Paul Joyce Senior Policy Analyst Free Legal Advice Centres

1. 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

2. Mortgage arrears – Challenges ahead? A combination of: • 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.

3. What is in place to help? • 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

4. The CCMA - Purpose • 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.

5. The MARP - Process • 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 • 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) • 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 • It must document each option considered and why a particular option/s was chosen

6. The MARP – Repayment options The range of possible options includes: • interest only payment for a specified period • * a permanent or temporary reduction in the interest rate • payment of interest and a part of the capital for a period • a payment break for a period • extending the term of the mortgage • changing the type of mortgage • capitalising the arrears and interest • any voluntary scheme such as a Deferred Interest scheme • * equity participation (lender takes a share, principal is reduced) • * a split mortgage (serviced part and warehoused part) • * debt write off

7. The MARP – Appeals • 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

8. The MARP – Appeals • 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

9. The MARP – Appeals Proposals in revised code: • 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

10. The PI Act as an alternative • 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 co-operated 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 • PIA – At least 50% secured, 50% unsecured, 65% in total • DSA – At least 65% in total

11. The PI Act as an alternative Some reasons you might want to bypass appealing include: • 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

12. The PI Act as an alternative Some reasons you might not want to bypass appealing include: • 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

13. Some practical matters • 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

14. Some practical matters • 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