The number of mortgage accounts for principal dwelling houses in arrears rose following the credit crunch, but has declined in the last few years, due to a number of economic factors.
However, the number is still relatively high, and at the end of 2016, there were 77,493 (11%) of all accounts in arrears.
Despite this decline, banks continue to issue court proceedings to enforce debt/ security on principal dwelling houses.
At the end of 2016, there were 1,397 ongoing cases in court, and in 273 of these cases, the courts granted an order for possession.
455 properties were taken into possession by lenders during the last quarter of 2016.
This is the highest level recorded yet.
This reflects the fact that as the economy improves, the majority of properties have come out of negative equity, and the lenders can enforce for the full debt, when an order for possession is granted. Previously, the lenders would have been reluctant to enforce or seek an order of possession, when properties were in negative equity, as they were unlikely to recover the full amount of the debt because most mortgages on principal dwelling houses would be 80% or more of the purchase price.
In this article, I will deal with the court procedure when a lender/bank seeks to take possession of the property with a view to selling it.
Preferably, as a borrower, you should try to avoid this, and it is recommended that the bank or financial institution are approached, with a view to re-negotiating the debt. This would normally entail changing the repayment structure, based on what you can afford to pay.
A write-down of the debt may be considered, by selling some assets with a view to paying off the debt at a reduced figure.
The lender will probably only consider this if the property is in negative equity.
There are clear regulations set out by the Central Bank, stating the framework that lenders must use when dealing with borrowers and with mortgage arrears.
This is known as the Mortgage Arrears Resolution Process. It requires lenders to handle all such cases sympathetically and positively, with the objective at all times of helping people to meet their mortgage obligations.
You will normally be required to provide the bank with a statement of means which sets out all your assets, income, liabilities, and expenses, and will show your net worth.
This assists the parties in ascertaining what a viable payment structure would be.
It is important that you keep up-to-date financial records, including copies of all receipts and invoices, and engage an accountant to prepare financial accounts if this is necessary. If you do not do this, you are potentially in a considerably weaker position, and it is important to keep all financial records, because you may need to produce these in court later, to show that efforts are being made to pay the debt.
It is advisable to approach an accountant, financial advisor, or a personal insolvency practitioner, to advise you in this regard, with a view to putting a proposal to the bank.
They will advise you as to what the best means are to restructure the debt, based on what you can afford to pay.
In the event that it is not possible to reach an agreement, the lender may take you to court to repossess your home.
The usual procedure is that the lender will apply for a possession order or a well charging order, in either the Circuit Court or the High Court.
A document known as a civil bill (Circuit Court) or a special summons (High Court) will be served on you, with an affidavit from the lender.
These documents set out the basis of the case of the lender.
You will be required to file a document in court known as an appearance, and you will have an opportunity to file a replying affidavit, to respond to the allegations from the lender.
The replying affidavit is a critical document, and it is strongly advised that you get legal advice before preparing this, and we would recommend instructing a solicitor to represent you.
These matters are normally dealt with initially by the County Registrar in the Circuit Court, and the Master of the High Court, but can then be transferred to a judge for a hearing.
Oral evidence is normally not heard, and the courts consider the affidavits before making an order.
The County Registrar and the Master frequently adjourn matters in order to give borrowers further time to try to pay the debt, or potentially re-negotiate with the bank.
However, if a compromise cannot be agreed between the parties, and the lender can show significant arrears and that no efforts are being made to repay, it is likely the court will make an order for possession.
It should be noted the government has recently set up a scheme called Abhaile, in order that a borrower can access free legal and financial advice similar to the legal aid scheme.
In the event that you as a borrower fall into arrears on a mortgage, it is strongly advisable that you engage the service of a legal or financial expert to assist you.
Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners, Solicitors, 17, South Mall, Cork (021-4270200), and author of ‘Farming and the Law’. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.
Email: firstname.lastname@example.org Web: www.walshandpartners.ie