Central Bank issues tougher rules to banks on mortgage arrears

Banks have been given two revised deadlines to conclude deals with mortgage holders three months behind in repayments.

Under tougher rules to try to resolve the deepening crisis, the main lenders will have to write down loans, reschedule loans or repossess homes on 15% of the households 90 days in debt by the end of the year.

The new Central Bank order was issued following negotiations between the State’s finance officials and the Troika.

A second target has been set to push the bank to offer sustainable solutions for 70% of its customers in long-term mortgage arrears by the end of next March.

The same deadline has been set for a quarter of debt-laden mortgages to be finally resolved.

The main lenders, Bank of Ireland, Allied Irish Banks, Ulster Bank and Permanent TSB will be allowed to offer split mortgages, force repossession, ask for voluntary surrender, write down debt and reschedule loans.

Official figures from the Central Bank lay bare the extent of the mortgage arrears crisis with almost 100,000 households three months behind in their repayments.

The heads of the banks were called before the Oireachtas Finance Committee earlier this month to explain whether they had reached the original targets set down for the period to the end of June.

The chiefs of the four main banks said that altogether about 15,000 legal letters which included threats of repossession had been sent to home owners and they claimed that this was considered part of an effort to reach a sustainable solution to the crisis.

Governor of the Central Bank Patrick Honohan is to give his views to the committee on the banks’ approach to the targets and deadlines next week.

The committee has asked the main banks to give a full breakdown of their resolution processes and how they have been applied to distressed borrowers.

The lenders have also been asked to include other resolutions outside of the Central Bank’s prescribed formulas.

The committee is looking closely at why some banks favour split mortgages over others and the manner in which bankers write to debt-laden homeowners.