# Report of Expert Group on Mortgage Arrears published



## Sunny (17 Nov 2010)

http://www.finance.irlgov.ie/documents/publications/reports/2010/mortgagearrrepfin.pdf


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## Brendan Burgess (17 Nov 2010)

[FONT=&quot][/FONT][FONT=&quot]*Press statement by the Minister for Finance

*[/FONT]*Press Statement on the publication of the Final Report by the Expert Group on Mortgage Arrears and Personal Debt*
The Expert Group on Mortgage Arrears and Personal Debt Expert Group, chaired by Hugh Cooney, today (17th  November 2010) published its final report with recommendations on  measures to assist in dealing with the difficulties created by mortgage  arrears. The report follows on from an Interim Report published in July.  
The Minister for Finance welcomed the report stating . "The Government has already taken several decisive steps to support those in difficulty with their mortgages. A revised Code of Conduct on Mortgage Arrears is being finalised by the Central Bank and will be issued shortly. The Mortgage Interest Supplement, which provides an invaluable safety net to mortgage borrowers, is also being reformed.
We are committed to  solutions that are fair and appropriate to the current circumstances of  Irish homeowners. The Government accepts the groups recommendations and  wants to see them implemented without delay.”
*The main recommendations are:*


A  Deferred Interest Scheme should be introduced for borrowers who can pay  at least 66% of the interest. This would give borrowers up to 5 years to  get back on their feet. Lenders representing more than half of the  market have agreed to take part in a scheme along the lines of the Group  proposal. 
 

Lenders should consider facilitating borrowers in negative equity who wish to trade down to a more affordable home. 
 

Where a mortgage is unsustainable, assessment for social housing should be done before repossession takes place. 
 

A  mechanism should be put in place to allow repossessed borrowers to  remain in their homes for a time, allowing the housing authority time to  source appropriate accommodation. 
 

The Group is not recommending debt forgiveness, nor a State funded Mortgage to rent scheme. 
 

New bankruptcy legislation should be introduced. 
 

A statutory non-judicial debt settlement system should be established 
 

The time limit for discharge of debt should vary in line with the total value of debt. 
 The  Minister for Finance is also pleased to note that the Central Bank has  stated that the latest Mortgage Arrears figures imply a portfolio loss  rate below the industry average base loss rate used on the PCAR and well  below the stress PCAR portfolio loss rate. This indicates that the PCAR  tests took a realistic view of likely losses to mortgage lenders.
The  Group believes these recommendations represent a balanced and measured  set of proposals which will improve the situation for those in mortgage  and personal debt difficulties and simultaneously best serve the  national interest. In its research the group found that:



Around 90% of mortgage accounts are being repaid in accordance with the contract. 
 

There  were 36,438 mortgage accounts (4.6% of total) in arrears for over 90  days at the end of June. The Group did not have the September figure,  being published today. 
 

Repossessions remain low and lender forbearance has worked well to date. 
 

The  Mortgage Interest Supplement provides an essential support for almost  18,000 borrowers. As interest is paid in full, the debt of borrowers in  the scheme does not increase. 
 

An examination of international practices suggest that Irish debt legislation needs to be modernised. 
 In light of these  findings the Minister believes that a targeted approach to those  experiencing difficulties meeting their mortgage commitments is  appropriate and in the best long term interests of the mortgage market  in this country.


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## Brendan Burgess (17 Nov 2010)

*[FONT=&quot]Key Recommendations from the final   phase of the Group’s work[/FONT]*
[FONT=&quot]
[/FONT]

*[FONT=&quot]Debt Forgiveness[/FONT]*
• [FONT=&quot]We   do not recommend a formal debt forgiveness scheme having regard to the[/FONT]
[FONT=&quot]        broad range of policy considerations which are outlined in the main   body of[/FONT]
[FONT=&quot]        the report.[/FONT]
[FONT=&quot]
[/FONT]

