Mortgage arrears measures ‘throw borrowers to the wolves’

The Central Bank will audit banks throughout next year to ensure they are meeting their targets.

New measures to tackle the mortgage arrears crisis offer no hope to borrowers and effectively “throw them to the wolves”, campaigners have claimed.

Under the plan announced by the Government and the Central Bank, there will be a sharp rise in repossessions, with banks forced to write down debt.

The six main lenders — AIB, Bank of Ireland, Ulster Bank, PTSB, ACC, and KBC — have been given specific targets to have solutions in place with 20% of distressed customers by the end of June, 50% by the end of the year, and the balance over 2014.

The Central Bank will audit the banks throughout next year to ensure they are meeting their targets.

The current limit on a bank of contacting homeowners in arrears no more than three times in a month has been scrapped.

The revised Code of Conduct on Mortgage Arrears also gives the banks a range of powers to penalise customers who refuse to co-operate — up to repossession.

Customers will have to provide a full breakdown of the reasons why they cannot meet their mortgage payments. If a bank refuses to enter into a restructuring arrangement, then it must write to the customer with a full breakdown explaining its reasons.

There are currently:

*94,488 residential mortgages and 27,018 buy-to-let mortgages in arrears of more than 90 days;

*23,523 residential mortgages, with a collective value of €4.8bn, more than 720 days in arrears;

*51,352 residential mortgages in arrears of more than 360 days.

Financial regulator Matthew Elderfield said he expects repossessions to “rise significantly”, which is at odds with what the Government has been saying.

He said “some form of debt relief makes sense but it is up to each bank”.

Finance Minister Michael Noonan said the Government intends to keep the rate of repossessions “very small” and they will only happen as “a last option”.

Mr Noonan said he does not expect the banks will need to raise extra capital.

David Hall of the Irish Mortgage Holders Organisation said the plan offers no hope for borrowers in distress and will spread fear.

He said the State’s response has been woefully inadequate and has erred on the side of the banks.

“The plan delivers no improvement in transparency of solutions to be offered to borrowers by the lenders, and provides no protection for borrowers against potential abuses by the lenders of their powers… it throws borrowers to the wolves.”

He also raised concerns about the removal of the current cap on the number of times a bank is allowed to contact or call or visit a borrower and warned lenders have been incentivised “to maximise the rate of extraction of savings and income from the already distressed borrowers”.

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