Task force to call for overhaul of banking conduct over debts

A GROUP tasked with advising the Government on how best to help people struggling with their mortgages is expected to call for an overhaul of the banking sector’s code of conduct when dealing with borrowers in arrears.

Finance Minister Brian Lenihan is expected to receive the mortgage arrears and personal debt group’s first interim report later this week, before presenting it to Cabinet.

A “menu of options” is being prepared for the Government on how to put together a bailout package for struggling homeowners, according to one finance source.

The Irish Examiner has learned the initial report is expected to push for changes in the code of conduct used by lenders for mortgage arrears cases.

It is expected the group will call for some “breathing space” for borrowers and for banks to operate a standard approach in dealing with debt-ridden customers. The report will also focus on how banks are communicating with those in arrears and how to improve this.

A number of main lenders including EBS Building Society, AIB and Bank of Ireland met the expert group in April.

The expert group, chaired by accountant Hugh Cooney, met yesterday to finalise details of its report for Mr Lenihan.

The contents of the report must be laid before Cabinet, which is expected to happen next Tuesday, before it is then published and ministers consider its recommendations over the summer.

The group could recommend that lenders are compelled under the code of conduct to offer distressed homeowners a chance to extend the length of their mortgage term, to pay interest only for a period or to take payment holidays.

But the group, which includes the financial regulator, is unlikely to argue for a large-scale package or a “NAMA for the people”.

Such a scenario could in fact worsen the country’s arrears problems by letting loans grow out of control over long periods, finance experts have said.

Instead, it is expected the code of conduct and mortgage arrears recommendations will focus on small efforts to stabilise those in arrears and particularly borrowers who have a realistic chance of eventually meeting their mortgage repayment schedules.

The latest figures show one in every 25 residential mortgage holders are over three months in arrears.

Mr Lenihan’s spokesman yesterday confirmed he was expecting the expert group to focus on the further issue of personal debt later this year, in a second report.