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Mortgage arrears and consumer protection codes
Lending institutions such as banks and building societies are bound by two statutory codes of conduct in relation to mortgages. These are the Central Bank's Code of Conduct on Mortgage Arrears (CCMA) and its Consumer Protection Code 2012.
Local authorities operate under similar rules. For people having difficulty repaying local authority loans, two pieces of legislation, along with a set of guidelines, provide for the local authority to make arrangements to deal with the situation - (see ‘Local authority loans’ below).
If you are having difficulties paying your mortgage, you should talk to the lending institution as soon as possible. Your lender must take certain steps to deal with any problems you have in paying your mortgage. Repossessing your home should be the lender's last resort.
Code of Conduct on Mortgage Arrears (CCMA)
The current version of the Central Bank’s Code of Conduct on Mortgage Arrears (CCMA) came into effect on 1 July 2013. This is the main code of relevance to people whose mortgage is in arrears or in danger of slipping into arrears.
The CCMA requires mortgage lenders to adopt specific procedures when dealing with borrowers experiencing arrears and financial difficulties. Such procedures must be aimed at helping you as far as possible in your own particular circumstances.
In general, the CCMA requires lenders to wait 8 months before taking legal action about mortgages in arrears. However, this requirement does not apply if a borrower is deliberately not co-operating with the lender - see below.
Regardless of how long it takes your lender to assess your case, and provided that you are co-operating, you must be given 3 months’ notice before they can commence legal proceedings where either:
- Your lender does not offer you an alternative repayment arrangement for your mortgage or
- You do not accept an alternative repayment arrangement offered to you
This will give you time to consider other options, such as voluntary surrender, voluntary sale or a Personal Insolvency Arrangement.
If you are classified as not co-operating, your lender may commence legal proceedings immediately. Before you can be classified as not co-operating, your lender must first write to you and warn you that this might happen and tell you what steps you need to take to avoid being classified as not co-operating.
You may be classified as not co-operating with your lender if you:
- Do not fully and honestly disclose significant information or
- Fail to provide relevant information within a reasonable time or
- Are in arrears for 3 months, during which you either failed to contact the lender or respond to its communications, or your response is insufficient for a complete assessment of your circumstances or
- Have entered an alternative repayment arrangement and 3 months have passed, during which you have not fully made the alternative repayments or
- Have not entered an alternative repayment arrangement and 3 months have passed, during which you have not fully paid your mortgage or have not cleared your arrears
Before classifying you as not co-operating, the lender must write to you, giving you 20 business days to take specific actions to enable it to assess your circumstances. It must warn you about the implications of not co-operating and suggest that you seek appropriate advice. It must also highlight the position about debt outstanding after repossession or sale.
If you are classified as not co-operating, you lose the protections of the MARP and your lender may commence legal proceedings immediately. Before you can be classified as not co-operating, your lender must first write to you and warn you that this might happen and tell you what steps you need to take to avoid being classified as not co-operating. You may appeal the decision to classify you as not co-operating.
Scope of CCMA
The CCMA applies to mortgages on primary residences only. It defines primary residence to include “a residential property in this State which is the only residential property owned by the borrower” as well as the more common definition of “the residential property which the borrower occupies as his/her primary residence in this State” (your main home).
The purpose of this wider definition is to apply the protections of the CCMA to people who are trying to maximise their income to help pay the mortgage on their main residence or home, whether or not they actually live in it.
The Code also covers borrowers in pre-arrears. It defines pre-arrears as follows: "A pre-arrears case arises where the borrower contacts the lender to inform them that he/she is in danger of going into financial difficulties and/or is concerned about going into mortgage arrears".
The CCMA applies to all regulated mortgage lenders operating in the State when dealing with borrowers facing or in mortgage arrears on their primary residence, including any mortgage lending activities outsourced by these lenders. It does not apply to credit unions or to local authorities (see ‘Local authority loans’ below).
The Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 (pdf) aims to ensure that people whose mortgages have been transferred to unregulated entities – not currently covered by the CCMA – will have the same protection that they had before the loan was sold. Read more in the Explanatory Memorandum (pdf) and this press release.
Requirements of CCMA
The CCMA sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. It requires lenders to handle all such cases sympathetically and positively, with the objective at all times of helping people to meet their mortgage obligations.
