Mortgage Arrears in the context of the sale of loans by regulated lenders. I am glad to see, in this instance, that the Central Bank is satisfied that, for borrowers who engage with the process, the Code of Conduct on Mortgage Arrears is working effectively and as intended’.
“I note that, as a result of its review, the Central Bank is not proposing any changes to the Code at the moment. However, as the Government and I take matters regarding mortgage arrears very seriously, we are always prepared to make changes and support actions where the Central Bank thinks they are necessary.”
Ends
Note to Editors:
*Findings:
- The key finding of the Report is that for borrowers who engage with the process, the CCMA is working effectively and as intended in the context of the sale of loans entities regulated by the Central Bank
More generally:
- The Mortgage Arrears Resolution Process (MARP), as set out in the CCMA, provides a clear framework for borrowers in or facing mortgage arrears on their primary residence to engage with relevant regulated entities, including banks, Retail Credit Firms and Credit Servicing Firms.
- Both regulated lenders and Credit Servicing Firms (acting on behalf of Unregulated Loan owners) continue to put in place arrangements for borrowers who engage with this process.
- There is no evidence that the Credit Servicing Firms inspected did not seek to engage with borrowers in arrears. The inspected Credit Servicing Firms have frameworks in place to support engagement with borrowers in arrears, as required by the CCMA. The Central Bank did not identify any material breaches of the CCMA by these firms.
- Where a loan is sold to a Non-banking Fund (Unregulated Loan Owner), existing arrangements with borrowers are honoured by Retail Credit Firms and Credit Servicing Firms (acting on behalf of a Unregulated Loan Owner) until the agreed term of the arrangement comes to an end. Borrowers may then be offered a different arrangement from the suite of arrangements considered by the Retail Credit Firms and Credit Servicing Firms (acting on behalf of the Unregulated Loan Owner), within the MARP framework.
- There is no evidence that borrowers whose circumstances have not changed are being moved off existing arrangements by Credit Servicing Firms (acting on behalf of the Unregulated Loan Owner) during the term of the arrangement.
- Based on the number of properties taken into possession by banks, Retail Credit Firms and Unregulated Loan Owners over the period Q1 2016 to end Q1 2018, there is no material difference in the level of repossession activity by Unregulated Loan Owners compared with regulated lenders.
Background:
- The Minister wrote to the Governor of the Central Bank earlier this year, under Section 6A of the Central Bank Act, 1942, as amended, requesting the Governor of the Central Bank to carry out a review of the Code of Conduct on Mortgage Arrears (CCMA) to ensure it remains as effective as possible.
- The CCMA is a statutory Code put in place to ensure that lenders have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears.
- Lenders are required to comply with all aspects of the CCMA and non-compliance with the CCMA is enforceable against regulated entities by the Central Bank.
The CCMA:
- includes the Mortgage Arrears Resolution Process (MARP) framework, which sets out the steps that lenders must follow. The completion of an affordability assessment is a key step in the MARP.
- sets out that a lender must examine each case on its individual merits and it must base its assessment on the full circumstances of the borrower, including, inter alia, the borrower’s current repayment capacity, as determined by up to date financial information in a standard form known as a standard financial statement (SFS).
- also requires lenders to review an alternative repayment arrangement at appropriate intervals for the type and duration of the arrangement. The lender must also carry out a review of an alternative repayment arrangement at any time, if requested by the borrower.
- states that all cases must be handled sympathetically and positively by the lender, with the objective at all times of assisting the borrower to meet his/her mortgage obligations.