*[FONT=&quot]Advanced Forbearance[/FONT]*
• [FONT=&quot]All   mortgage lenders will be requested to commit to the proposed Deferred[/FONT]
[FONT=&quot]       Interest Scheme (DIS) or an equivalent scheme. Lenders representing   the[/FONT]
[FONT=&quot]       majority of the market have already indicated their willingness to   implement[/FONT]
[FONT=&quot]       this or an equivalent scheme and the remaining lenders will be   requested to do[/FONT]
[FONT=&quot]       so.[/FONT]
• [FONT=&quot]The DIS should enable   borrowers who can pay at least 66% of their mortgage[/FONT]
[FONT=&quot]       interest (but less than the full interest) to defer payment of the   unpaid interest[/FONT]
[FONT=&quot]       for up to 5 years.[/FONT]
• [FONT=&quot]When the accumulated   amount in the deferred interest account is equal to a[/FONT]
[FONT=&quot]       total of 18 months interest, or when the borrower has participated in   the DIS[/FONT]
[FONT=&quot]       for up to 5 years, the mortgage may be deemed to be unsustainable.[/FONT]
[FONT=&quot]
[/FONT]

*[FONT=&quot]Social Housing[/FONT]*
• [FONT=&quot]The   Department of the Environment, Heritage and Local Government should[/FONT]
[FONT=&quot]         swiftly implement new regulations (currently being developed) which   will[/FONT]
[FONT=&quot]         enable borrowers whose mortgage has been deemed unsustainable, to   become[/FONT]
[FONT=&quot]         eligible for social housing assessment before a repossession order has   been[/FONT]
[FONT=&quot]         made or repossession has actually taken place.[/FONT]
• [FONT=&quot]The Group recommends   that a mechanism be put in place which would enable,[/FONT]
[FONT=&quot]         where appropriate, the borrower and lender agree to a voluntary   repossession,[/FONT]
[FONT=&quot]         with actual repossession deferred for a specified maximum period or   until such[/FONT]
[FONT=&quot]       time as the housing authority has   sourced appropriate accommodation,[/FONT]
[FONT=&quot]         whichever comes sooner.[/FONT]

[FONT=&quot]
[/FONT]

[FONT=&quot]The Group recommends that an Exchequer   funded mortgage to rent scheme[/FONT]
[FONT=&quot]should not be introduced given the current   budgetary and fiscal environment[/FONT]
[FONT=&quot]and existing waiting list for social   housing. However, should these constraints[/FONT]
[FONT=&quot]ease, it may be appropriate to reconsider   a mortgage to rent scheme.[/FONT]
*
[FONT=&quot]Personal Debt[/FONT]* 
• [FONT=&quot]That   reform of Ireland’s personal insolvency regime should consist of two[/FONT]
[FONT=&quot]        main parts:[/FONT]
[FONT=&quot]        (i)new and modernised bankruptcy legislation with a less punitive[/FONT]
[FONT=&quot]              approach; and[/FONT]
[FONT=&quot]        (ii)a non-judicial debt settlement and enforcement system which would   be[/FONT]
[FONT=&quot]              an alternative to bankruptcy in   most cases.[/FONT]
• [FONT=&quot]That the time period   for discharge of the debt under a non-judicial debt[/FONT]
[FONT=&quot]        settlement mechanism should vary according to the quantum of the debt,   with[/FONT]
[FONT=&quot]        a large quantum of debt having a longer discharge period than a   smaller one.[/FONT]

*[FONT=&quot]Trade Down [/FONT]*
• [FONT=&quot]The   Group notes that, for some mortgage holders who are in negative equity,[/FONT]
[FONT=&quot]        trading down would produce a reduction in mortgage debt and more   affordable[/FONT]
[FONT=&quot]        monthly payments. The Group recommends that further consideration   should[/FONT]
[FONT=&quot]        be given by lenders to facilitating trading down by borrowers in this   situation.[/FONT]
[FONT=&quot]        Such options would have to meet relevant prudential standards, with[/FONT]
[FONT=&quot]        appropriate controls in place, and be in the customers’ best interest.[/FONT]
*
[FONT=&quot]Assisted Sales and Cost of Sale[/FONT]* 
• [FONT=&quot]The   Group recognises that an early assisted sale may have advantages over a[/FONT]
[FONT=&quot]         formal repossession in the case of an unsustainable mortgage. We   recommend[/FONT]
[FONT=&quot]         that lenders develop a protocol setting out their practices,   procedures and[/FONT]
[FONT=&quot]         charges in this area.[/FONT]

