Calls for new legislation to help separated borrowers in mortgage arrears

Calls for new legislation to help separated borrowers in mortgage arrears

Banking lobbyists have called for the introduction of new legislation to ease the plight of separated borrowers who are in mortgage arrears.

It is estimated that one-in-ten cases of mortgage arrears involves borrowers who have separated.

Banking & Payments Federation Ireland (BPFI), a lobby group which represents the banking, payments and fintech sector, is calling for consideration to be given to new legislation which would better enable lenders to deal with separated borrowers who are in arrears.

The call comes in the wake of BPFI analysis which showed that lenders have to adopt a case-by-case approach because of the commercial, legal and other complexities involved.

A potential solution tabled by the lobby group is to treat each party as a single borrower with repayment capacity calculated on an individual basis, but with both borrowers remaining liable for the outstanding debt.

An alternative is to offer certain short-term alternative repayment arrangements in cases where just one party is engaging or other long-term options where both parties agree.

BPFI believes that consideration should be given by regulators and legislators to introducing new measures which could greatly help the plight of separated borrowers with mortgage arrears. These could include one or more of the following:

  • Regulation – the possibility of new regulatory provision to facilitate the engaging party and the non-cooperating party to find a workable solution;
  • Insolvency Legislation –the possibility of legislative change which would allow a lender to pursue a co-debtor who, unlike the other party in an insolvency arrangement, has not been cooperating and is not a party to the arrangement;
  • Court-approved agreements – the possibility of court-approved agreements to be put in place that may override the scope currently afforded to the non-cooperating borrower to veto an agreement;
  • Mediation – the possibility of amending the provisions of the Mediation Act 2017 to oblige solicitors in family law cases to also include the issue of the mortgage as part of the mediation stage in a separation.

Speaking on the complexity of the matter Brian Hayes, BPFI Chief Executive, said: "Lenders are doing all they can to accommodate mortgage arrears cases involving separated borrowers but there is only so much they can do on their own given the complexities involved."

BPFI has written to the Central Bank, the Insolvency Service, the Department of Finance, the Department of Justice and Equality, and MABS to seek support for introducing the changes.

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