Elderfield urges banks to extend repossessions moratorium

Debt-ridden homeowners may only secure a year-long delay on repossession if they co-operate reasonably and honestly with their banks, it was warned today.

Financial Regulator Matthew Elderfield suggested court action should be put off for 12 months if struggling borrowers agree and adhere to a revised repayment scheme.

The new rules on repossession moratoriums are part of proposed reform of a code of conduct for lenders dealing with more than 30,000 homeowners in arrears.

“Where borrowers are co-operating reasonably and honestly with lenders, lenders must wait at least 12 months before applying to the courts to commence enforcement of any legal action on repossession of a primary residence,” Mr Elderfield’s proposal stated.

Under the old regime, introduced last February, debt-hit mortgage holders were granted an automatic year- long moratorium on repossession after falling into arrears.

The new system would guarantee no moves to repossess if borrowers stick to agreements on repayments struck with their lender.

Mr Elderfield’s plan would see borrowers given 12-months grace from when arrears first arise if a revised repayment arrangement has not been agreed.

The moratorium would also come into effect when the borrower ceases to adhere to the terms of a revised repayment arrangement and no further arrangements are being entered into.

Lenders must also wait for a new appeal process to be completed before applying to the courts for a repossession.

Other proposals to ease the burden of debt include:

:: Lenders must engage with borrowers in difficulty repaying debts and set up a resolution process to handle arrears and pre-arrears cases.

:: Borrowers in trouble must get customer friendly information including standard financial statements to fill in.

:: Banks must look at all the repayment options.

:: Borrowers must not be ordered to switch from a tracker to another mortgage.

:: Bank staff must be properly trained to deal with debt-ridden customers.

:: An appeals process must be set up to allow customers to challenge a bank’s decision on repayments.

The Regulator is also planning to have the code of conduct on mortgage arrears extended to credit unions.

Mr Elderfield’s office has asked for interested parties to respond to the proposals by September 2 and hopes to draw a revised code of conduct by November.