*[FONT=&quot]Monitoring and Reviews[/FONT]*
• [FONT=&quot]Having   regard to the fact that the MARP and the DIS represents a new[/FONT]
[FONT=&quot]        approach designed to address a specific problem, the Group believes   that all its[/FONT]
[FONT=&quot]        main constituent parts will require close monitoring from their[/FONT]
[FONT=&quot]        commencement. It recommends that the MARP, the DIS and the Appeals[/FONT] 
[FONT=&quot]      Process be formally reviewed within 18 months of commencement[/FONT]


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## Brendan Burgess (17 Nov 2010)

[FONT=&quot]*I have summarised the Executive Summary over three posts*[/FONT][FONT=&quot]
[/FONT]
[FONT=&quot]The Expert Group on Mortgage Arrears and   Personal Debt was established by the[/FONT]
[FONT=&quot]Government in February 2010 and was tasked   with making recommendations to the[/FONT]
[FONT=&quot]Minister for Finance on options for   improving the current situation for families with[/FONT]
[FONT=&quot]mortgage arrears on their principal   private residence and with personal debt.[/FONT]

[FONT=&quot]The Group published an Interim Report in   July 2010 and its recommendations were[/FONT]
[FONT=&quot]accepted by the Government. These   recommendations have formed a very important[/FONT]
[FONT=&quot]part of the overall work of the Group.   Many of these recommendations are currently[/FONT]
[FONT=&quot]being implemented. This includes   publication by the Central Bank of a consultation[/FONT]
[FONT=&quot]paper to amend the statutory Code of   Conduct on Mortgage Arrears (CCMA).[/FONT]

[FONT=&quot]In the final phase of its work, the Group   focussed on the three key areas of advanced[/FONT]
[FONT=&quot]forbearance, social housing and personal   debt. The Group actively sought the views of[/FONT]
[FONT=&quot]practitioners in these areas to add to its   understanding of both complex technical[/FONT]
[FONT=&quot]matters and general issues of policy.[/FONT]

[FONT=&quot]The Group reviewed international practices   in regard to all of the main issues which it[/FONT]
[FONT=&quot]considered. A critical part of the Group’s   work was to evaluate the potential[/FONT]
[FONT=&quot]applicability of solutions, which are in   operation elsewhere, to an Irish context.[/FONT]

[FONT=&quot]This Report is based on the current level   of information available. However, the[/FONT]
[FONT=&quot]Group is conscious of the range of factors   which may impact on future developments[/FONT]
[FONT=&quot]in the economy. Accordingly, we suggest   that arrangements be made for ongoing[/FONT]
[FONT=&quot]monitoring of the situation to ensure that   policy responses continue to be relevant and[/FONT]
[FONT=&quot]appropriate.[/FONT]

*[FONT=&quot]Key Findings[/FONT]*
[FONT=&quot]The key findings are set out below and   described more fully in the main body of the[/FONT]
[FONT=&quot]report.[/FONT]

[FONT=&quot]Mortgage arrears data from the Central   Bank at the end of June 2010 show[/FONT]
[FONT=&quot]that 36,438 residential mortgage accounts,   representing 4.6% of the total[/FONT]
[FONT=&quot]number of accounts, are in arrears for   over 90 days. This compares with 3.3%[/FONT]
[FONT=&quot]at the end of September 2009.[/FONT]

