# IMF's comments on the mortgage crisis



## Brendan Burgess (22 Apr 2013)

From the  issued in March 2013 




> Box 3. Mortgage Arrears Resolution Preparations (PDF page 19)
> *Initial steps in dealing with mortgage arrears emphasized consumer protection including protections of the family home.*
> The Code of Conduct on Mortgage Arrears (CCMA), introduced by the CBI in 2009 and strengthened in 2010, requires banks to establish a structured Mortgage Arrears Resolution Process for engaging with struggling borrowers, through a specialized Arrears Support Unit. There is a 12-month moratorium on repossession so long as the borrower cooperates with the lender, limits on contacts with borrowers to avoid harassment, and lenders must not require borrowers in arrears to give up their low cost tracker mortgage. At the same time, borrowers must disclose their financial position through a Standard Financial Statement.
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> ...


*19.    A range of factors have hindered durable resolution, but the authorities recognize that there is a need to address unsustainable debts to avoid further delaying the domestic economic recovery.* 

As is typical in a crisis, banks delay loan resolution in the hope of more favorable economic and property market conditions. In the meantime, the application of IRFS incurred loss model has facilitated banks recognizing their loan losses at a slower pace than under other accounting regimes. It has also taken time to strengthen inadequate operational capacity to deal with distressed assets, and banks experience difficulties engaging with some borrowers, in part reflecting protections under the Code of Conduct on Mortgage Arrears (CCMA). Personal insolvency reforms that were recently completed had earlier posed uncertainties for banks about appropriate resolution strategies; more recently, with these reforms nearing implementation, a group of banks has adopted a multilender coordination protocol which could help resolve arrears cases without deploying the personal insolvency framework. Finally, there are also concerns that loan modifications entailing principal reductions could stimulate strategic defaults, with such concerns heightened by impediments to initiating repossession proceedings.  

*20.      Accordingly, the authorities are committed to wide-ranging actions to ensure decisive progress in resolving distressed assets in 2013* Targets for durable loan restructuring are supported by steps across consumer protection arrangements, reforms of repossession procedures, and implementing the recently enacted personal insolvency reforms: 



 The CBI will establish by end-March a target requiring banks to offer a substantial share of restructuring arrangements during 2013 (proposed structural benchmark) (MEFP ¶5). A target for completing such arrangements during 2013 will be set subsequently, prior to the completion of the 11th  review. Critically, the CBI will monitor each bank‘s progress closely, including by auditing samples of loan modifications to ensure they can be expected to durably address arrears.
The CBI will also modify the CCMA by end-June, where appropriate to facilitate effective engagement with mortgage borrowers in arrears (MEFP ¶6). The CBI intends to review in particular (i) the restrictions on contacts to facilitateconstructive engagement, where it recently provided a clarification; (ii) amending the definition of non-cooperating borrowers to ensure protections are limited to borrowers where engagement is timely and consistent with addressing their arrears; and (iii) the current protection on tracker mortgages, specifically in cases where a borrowers is offered an alternative arrangement that is advantageous in the long-term. Staff considers a thorough review of the CCMA appropriate as the emphasis shifts from forbearance to resolution, and notes in particular the need to ensure unsecured lenders are not advantaged in collections.
To facilitate durable resolution results, the authorities will also ensure that repossession procedures work efficiently in practice (MEFP ¶7). Repossessions declined in recent years despite the rise in arrears. The authorities remain committed to remove unintended constraints through legislative amendments to be submitted to parliament by end-March (MEFP ¶12, eighth review), with a view of passing them into law by around mid-year. This step is important to facilitate the funding needed for a renewal of mortgage lending on reasonable terms, and it will also facilitate conclusion of agreements to modify a loan and help ensure they are lasting solutions, while containing the risk that such modifications reduce payments by borrowers that can afford to pay. In addition, the authorities will keep repossession experience under review, and quickly bring forward appropriate measures to address any problems regarding the length, predictability, and cost of proceedings; Box 4 outlines some potential steps. Staff noted the need for prudential policies on banks‘ property management and vendor financing to facilitate reasonably timely disposal of property while avoiding market disruption.




> *Box 4. Enhancing the Efficiency of the Repossession Regime*
> *Recent international experience underscores the need for efficient repossession procedures, while ensuring proper protection of the interests of the debtor.
> *Prolonged and costly procedures to seize mortgage collateral tend to be associated with slower recovery of property markets. In Ireland, the overall number of repossessions is very low, at some 0.3 percent of total arrears cases in 2012, compared with rates of 3 to 5 percent in the U.K. and U.S., suggesting a need to strengthen the efficiency of the repossession regime.
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*22.      By end-May, the CBI will update the 2011 Impairment Provisioning and Disclosure Guidelines (proposed structural benchmark), which will give further momentum to durable restructuring efforts* 
. As a first step, the CBI is engaging with banks to ensure key inputs for provisioning of loans, especially modified loans, are appropriately prudent. Taking into account an assessment of the application of the current guidelines, the CBI will then update the guidelines, where necessary, setting out clear definitions and principles underpinning bank‘s provisioning models. In the context of their ongoing efforts to strengthen financial supervision the authorities have also requested an external Basle Core Principles assessment (structural benchmark from the 8th  review) that will be carried out during the second half of 2013.


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## Delboy (21 Jun 2013)

http://www.independent.ie/business/...trackers-should-lose-tax-relief-29358866.html

Latest IMF spiel...

"HOMEOWNERS with good-value tracker mortgages should lose their tax relief, the IMF has recommended.
This would be a way for the State to subsidise domestic banks for the huge losses they are making on these mortgages.
Around half-a-million people get mortgage tax relief on 350,000 mortgage accounts, according to Revenue"


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## gaius (4 Jul 2013)

Delboy said:


> http://www.independent.ie/business/...trackers-should-lose-tax-relief-29358866.html
> 
> Latest IMF spiel...
> 
> ...


 If the tracker is fully paid up, they should be told where to go.

Probably just a shot across the bows of people on trackers but also in arrears.


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