New mortgage Code gets balance right

Anecdotal evidence suggests that until now mortgage holders in arrears have hugely differing experiences in their interactions with their banks. The nature of dialogue between mortgage holder and bank seems to have been predicated as much on the level of personal rapport as rigourous analysis.

This was perhaps a function of the “extend and pretend” culture exhibited by the banks as they failed to recognise the extent of the mortgage problem and certainly failed to reflect it in their financial statements.

But the signs are that this extended period of willful ignorance has come to an end, and in this respect the publication of the revised Code of Conduct on Mortgage Arrears (CCMA) is something of a landmark.

Predictably, much of the focus to date has been on the most emotive aspect of the Code, namely the removal of the limit of three successful unsolicited customer contacts per month on the part of lenders. Reaction to that provision has looked to portray the new regime as a charter for customer harassment and persecution.

But such a depiction is wide of the mark. As noted by Bernard Sheridan, Director of Consumer Protection at the Central Bank, for borrowers who are cooperating with the lender, the number of calls is irrelevant as the very definition of cooperation implies a two-way communication process.

The removal of the upper limit of three calls will therefore only cause concern to those who are not cooperating and engaging in efforts to resolve their situation and, in the Director’s words, “it is difficult to see how a solution can be agreed in the absence of any engagement”.

In any case, the new Code is replete with protection. To quote, a lender must ensure 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 circumstances of the borrowers, including that unnecessarily frequent communications are not made; communications with borrowers are not aggressive, intimidating or harassing; borrowers are given sufficient time to complete an action they have committed to before follow up communication is attempted.”

The welcome clarity the Code has brought to the arrears process extends also to the critical definition of a non-cooperating borrower.

The current CCMA provides that a lender may classify a borrower as not co-operating if they fail to provide information sought by the lender and if the borrower has, during a three month period, failed to meet mortgage repayments in full and has not made contact with or responded to any communications from the lender.

The new CCMA provides that the lender may now specify the timeline for the return of information. As Mr Sheridan notes, this will provide greater clarity to the borrower of what is expected from them.

The new CCMA requires lenders to inform borrowers (with at least 20 business days’ notice) of the specific actions they need to take to avoid being classified as such. In addition, the borrower must be informed in writing if they have been subsequently deemed to be not co-operating. “This information must include what options are available to them, their right to appeal the decision and their right to consult a Personal Insolvency Practitioner under the insolvency legislation.” It is difficult to disagree with Mr Sheridan that these changes “will bring greater certainty and transparency for both the borrower and lender, while protecting those who are genuinely trying to cooperate.”

The new clarity over the definition of “non-cooperating” is critical as the implications of joining that club are serious.

The casting of the new customer contact provisions in adversarial terms is at best misguided and at worst mischievous. It is in nobody’s interests – borrower or lender’s – to have to a situation where there is no working relationship. From a borrower perspective, where there is no engagement and no co-operation, there can be no influence brought to bear on the outcome of the process and, under the new Code, it merely hastens the imposition of punitive penalty charges and legal proceedings for repossession.

In Mr Sheridan’s words, under the new Code, “the non-cooperating borrower is in a very perilous situation with growing arrears and fewer protections.”

As Bernard Sheridan’s boss, Central Bank Governor Patrick Honohan, noted as recently as late-May, “The persistent rise in cases of prolonged mortgage arrears over the five years of the crisis undoubtedly presents one of the biggest economic policy challenges of our day.”

Mr Honohan also made at least implicit criticism for the tardiness of the banks in dealing with the situation when he said: “Wait-and-see may have been an appropriate or sufficient initial position to take as the great crisis unfolded, but the time for passivity is long past.”

We agree. It serves nobody’s interests if the sensible and much needed clarity brought to this desperate mess by the new Code is subjected to potentially destructive and opportunistic opposition.

Top Judgments Registered


Phelim O'Connell
Address: Ballynamona, Clifden, Co Kilkenny
Amount: €966,131.67


Eamonn Hayes
Address: 50 New Street, Carrick On Suir, County Tipperary
Amount: €305,622.97


Daniel O'Malley
Address: Collacoon, Louisburgh, Co Mayo
Amount: €80,524.23


Maurice Kiely
Address: 27 Argideen Lawn, Togher, Cork
Amount: €71,169.46

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