The Central Bank of Ireland published a revised Code of Conduct on Mortgage Arrears which came into force on 1st July 2013. The Code deals with how lenders (i.e. the banks) can deal with people in mortgage arrears or in danger of going into mortgage arrears on their primary residence and with the Mortgage Arrears Resolution Process (MARP) which must be followed by lenders.
Changes include the removal of the limit on the number of uninvited communications the lenders can make to borrowers whose mortgages are in arrears or pre-arrears. Previously this was capped at three successful contacts a month but this has now been changed to “proportionate” level of contact to be considered on a case by case basis. However, lenders will be now allowed to visit borrowers in arrears at their homes if they are not engaging with the banks.
There will no longer be a 12 month moratorium on legal action against people in arrears. Instead borrowers will have 8 months from the date they are notified by the bank that they have entered arrears or three months from the end of the MARP process, whichever is the later, before legal action can be taken against them.
Significantly, the bank cannot require an existing tracker mortgage holder to change to a different mortgage type unless all other alternatives have been considered first. The different mortgage must be affordable to the borrower and sustainable in the long term by the borrower. In practice this would likely mean that the mortgage amount would have to be reduced.
The revised Code has increased the information requirements on the lenders. All communication about arrears or pre-arrears must be provided to borrowers in a timely manner. It must be clear and consumer friendly and it should be easily understood by a borrower. The lender must also prepare and make available an information booklet about the Mortgage Arrears Resolution Process. The Standard Financial Statement (which is used to assess borrowers engaged in the MARP process) must be provided at the earliest opportunity and borrowers must be offered assistance completing it. Borrowers at risk of being classified as “not co-operating” must now be sent a warning letter giving them at least 20 clear business days’ notice that they are at risk of the classification. The bank must also provide information on how to prevent this occurring.
The banks will have six months to provide any necessary training for staff and to amend their current systems in order to implement the new requirements. The Code is intended to protect both the banks and the borrowers and therefore it is important for everyone to be aware of the rights and obligations contained in the revised Code.