Debt Relief: New Targets and possible changes to MARP. Is this positive or negative for those in need of mortgage debt relief?
Despite the processes provided to deal with the personal debt crisis there is a sense of a lack of sufficient progress by the banks in dealing with the problem, particularly for homeowners with unsustainable mortgages. In response to this the Central Bank is now seeking real delivery from the banks on this critical issue of mortgage arrears and will introduce specifc targets which the banks must adhere to or suffer sanctions which may result in them having to raise new capital.
It is envisaged that these specific performance targets for banks will ensure borrowers in arrears will be put on more sustainable solutions tailored to their individual situation. The banks for their part have indicated that some of the MARP terms have impeded their ability to deal with mortgage arrears, in particular those terms concerning customer contact and engagement.
The Central Bank has issued a consultation paper on possible adjustments to MARP and is inviting responses from interested parties by 11 April 2013. Following this consultation period some alterations are likely. A document, entitled Review of the Code of Conduct on Mortgage Arrears, which deals with the proposed changes is available on the Central Bank’s website. A significant proposed change focuses on encouraging customer co- operation and engagement with their lender, and if this is not forthcoming the proposed change will make it easier for the lender to proceed to repossession. The objective of the consultation paper is to update the mortgage arrears process so that it continues to provide protection to customers who co- operate with their lender while facilitating and promoting the resolution of arrears cases. This may mean a tougher approach towards those who do not co-operate. Those who fully engage with the process stand to gain from it and will have less to fear from any changes.
The consultation process will also consider whether there is merit in allowing a lender to move a borrower in arrears off a tracker rate, where the lender has offered an alternative arrangement which is advantageous to the borrower in the ong term. Arrangements involving debt forgiveness may be one example but, again, the criteria seem to be that it must be advantageous and agreeable to the borrower.
This new dynamic being injected into the process has its positives and negatives. On the positive side it puts pressure on your lender to make a deal; however, the pressure to hit the targets may lead to ‘one-size-fits-all’ type solutions. Your requirement is unique, so you must know what fits you. On the negative side once the push for solutions kicks off, if you are not informed and have not done your homework you may accept a deal which looks good now but is not a good long-term solution. This new target-based approach is welcome, but those people who are best informed and know what they need to achieve may fair best. The framework applies to ACC, AIB, Bank of Ireland, KBC Bank, permanent tsb and Ulster Bank. It applies to both principal dwelling
homes and buy-to-let mortgages. If your lender is other than these banks they may have a different approach.