The current limit on a bank of contacting a distressed mortgage customer a maximum of three times in a month has been removed as part of the revised Code of Conduct on Mortgage Arrears (CCMA).
The revised code is part of an overall package of reforms aimed at accelerating the resolution process between banks and mortgage holders in arrears.
The main provisions deal with differentiating between co-operating and not co-operating customers.
If a bank proves a customer is not co-operating, then previous safeguards such as the inability to impose surcharges and/or interest on arrears for the first 12 months of the default period no longer applies.
Moreover, a customer not co-operating may also be prevented from applying for a personal insolvency arrangement under the new personal insolvency legislation.
A customer will be deemed to be not co-operating if:
*They do not make a full and honest disclosure of their financial affairs to the banks;
*they withhold information that is sought by the lender;
*they fail to make contact with a lender over a three month period when no mortgage payments have been made.
In the past, a customer who made partial contact with the lender was able to seek the protection of the code of conduct on mortgage arrears for 12 months. This has also been scrapped.
From now on, only customers that fully engage with their banks will be deemed to be co-operating. And even though the limit of three contacts in a month has been removed, any future contact must be reasonable and proportionate.
Customers will have to provide a full breakdown of the reasons why they cannot meet their mortgage payments.
However, the banks will have to give a reasonable amount of time to a distressed customer to provide a detailed breakdown of all relevant financial information.
To this end, standardised financial statements will be used.
Moreover, if a bank refuses to enter into a restructuring arrangement, then it must write to the customer with a full breakdown explaining its reasons.
The new CCMA ensures there is a smooth transition for a customer who has been through a mortgage arrears resolution process and who wishes to apply for a personal insolvency arrangement.
Consequently, a lender must include a link to the Insolvency Service of Ireland on its website or provide documentation about the Insolvency Service in communications with a distressed borrower.
Under the CCMA, a co-operating customer has to be given a 12 month moratorium before the bank can start legal proceedings which ultimately ends in repossession.
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