Central Bank deputy tells banks to sort out running sore of home mortgage arrears

According to new figures, 95,000 home loans – or 13% of all home mortgage loans in the Republic – were categorised by the lenders as facing shortfalls, deputy governor Ed Sibley said

Ed Sibley, deputy governor of the Central Bank, told a banking industry audience that banks 'need to do more' to resolve the arrears crisis.

A call by a Central Bank chief that lenders finally sort out the running sore of mortgage arrears has been welcomed by debt advisers and mortgage brokers. 

Deputy governor Ed Sibley told a banking industry audience that banks "need to do more" to resolve the arrears crisis which in the Republic is characterised by long-term arrears carried from the last financial crisis of a decade ago. 

Mr Sibley told bank executives that lenders were failing to make good on their commitments to the regulator. 

"Specifically, he identified the inadequate use of existing tools to deliver sustainable restructures, inconsistencies in the approaches to personal insolvency arrangements, inadequate consideration of diverse borrower demographics and the need for greater collaboration in seeking system-wide solutions for those in the deepest levels of distress," according to a Central Bank statement on the speech.

Praised lenders

However, Mr Sibley also praised lenders for their treatment of distressed customers since the onset of the Covid economic crisis last year. 

Even before the Covid crisis, Ireland's arrears crisis was still among the deepest in Europe. According to new figures, 95,000 home loans – or 13% of all home mortgage loans in the Republic – were categorised by the lenders as facing shortfalls, Mr Sibley said.  

Brokers and debt advisers have long complained that long-term arrears were still increasing 10 years after the financial crisis, with 5,416 accounts in arrears for over 10 years. They said no other country in the world would put up the long-drawn out nature of the crisis.

Critics have also said that offers of restructured mortgages, such as capitalisation of arrears, made by lenders have not been in the financial interest of distressed borrowers.     

Loan sales

They have also highlighted that the Central Bank and the Government have effectively endorsed the sale by banks of distressed mortgage loan books. Critics have said loan sales have done little to resolve the arrears crisis. 

However, one of the country's leading debt experts Paul Joyce, who is also senior policy adviser at the Free Legal Advice Centres (Flac), said he welcomed the "mood music" in Mr Sibley's comments that call for banks to offer distressed borrowers sustainable restructured mortgages.

Mr Joyce said Flac's own new research suggests customers are facing "huge difficulties" in securing a sustainable restructuring agreements from lenders. He wants the Central Bank to consider all types of household debt in its research, including unsecured debt. 

Flac last month published the first of a series of research papers on household debt focusing on unsecured debt and is preparing to issue research on mortgage debt. 

Rachel McGovern, financial services director at industry group Brokers Ireland, also welcomed the comments. 

“It is time to face up to something we in Brokers Ireland have long maintained, that is that restructures such as arrears capitalisation are effectively a method of kicking the can down the road,” Ms McGovern said.