The revised code of conduct on mortgage arrears – the CCMA – needs to work.
As Yeats once noted ‘the centre cannot hold’, and that is now: over 54,000 homeowners are in two years of arrears; 95,000 haven’t made a payment for 90 days or more, more than 46,500 under 90 days in arrears and 80,000 restructured loans (people mainly put on interest only), 25% of which are not performing. 30,000 buy to lets are in more than 90 days arrears.
So precarious is the personal financial position of so many indebted borrowers that any significant rise in mortgage or other loan rates, another tax rise, or even a relatively minor financial event like an expensive home repair or other unexpected bill could cause thousands more to fall into arrears.
The original code of conduct has been revised – again - because the last one wasn’t working. The numbers in arrears has gone up, there has been no big improvement from the “engagement” process and pitifully small numbers of “long term and sustainable solutions”. The psychological effect of mortgage distress has not been factored into the resolution process and could end up being worsened, say the critics of the new code.
Something had to be done, cried the politicians, and the Central Bank will now require the banks
- to have a written communication strategy in place for dealing with all its mortgage arrears customers;
- to put in writing a timeline for engagement between itself and the customer who has gone into arrears, such as telling them exactly within what period they must return information to the bank, or that the customer now has 20 days to return this information or be classified as “non-cooperating” (which could lead to legal action and repossession starting in eight months);
- to inform the customer in writing that they have been deemed to be not cooperating with the bank and now, what options are open to them – a right to appeal, or to consult a Personal Insolvency Practitioner about applying for legal insolvency.
Unfortunately, the revised code means that the banks are no longer restricted to just three unsolicited calls per month and no longer have to show the same restraint tracking down people who have not been “engaging” with them.
So if you are in serious arrears, or just slipping into the great mortgage void, you need to
a)engage with your mortgage lender, and all other creditors. Put all proposals and offers in writing. Keep receipts for letters you handdeliver or post; keep a paper log of all emails. Tape phone calls and meetings (tell the bank you are doing so) and ideally bring a reliable witness/adviser to all meetings.
b)To qualify for MARP you need to fill out a Standard Financial Statement. With this picture of your financial position you need to seriously consider exactly what kind of mortgage is realistic and sustainable for you before you meet with the bank and they present you with what they believe is a sustainable deal.
c)Contact MABS, New Beginning, the Irish Mortgage Holders Association, FLAC or another trusted adviser who can explain the consequences of the bank offers. From them, find out about Personal Insolvency Arrangements and the debt write-debt that may accompany a successful application.
Debt write-down via an insolvency application is not something the banks want to have to concede. Should they reject such an application, the last option for the distressed borrower is to bankrupt with all their debts discharged after three years, but with the loss of their home.
Can this new Code of Conduct avoid this most dramatic (and costly) outcome?
Let’s hope so but the immediate reaction hasn’t been favourable …and time is running out.