Sep 1

Mortgage Arrears And How To Deal With Them

With so many people facing financial worry and uncertainty, mortgage arrears is a topic which is very much to the forefront of people’s minds at the moment. There are various useful tips and strategies if you find yourself in arrears, some of which are as follows:

Communication: It is essential that you remain in communication with your lender, particularly where you find yourself unable to pay your repayments in full or at all. Explain your difficulties to your lender, tell them how you propose to tackle these difficulties and keep them updated from time to time as to how things are going for you. If you refuse to communicate with the lender, the lender is far more likely to take legal proceedings.

Code of Conduct on Mortgage Arrears: Borrowers have useful rights under this code and should use them to their to their advantage. They are entitled to require their bank to liase with an intermediary eg their solicitor, accountant or other third party, on their behalf in relation to their arrears situation. Whilst this does not prevent the lender contacting the Borrower direct it does mean that the Borrower can refer the lender to the Intermediary and insist they deal through that intermediary. This can be very helpful where the Borrower is particularly stressed.

Tracker v Variable Interest Rates: Home owners should also be aware that the Central Bank Code of Conduct governs lenders behavior on the issue of tracker mortgages and does not allow them to force borrowers, whether in arrears or not, to move from a tracker mortgage to a variable mortgage, even if the lender is suggesting that they are making this a condition of restructuring the debt.

Restrictions on Repossessions of your Home:

1. The lender cannot commence proceedings against a borrower for repossession of your home until every reasonable effort has been made to agree an alternative arrangement with you or your nominated Intermediary (hence the importance of remaining in communication with your lender).

2. In particular, it is very important to be aware that the lender cannot commence legal proceedings against you for repossession of your home until at least 12 months after the date your mortgage is classified by the lender as a Mortgage Arrears Resolution Process (“MARP”) case ie a case where arrears have arisen on the account and remain outstanding for 31 days after the date on which the arrears arose.

3. The lender may not commence legal action for repossession of your home until every reasonable effort has been made to agree an alternative arrangement with you or your nominated intermediary. Providing you co-operate with the lender, the lender must wait at least 12 months from the date your case is classified as a Mortgage Arrears case before applying to Court to commence legal action for repossession of your home.

Investment Properties : The situation for investors is somewhat different, and these mortgages have been in the news lately, with PTSB attempting to move these borrowers off tracker mortgages and on to variable rate mortgages by a combination of stick and carrot. Further protection for borrowers is due to come into force later this year which will introduce new rules for all tracker mortgage holders.

Review your Letter of Offer: This document is essentially the contract executed between you and your lender and sets out the terms on which you agreed to borrow the money and the Bank agreed to lend it to you. Neither party is allowed to change the agreed terms unless by a further agreement between the two of you. This point is worth making because it has happened in some cases that Letters of Loan Offer may have led a borrower to believe the loan would be on a basis which the lender is now seeking to change. It is therefore important to read this document carefully and also any correspondence in relation to any queries you may have had on the terms of same. All of this will be what defines the actual terms and conditions on which you borrowed the money.

Hope on the horizon: Various solutions are being offered already on an ad hoc basis, in the form of debt forgiveness (it is believed) on a case by case basis, agreement in principle to transfer of negative equity mortgages by some banks, (and approval has already been granted for this by the Central Bank). Other forms of assistance are also under discussion.

Record your Discussions in Writing: For all Borrowers, ongoing contact including face to face meetings with the Bank may well be useful as they will have an opportunity to discuss your plans with you and may perhaps make useful suggestions of their own. It is always a good idea to make a written record of such meetings, perhaps by way of follow up email or letter, simply to record the discussion which took place and the conclusions, if any, which resulted, which you will both have if required for record purposes at a later date. The same holds true of telephone discussions. This way, if there is any dispute later as to whether you made a proper effort to communicate and/or co-operate, you will have a written record to verify what occurred. The importance of this particular piece of advice cannot be overstated!