[FONT=&quot]The Group concluded that arrears levels   will persist for some time and may get[/FONT]
[FONT=&quot]worse before they get better. Forthcoming   data from the Central Bank is[/FONT]
[FONT=&quot]expected to show that 5% of all mortgage   accounts are in arrears for over 90[/FONT]
[FONT=&quot]days. This has informed the Group’s   thinking in relation to proposals for[/FONT]
[FONT=&quot]advanced forbearance.[/FONT]

[FONT=&quot]The Central Bank, as an input into the   work of the Group, conducted a survey[/FONT]
[FONT=&quot]of lenders in regard to the level and type   of loan rescheduling. It is estimated[/FONT]
[FONT=&quot]from the survey that the number of   rescheduled mortgage accounts is up to[/FONT]
[FONT=&quot]45,000. There is an overlap of 20- 25%   between rescheduled mortgages and[/FONT]
[FONT=&quot]arrears cases, giving an estimated total   of 70,000 who are either in arrears or[/FONT]
[FONT=&quot]have rescheduled.[/FONT]

[FONT=&quot]The Group estimates, based on the Central   Bank’s quarterly data on mortgage[/FONT]
[FONT=&quot]arrears and the lenders survey, that   around 90% of mortgage accounts are[/FONT]
[FONT=&quot]being repaid in accordance with the   contract. Two thirds of rescheduled[/FONT]
[FONT=&quot]mortgage accounts are paying at least full   interest.[/FONT]

[FONT=&quot]The Group notes that repossession levels   in [/FONT][FONT=&quot]Ireland[/FONT][FONT=&quot] remain substantially lower[/FONT]
[FONT=&quot]than those experienced in the [/FONT][FONT=&quot]UK[/FONT][FONT=&quot] and found that lender forbearance is   working[/FONT]
[FONT=&quot]and is having a beneficial impact.[/FONT]

[FONT=&quot]The Group notes that the Exchequer is   already providing significant assistance[/FONT]
[FONT=&quot]through the Mortgage Interest Supplement   (MIS) scheme to borrowers on low[/FONT]
[FONT=&quot]incomes who are in difficulty. The Group   notes that, at present, MIS assists[/FONT]
[FONT=&quot]almost 17,800 borrowers.[/FONT]

[FONT=&quot]The Group, during the period of its   research, could not identify any[/FONT]
[FONT=&quot]arrangements internationally that could be   characterised as mortgage debt[/FONT]
[FONT=&quot]forgiveness schemes, with the exception of   parts of the [/FONT][FONT=&quot]US[/FONT][FONT=&quot] where non-recourse[/FONT]
[FONT=&quot]mortgage lending applies.[/FONT]

[FONT=&quot]The Group noted that Mortgage to Rent Schemes   operating in the [/FONT][FONT=&quot]UK[/FONT][FONT=&quot] are[/FONT]
[FONT=&quot]based on very different funding models   than that which would pertain in[/FONT]
[FONT=&quot]Ireland. The Group also noted that lenders   who participated in leasing type[/FONT]
[FONT=&quot]arrangements with local authorities, in   respect of properties held under[/FONT]
[FONT=&quot]unsustainable mortgages, would face   adverse capital implications.[/FONT]

[FONT=&quot]The Group noted that the development of   personal insolvency law in many[/FONT]
[FONT=&quot]jurisdictions would indicate that [/FONT][FONT=&quot]Ireland[/FONT][FONT=&quot] requires reform in this area as a matter[/FONT]
[FONT=&quot]of urgency.[/FONT]

[FONT=&quot]The Group recognises that in the event of   a sale of a home, a mortgage[/FONT]
[FONT=&quot]shortfall debt, where such arises, becomes   an unsecured personal debt still[/FONT]
[FONT=&quot]owed to the mortgage lender. In all   judicial and quasi judicial proceedings[/FONT]
[FONT=&quot]such debt is treated on an equal basis   with all other forms of unsecured debt.[/FONT]


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## Brendan Burgess (17 Nov 2010)

*[FONT=&quot]Key Recommendations from the first phase of the Group’s work[/FONT]*