Under the CCMA, lenders must have the following:
- A Mortgage Arrears Resolution Process (MARP) to be used
when dealing with arrears and pre-arrears customers. The 4 steps for the
- Financial information
- Assessment and
- An Arrears Support Unit (ASU) to assess arrears and pre-arrears cases
- An internal Appeals Board to consider appeals from borrowers in relation to ASU decisions
Lenders must also:
- Ensure that communications with borrowers are presented in a clear and consumer-friendly manner and that the level of communications from the lender, or any third party acting on its behalf, is proportionate and not excessive, taking into account the borrower’s circumstances.
- Not make unnecessarily frequent communications.
- Ensure that communications with borrowers are not aggressive, intimidating or harassing
- Ensure that borrowers are given sufficient time to complete an action they have committed to before follow-up communication is attempted.
- Make an information booklet available to borrowers in arrears (or pre-arrears) including details on the MARP, relevant contact points for arrears issues and details of websites with mortgage arrears information, such as mabs.ie and keepingyourhome.ie.
- Provide a dedicated section on their website for borrowers who are in or facing financial difficulties. This section must include the above booklet and links to the above websites.
- Wait at least 8 months before applying to the courts to commence legal action for repossession of a property (this does not apply if the borrower is not co-operating with the lender).
Lenders must not:
- Require a borrower to change from an existing tracker mortgage to another mortgage type, as part of an alternative arrangement offered to the borrower in arrears or pre-arrears unless none of the options that would allow the borrower to retain the tracker interest rate are appropriate and sustainable for the borrower’s individual circumstances.
If this is the case, the lender may offer the borrower an alternative repayment arrangement which requires the borrower to change from an existing tracker mortgage to another mortgage type provided that:
- An alternative repayment arrangement is affordable for the borrower, and
- It is a long-term sustainable solution which is consistent with Central Bank of Ireland policy on sustainability
If you are not happy with the lender’s treatment of your case, or if youfeel they have not complied with the CCMA, you can complain to the lender under the Central Bank’s Consumer Protection Code 2012 - see below.
If you are not happy with the outcome of an appeal or complaint, you can refer to Financial Services Ombudsman.
However, since 7 February 2013, the Financial Services Ombudsman cannot pursue complaints against the Irish Bank Resolution Corporation (IBRC) without the consent of the High Court.
The Central Bank has published a booklet for consumers Code of Conduct on Mortgage Arrears – A Consumer Guide (pdf).
The Free Legal Advice Centres (FLAC) have published a guide to the Code of Conduct on Mortgage Arrears 2013 (pdf).
The Money Advice and Budgeting Service (MABS) has published a series of guides and leaflets on the CCMA and dealing with mortgage debt.
Consumer Protection Code 2012
The Code includes requirements setting out how regulated entities must deal with and treat consumers who are in arrears on a range of loans including credit cards, personal loans and buy-to-let mortgages. It does not apply to mortgages on a primary residence – these are covered by the Code of Conduct on Mortgage Arrears, described above.
The Consumer Protection Code requires lenders to seek to agree an approach that will assist a consumer in dealing with an arrears problem.
The Code also provides that the lender must:
- Have in place written procedures for handling arrears and make information available to you to assist you in dealing with arrears
- Where your account remains in arrears 10 business days after the arrears first arose, immediately contact you to find out the reason for the arrears
- Ensure that the level of contact and communications from them, or from any third party acting on their behalf, is proportionate and not excessive.
Lenders must not:
- Initiate more than 3 unsolicited communications with you, by whatever means, in a calendar month, other than correspondence required by the CCMA or other regulatory requirements. (This limit does not include missed calls or engaged numbers.)
The Consumer Protection Code 2012 replaces the original Consumer Protection Code, which came into effect in 2007.
The Central Bank has published a consumer guide to the Consumer Protection Code (pdf).
Local authority loans
Section 11 of the Housing (Miscellaneous Provisions) Act 1992 provides that the local authority may make such monetary arrangements with you as it considers equitable to take account of your particular circumstances. In effect, this means that, if you are having problems making your repayments, you should approach the local authority to see if you can make an arrangement to facilitate you paying over a longer term or to restructure the repayments in some other way. Detailed guidelines have been issued to local authorities (pdf) on how to deal with such cases. These guidelines are based on the Central Bank’s Code of Conduct on Mortgage Arrears, described above.
The Housing (Miscellaneous Provisions) Act 2009 provides that where you owe money to a local authority either for rent or loan repayments and the local authority is satisfied that you would otherwise suffer undue hardship, it may make an arrangement with you to repay by instalments. This section (Section 34) is in effect with respect of loan repayments since 14 June 2010 but not in respect of rent.