New measures needed to deal with ‘complex’ cases of separated borrowers

Banking lobbyists have called for the introduction of new legislation to ease the plight of separated borrowers who are in mortgage arrears.

New measures needed to deal with ‘complex’ cases of separated borrowers

Banking lobbyists have called for the introduction of new legislation to ease the plight of separated borrowers who are in mortgage arrears.

It is estimated that one in 10 cases of mortgage arrears involves borrowers who have separated.

Banking & Payments Federation Ireland (BPFI) — a lobby group representing the banking, payments, and fintech sectors — has asked for new legislation that would better enable lenders to deal with separated borrowers in arrears.

The call comes in the wake of BPFI analysis which showed that lenders have to adopt a case-by-case approach because of the commercial, legal, and other complexities involved.

A potential solution tabled by the lobby group is to treat each party as a single borrower with repayment capacity calculated on an individual basis — but with both borrowers remaining liable for the outstanding debt.

An alternative is to offer short-term repayment arrangements in cases where just one party is engaging, or other long-term options where both parties agree.

BPFI believes that consideration should be given by regulators and legislators to introducing new measures which could include one or more of the following:

  • Regulation — the possibility of new regulatory provision to facilitate the engaging party and the non-cooperating party to find a workable solution;
  • Insolvency legislation — the possibility of legislative change which would allow a lender to pursue a co-debtor who, unlike the other party in an insolvency arrangement, has not been cooperating and is not a party to the arrangement;
  • Court-approved agreements — the possibility of court-approved agreements to be put in place that may override the scope currently afforded to the non-cooperating borrower to veto an agreement;
  • Mediation — the possibility of amending the provisions of the Mediation Act 2017 to oblige solicitors in family law cases to also include the issue of the mortgage as part of the mediation stage in a separation

“Lenders are doing all they can to accommodate mortgage arrears cases involving separated borrowers, but there is only so much they can do on their own, given the complexities involved,” said BPFI chief executive Brian Hayes.

BPFI has written to the Central Bank, the Insolvency Service, the Department of Finance, the Department of Justice and Equality, and MABS in an effort to seek support for the introduction of the proposed changes.

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