[FONT=&quot]In July 2010, the Group made 41   recommendations – see Chapter 2 for a full list of[/FONT]
[FONT=&quot]recommendations from both phases of the   Group’s work. The following are among[/FONT]
[FONT=&quot]the key recommendations from the Interim   Report:[/FONT]

[FONT=&quot]All lenders must develop a Mortgage   Arrears Resolution Process (MARP) to[/FONT]
[FONT=&quot]provide a framework for handling arrears   and pre-arrears cases.[/FONT]

[FONT=&quot]Lenders must not apply penalty interest or   arrears charges to borrowers who[/FONT]
[FONT=&quot]are taking part in the MARP.[/FONT]

[FONT=&quot]A Standard Financial Statement (SFS)   should be developed for use by all[/FONT]
[FONT=&quot]lenders and MABS. This should be used to   assess a borrower’s financial[/FONT]
[FONT=&quot]position and to identify a best course of   action.[/FONT]

[FONT=&quot]Lenders must not require the borrower to   give up their low cost tracker or[/FONT]
[FONT=&quot]other existing product if to do so would   put the borrower at a financial[/FONT]
[FONT=&quot]disadvantage.[/FONT]

[FONT=&quot]All lenders must establish a centralised   and dedicated Arrears Support Unit[/FONT]
[FONT=&quot](ASU) to manage pre-arrears under the   MARP.[/FONT]

[FONT=&quot]The complaints handling procedures of the   Consumer Protection Code should[/FONT]
[FONT=&quot]apply to the CCMA including the decisions   of the ASU relating to the[/FONT]
[FONT=&quot]application of the lender’s MARP.[/FONT]

[FONT=&quot]The Department of Social Protection should   introduce an alternative and more[/FONT]
[FONT=&quot]equitable approach to achieving the   Mortgage Interest Supplement (MIS)[/FONT]
[FONT=&quot]objectives and maintaining its   sustainability in light of changes in the[/FONT]
[FONT=&quot]economic climate and the mortgage market.[/FONT]

[FONT=&quot]Consideration should be given to the   effective implementation, in the shortest[/FONT]
[FONT=&quot]possible timeframe, of measures for the   comprehensive reform of both judicial[/FONT]
[FONT=&quot]bankruptcy proceedings and the   establishment of a non-judicial debt[/FONT]
[FONT=&quot]settlement process.[/FONT]

[FONT=&quot]A more comprehensive system of credit   reporting should be put in place. The[/FONT]
[FONT=&quot]Group welcomed the Financial Regulator’s   announcement of a review of[/FONT] 
[FONT=&quot]credit reporting arrangements in [/FONT][FONT=&quot]Ireland[/FONT][FONT=&quot].[/FONT]


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## Brendan Burgess (17 Nov 2010)

IBF press statement: 

*IBF Statement on  Final Report of the Expert Group *​ *on Mortgage  Arrears and Personal Debt*​ 
The Irish Banking Federation  (IBF) welcomes publication on the Dept. of Finance website of the Expert Group’s  final report as reflecting the positive impact for borrowers of ongoing standard  forbearance practices by the mainstream lenders and as providing the basis for  additional customer support measures by way of advanced forbearance.   



The IBF particularly welcomes the  report’s acknowledgement that lender forbearance is working and is having a  beneficial impact; and that the level of repossessions here remains  substantially lower than that experienced in the UK.   



As a participant in the work of  the Expert Group, IBF was pleased to represent the views of the banking sector  as part of the constructive deliberations to identify the nature and scale of  mortgage arrears and the appropriateness of additional supportive measures.   IBF-member institutions have variously indicated their intention to voluntarily  establish schemes that will reflect the principles of the Deferred Interest  Scheme (DIS) proposed in the report and that will deliver on its overall  objective. At the same time, the sector welcomes the Expert Group’s decision not  to recommend a formal debt forgiveness scheme.


