Call for two-year reprieve on mortgage repayments

MORTGAGE holders unable to meet repayments should get a two-year reprieve during which banks and financial institutions are prevented from taking legal action to take over their homes.

A report by the Oireachtas Committee on Social and Family Affairs also says banks or brokers should be liable in mortgage arrears cases when lending has been reckless.

The Government has been urged to act “immediately” to extend the moratorium on home repossession for banks who were bailed out with taxpayers’ money from 12 to 24 months.

A report on The High Level of Indebtedness in Irish Society recommends that customers should be able to sue banks who do not comply with the Financial Regulator’s guidelines on mortgages. This would involve putting the Code of Practice on Mortgage Arrears on a statutory basis.

Bank of Ireland and AIB have resisted Government attempts to extend the repossession moratorium to two years in exchange for the injection of €7 billion of taxpayers’ money.

But yesterday’s report says the Government can enforce the ban on legal action against homeowners to two years and expand it to include other lending institutions.

“It is possible. It will require some work, it won’t be done overnight but we are asking the Government to start that work immediately,” said one of the report’s authors, Fianna Fáil’s Thomas Byrne.

The committee accepted that it went beyond its own scope by recommending that: “Where lending has been reckless, all responsibility should not rest with the borrower but liability should be apportioned to the financial institutions and, if necessary, the broker who arranged the loan.”

Mr Byrne said: “The emphasis is always on the borrowers and their responsibility, but the banks certainly pumped the money out there, certainly facilitated mortgages and there is no doubt that some brokers and banks clubbed together to give people loans that really they shouldn’t have got.”

Almost 300 people are jailed every year for failure to pay debt, spending an average of 20 days behind bars.

“Many people with debt do not open registered letters and if they do, they panic at the prospect of court hearings and are looking at documents that are unintelligible to them,” it says.

The committee recommends:

- Ensuring legal documents in relation to debt enforcement are written in simple language.

- Banning penalty interest on missed or late payments.

- Making lenders engaged in pre-emptive contact with customers who might fall into debt problems and make special arrangements to stop this happening.

One of the authors, Fine Gael’s Olwyn Enright, said: “There must be changes in policy and practices to help people cope with this new reality.”