Tipp FM Legal Slot – 25th June 2012
Andrea Gleasure on Mortgage Arrears Resolution Process[soundcloud id=’166753247′]
The Mortgage Arrears Resolution Process (MARP) is a procedure introduced by the Central Bank of Ireland in their Code of Conduct on Mortgage Arrears since 1st January 2011 to deal with situations where a borrower is in difficulty in meeting their mortgage payments.
This process exists independently of the Personal Insolvency Act 2012, but people with mortgage arrears need to be aware of MARP’s five-step process.
While the level of new mortgage arrears is reducing the existing level of personal debt needs to be addressed and the Central Bank recently announced that it expects the six main banks to tackle 50% of arrears by the end of December 2013 with the balance finished by 2014.
What framework has the Central Bank introduced for lenders to adhere by?
The Central Bank’s statutory Code of Conduct on Mortgage Arrears (CCMA) outlines a framework that lenders must use when dealing with borrowers who are in mortgage arrears or at risk of falling into arrears. Lenders have to set up a centralised and dedicated Arrears Support Unit (ASU) to manage cases under the MARP.
The Central Bank is in the process of amending this code to allow the earlier sale of distressed assets and to force the Banks to make long terms arrangements for arrears customers. Under the CCMA the Central Bank introduced a Mortgage Arrears Resolution Process (MARP) and there are five steps lenders must take under this process: communication; financial information; assessment; resolution and appeals.
What is the five step process introduced by the Central Bank?
The MARP is a five-step process where lenders have to:
1) Communicate with borrowers;
The borrower must be informed that a third party has been appointed to deal with them, no more than three unsolicited communications with the borrower can be made each month, the date that arrears began, number of payments missed and amount of arrears must be sent to the borrower as well as details of fees and charges which apply regarding the arrears.
2) Get financial Information using a standard financial statement;
A statement of financial affairs must be sent to the borrower for completion and once received back must be sent to the Arrears Support Unit to be considered.
3) Complete an Assessment of the borrowers case;
The Arrears Support Unit must assess the financial statement using:
- The personal circumstances of the borrower;
- The overall indebtedness of the borrower;
- The information in the standard financial statement;
- The borrower’s current repayment capacity; and
- The borrower’s previous payment history.
4) Consider Options to resolve the arrears;
Such alternative repayment arrangements must include:
a) An interest-only arrangement for a specified period;
b) An arrangement to pay interest and part of the normal capital element for a specified period;
c) Deferring payment of all or part of the instalment repayment for a period;
d) Extending the term of the mortgage;
e) Changing the type of the mortgage, except in the case of tracker mortgages;
f) Capitalising the arrears and interest; and
g) Any voluntary scheme to which the lender has signed up e.g. Deferred Interest Scheme.
5) Consider Appeals
Lenders must set up an Appeals Board to independently review any appeals by borrowers to alternative arrangements recommended with these rules:
- The Appeals Board will only consider written appeals;
- The lender must acknowledge each appeal in writing within 5 business days of the appeal being received;
- The lender must provide the borrower with the name of one or more individuals appointed by the lender to be the borrower’s point of contact in relation to the complaint, until the Appeals Board adjudicates on the appeal;
- The lender must provide the borrower with a regular written update on the progress of the appeal , at intervals of not greater than 20 business days;
- The lender must consider and adjudicate on an appeal within 40 business days of having received the appeal. The lender must notify the borrower in writing, within 5 business days of the completion of the consideration of an appeal, of the decision of the Appeals Board and explain the terms of any offer being made. The lender must also inform the borrower of his/her right to refer the matter to the Financial Services Ombudsman and must provide the borrower with the contact details of that Ombudsman.
What would happen if the banks do not follow the five step process?
A recent High Court decision ruled that because the lender had not complied with the Code of Conduct they were not entitled to take possession of a house.
While MARP exists independently of the Personal Insolvency Act 2012, people with mortgage arrears need to be aware of MARP’s five-step process; you are discussing this area at your Personal Insolvency and Bankruptcy seminars. For listeners who are interested in hearing more about MARP and the Act when is the next seminar?
As I mentioned previously on the show I have been discussing this area at our Personal Insolvency and Bankruptcy seminars, which are well underway at this stage and for anyone who has not had the opportunity to attend yet we’ll be in the Portlaoise Heritage Hotel tomorrow evening at 5.30pm; next week the seminar will be taking place in the Tower Hotel Waterford on Wednesday evening at 5.30pm; we’ll be in the Cork International Airport Hotel on 10th July and the Castletroy Park Hotel on 17th July.