Mortgage debt - Reasonable measures

It seemed incongruous that the public were being called on to rescue the banks while no provisions were being implemented to protect members of the public from the banks, if they came down heavily on individuals in financial difficulties in the midst of the current economic downturn.

In many instances people were enticed into excessive debt by the easy facilities being provided by lenders during the property boom.

The Central Bank and Financial Regulator have suggested new proposals to protect people who get into difficulties with their mortgage repayments. They have called for an agreed definition to be formulated as to when payments should be considered in arrears, because various institutions are currently using different criteria.

The financial institutions are being required to establish a Mortgage Arrears Resolution Process to handle cases where homeowners get into difficulties with repayments. The new code will require lenders to explore alternative repayment arrangements and “all viable options” with homeowners who get into financial difficulties.

Mortgage lenders will not be allowed to compel homeowners to change from a tracker mortgage to another form of mortgage, and financial institutions should have to await the outcome of any complaint or appeal process before applying for repossession of a home. The new proposals also stipulate that banks and building societies would have to wait for 12 months before applying to the courts for repossession of anybody’s home. If homeowners agree to a new repayment arrangement, the 12-month period will only begin once the owner falls into arrears in complying with the new payment arrangements.

The proposals seem eminently reasonable and should be welcomed as a protection for vulnerable homeowners who got caught up in the reckless borrowing frenzy fuelled by the bankers.