Banks remain fully committed to  doing everything possible to help customers with genuine repayment difficulties  and to working with Government and relevant agencies to ensure that both  mortgage and personal debt are dealt with in a fair and sensible way.  This  commitment is reflected in the Q3 2010 arrears data published today by the  Financial Regulator.  This shows that, while the proportion of mortgages in  arrears more than 90 days has increased from 4.6% to 5.1%, the number of actual  repossessions continues to decline, from 86 to 81 – of which 22 were on foot of  a court order and 59 were voluntarily surrendered/abandoned.  The number of  repossessions has now fallen for the fourth successive quarter.


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## canicemcavoy (17 Nov 2010)

The report is being discussed on Matt Cooper's show right now.


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## Time (17 Nov 2010)

> *[FONT=&quot]Social Housing[/FONT]*
> • [FONT=&quot]The   Department of the Environment, Heritage and Local Government should[/FONT]
> [FONT=&quot]         swiftly implement new regulations (currently being developed) which   will[/FONT]
> [FONT=&quot]         enable borrowers whose mortgage has been deemed unsustainable, to   become[/FONT]
> ...


This should be welcomed. The current situation of having to wait for a repossession order is often frightening for the people involved. At least with this new measure a person will be sure of where they are going to live after losing their home.


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## RIAD_BSC (18 Nov 2010)

Are there any recommendations for people who are in negative equity, who want to move house and can afford to, but who can't because they are not allowed to sell their first home? I am referring to, for example, people in NE with very good salaries who might be stuck in an apartment, but want to start a family. I can't see any reommendations in this report to help them.


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## Questionable (19 Nov 2010)

I've a question...

Can anyone explain to me....

How does one in a position where one feels they might avail of parts of this new legislation actually avail of it? I'm particularly interest in the following point of the report...

"A Deferred Interest Scheme should be introduced for borrowers who can pay at least 66% of the interest. This would give borrowers up to 5 years to get back on their feet."

I'm a customer of a bank that is adopting the scheme. I'd like to push back part of my interest payments for a period of time, e.g 3 or 5 years. 

Do I approach the bank quoting the report and ask them to reforecast my mortgage based on possible new terms as allowed by them following the report? 

Many thanks.


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## Brendan Burgess (20 Nov 2010)

RIAD_BSC said:


> Are there any recommendations for people who are in negative equity, who want to move house and can afford to, but who can't because they are not allowed to sell their first home? I am referring to, for example, people in NE with very good salaries who might be stuck in an apartment, but want to start a family. I can't see any reommendations in this report to help them.



No. The focus of the group was on mortgage arrears. 

I understand that the Financial Regulator is looking at the issue of negative equity mortgages.


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## Brendan Burgess (20 Nov 2010)

Questionable said:


> How does one in a position where one feels they might avail of parts of this new legislation actually avail of it? I'm particularly interest in the following point of the report...
> 
> "A Deferred Interest Scheme should be introduced for borrowers who can pay at least 66% of the interest. This would give borrowers up to 5 years to get back on their feet."
> 
> ...





> Features of a Deferred Interest Scheme (DIS)
> 4.4.2 In summary, the scheme would work as follows:
> 1.
> DIS is made available to borrowers who cannot afford to pay the full interest on their mortgage and who meet the eligibility criteria set out in 4.4.3.
> ...


The scheme does not give borrowers a general right to reduce their mortgage payments to 66% of the interest.  It is only for those who _cannot _make the full interest payments - it's not for those who would prefer not to make the full repayment.


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## Questionable (22 Nov 2010)

Brendan,

Do you envisage guidelines being drawn up on this for use by the banks who have agreed to this agreement or will it be left to the banks to draw up their own guidelines in order to decide who qualifies and who doesn't, under the DIS scheme as I've asked about for example. 

In the event of a disagreement between the mortgage holder and the bank in the level of interest payable, the amount that the mortage holder can afford to pay -do you envisage there being a body (regulator maybe?)that will come in to agreed the level of interest to be deferred? 

I haven't heard much about the practical implentation of these schemes.

Thanks.


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