Moving out of Personal Debt:
The Code of Conduct on Mortgage
Arrears 2013 & the Personal
Insolvency Act 2012
Paul Joyce
Senior Policy Analyst
Free Legal Advice
Centres
Mortgage arrears –
Challenges ahead?
A combination of:
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the Mortgage Arrears Resolution Targets (MART) set by the
Central Bank for the principal mortgage lenders
the current revision of the Central Bank’s Code of Conduct
on Mortgage Arrears (CCMA) and
the Land and Conveyancing Law Reform Bill 2013
will make an increase in applications to repossess principal
dwelling houses (PDH) more likely in 2013/2014 and beyond.
What is in place to help?
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To help to reach a resolution, you must therefore
know how the revised Code of Conduct on
Mortgage Arrears (CCMA) will operate
You will also need to know how the CCMA and
the Personal Insolvency Act 2012 are likely to link
into each other in practice, so as to better plan
your approach
The CCMA - Purpose
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This code is being revised at present – see FLAC’s submission at
www.flac.ie. What follows here assumes that the revised code as
drafted will remain as it is but there are still some grey areas
All mortgage lenders (except local authorities) must have a
Mortgage Arrears Resolution Process (MARP) - a system to
process arrears (and pre-arrears) cases
Object in principle is to resolve arrears cases by putting in place
an alternative repayment arrangement, not to repossess family
homes
It is important that in your dealings with your mortgage lender,
you get across the message that you understand this.
The MARP - Process
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You may request in writing that the lender liaise with a third party
nominated by you - the lender must comply with this request but note
that correspondence only goes to you
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You must fill out a Standard Financial Statement (SFS) - make sure the
details are absolutely correct as this is the financial information that will
be used by the lender’s Arrears Support Unit (ASU)
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Your lender must explore all options for alternative repayment
arrangements that it offers, note this may allow any lender to exclude
some of list of options from its MARP process – Ask in advance in writing
what options your lender offers
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It must document each option considered and why a particular option/s
was chosen
The MARP – Repayment options
The range of possible options includes:
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interest only payment for a specified period
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* a permanent or temporary reduction in the interest rate
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payment of interest and a part of the capital for a period
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a payment break for a period
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extending the term of the mortgage
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changing the type of mortgage
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capitalising the arrears and interest
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any voluntary scheme such as a Deferred Interest scheme
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* equity participation (lender takes a share, principal is reduced)
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* a split mortgage (serviced part and warehoused part)
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* debt write off
The MARP – Appeals
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A lender is not obliged to offer an alternative repayment
arrangement , it may decide that the mortgage is unsustainable
(reasons must be given in writing)
It may offer you an arrangement you do not believe is
sustainable
You are entitled to appeal in writing in either situation to the
lender’s Appeals Board – you must be allowed at least 20
business days to appeal, make sure that you have all relevant
information and include all relevant arguments for alternatives
A further complaint may be made to the Financial Services
Ombudsman (FSO) but this seems an appeal on process only
The MARP – Appeals
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If all appeals fail, the lender may issue legal proceedings
against the borrower for repossession
However, it must wait 12 months (the moratorium) from the
time it first formally notified arrears before doing so
Time negotiating and agreeing payment arrangements
counts – thus note any lender delay in this respect
Time complying with payment arrangements does not count
Time appealing decisions does not count – thus no
repossession action should be brought while the borrower is
co-operating and any appeal is being processed
The MARP – Appeals
Proposals in revised code:
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Where the borrower has refused a proposed arrangement, it is
proposed by the Central Bank that the 12 month moratorium (or
what remains of it) will no longer apply (after any appeals have
been processed) but that the borrower be given 30 days to consult
a Personal Insolvency Practitioner (PIP)
Where the lender has refused to propose an arrangement, the
Central Bank has asked whether what remains of the moratorium or
30 days to consult a PIP should apply (after any appeals)
The LCLR 2013 Bill also proposes that a court may adjourn an
application for a Possession Order for two months (and possibly
longer) for a borrower to consult a PIP with a view to applying for a
PIA
The PI Act as an alternative
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You do not have to appeal the lender’s decision – you may instead
decide to go to a PIP and apply under the 2012 Act for a Personal
Insolvency Arrangement (PIA) (or a Debt Settlement Arrangement
as an alternative)
However, you must make a declaration in writing that you have cooperated for at least 6 months under the MARP and you have not
been able to agree a payment arrangement or the lender has
declared the mortgage unsustainable
Critically, creditors at the creditor’s meeting must vote in sufficient
numbers in favour of the proposal so this is risky
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PIA – At least 50% secured, 50% unsecured, 65% in total
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DSA – At least 65% in total
The PI Act as an alternative
Some reasons you might want to bypass appealing include:
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You have substantial debts, secured and unsecured, and
need a binding settlement with all your creditors
If you achieve this, the balance of your unsecured debts will
be written off at the end of the PIA/DSA repayment period
Creditors may be more inclined to accept a proposal from a
PIP than from the debtor
Creditors will know that a debtor application for bankruptcy
may follow if the application is refused
The PI Act as an alternative
Some reasons you might not want to bypass appealing include:
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You have very few saleable assets and little disposable income
above the guidelines allowed by the Insolvency Service
Thus you may find it difficult to get a PIP to take on your case and/or
any proposal stands a slim chance of succeeding
You will be generally be looking for a better deal from the mortgage
lender than that already offered
Ultimately your creditors will decide and there is no appeal
mechanism for you
If you make a proposal and it is rejected, you may be left facing the
uncertainty of bankruptcy and the potential loss of your home
Some practical matters
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Open your own MARP file and ensure that the process is at all
times documented
Keep telephone contact to a minimum and make a note of any
telephone conversations you do have
Note all unsolicited communications which must not be
excessive, aggressive or intimidating
Follow up any calls/meetings in writing with your understanding
of decisions made and commitments given
Find out who is in charge of the lender’s ASU and correspond
with him or her, and note if you are regularly assigned to
different staff
Some practical matters
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Note any lack of co-operation, delay or inconsistency on the
part of the lender for potential appeals
Utilise your rights of appeal under the CCMA, both to the
Appeals Board and to the Financial Services Ombudsman
If and where you find these processes unsatisfactory and/or
unsuccessful, report this to your local TD’s, to the Central
Bank, to the Department of Justice and to FLAC
If these measures are not working to minimise repossessions
and find debt resolutions, they must be changed and
changed quickly, evidence of this will be needed