Banking Federation calls for legislative measures to deal with joint borrowers in arrears

[Brendan Burgess]

BPFI calls for measures to address separated borrowers in mortgage arrears​

• 1 in 10 mortgage arrears cases estimated to involve separated borrowers

Wednesday 15th January 2020 - Banking & Payments Federation Ireland (BPFI) today called for consideration to be given to a number of possible policy and legislative measures that would better enable lenders to deal with separated borrowers in the context of mortgage arrears. BPFI estimates that cases involving separated borrowers account for 10% of all mortgage arrears cases.

The call arises from a BPFI analysis of how lenders currently deal with a mortgage arrears case which involves separated borrowers – an analysis which was prompted by a query from Deputy Michael McGrath, the Fianna Fáil Finance Spokesperson.
The BPFI analysis shows that lenders have to adopt a case-by-case approach because of the commercial, legal and other complexities involved. The potential solutions tabled can range from treating each party as a single borrower with the repayment capacity assessed on an individual basis, but with both borrowers remaining liable for the outstanding debt; to offering certain short-term alternative repayment arrangements (ARAs) if only one party is engaging; or other longer-term options where the agreement of both parties is forthcoming.

Notwithstanding the complexities, what is common across all the main lenders is the commitment to find a resolution, wherever possible. This is captured, as follows, in the current Framework Agreement for Late Stage Mortgage Arrears between BPFI and the Money Advice and Budgeting Service (MABS): “Where borrowers are separated (and evidence of same is provided) and are not both in communication, the lender will consider a proposal from a MABS Dedicated Mortgage Adviser on behalf of a client who is in a position to service the mortgage in its original contractual form or in any ARA form which may be applied to it.”

BPFI believes that consideration should be given by our regulators, policy makers and legislators to introducing new measures which could greatly help the plight of separated borrowers with mortgage arrears. These 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.

Speaking on the complexity of the matter Brian Hayes, BPFI Chief Executive, said: “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. This is why we are calling today for consideration to be given to some new measures which we believe could greatly help address the complexities that arise with mortgage arrears cases that involve separated borrowers. I have now written to a number of relevant parties about this including the Central Bank of Ireland, the Insolvency Service, the Department of Finance, the Department of Justice and Equality as well as MABS; and I have informed Deputy Michael McGrath of our position as he was the first to raise this important matter with us. We all wish to see the outstanding level of mortgage arrears reduced as effectively and quickly as possible which is why we will be hoping for a constructive response.”