Banks need to do more for borrowers in early mortgage arrears – Central Bank

April 26, 2024

A Central Bank review of the supports that are in place for borrowers experiencing early mortgage arrears has found they need to be improved.

The analysis looked at the effectiveness of the system those experiencing difficulty must navigate, focusing in particular on the supports, resources and service levels that exist to assist consumers in financial difficulty.

Overall it found that the mortgage arrears resolution framework in the Code of Conduct on Mortgage Arrears is well positioned to support borrowers facing challenges.

It also found that solutions are most commonly found where borrowers engage early with lenders and that enhancements have been made by some firms to their processes.

But the review also concluded that improvements are needed in a range of areas, particularly around engagement by lenders with borrowers.

These include inadequate follow up with borrowers, leading to slow progress or delay.

Staff knowledge was at times found to be poor, as were communications, resulting in wrong or unclear information being given to borrowers.

The review also identified cases where there was a failure to recognise clear indications of a borrower’s financial problems and where complaints were not appropriately addressed.

Some customers were also given minimal assistance in completing the Standard Financial Statement which is required as part of the process of dealing with arrears.

While the study also identified excessive contact attempts based on the borrowers circumstances as being a problem.

“We have set out to the firms we regulate the improvements they need to make,” said the Central Bank’s Director of Consumer Protection, Colm Kincaid.

“It is critical that firms make these improvements to meet their responsibilities to support consumers in or facing mortgage arrears and avoid the risk of those arrears becoming longer term. This needs to be a priority for all firms.”

Evidence was also found of cases where there had been delay in giving information to borrowers or assessing the cases, while issues were also identified that heightened the risk of ineffective disclosure.

Minimal use of Temporary Alternative Repayment Arrangements was also found in most firms, despite the Central Bank encouraging businesses to make better use of them.

“The Central Bank has also encouraged firms to make greater use of temporary Alternative Repayment Arrangements (ARAs) to support borrowers where there is a risk that their situation will get worse during the time needed to gather information and assess the situation,” said Mr Kincaid.

The most recent data from the Central Bank showed early mortgage arrears of less than 90 days rose by 3% in the fourth quarter of 2023 as some mortgage holders struggled with repayments due to the continued high cost of living and rising interest rates.

But the Central Bank said the number of accounts in arrears over 90 days fell by 3% in the last three months of 2023, due to the uninterrupted decline in long-term arrears, which is arrears of more than a year.

The number of accounts in long-term arrears stood at 20,268 – or 3% of all home mortgage accounts at the end of December.

This marked a decrease of 11% in annual terms and a fall of 3% from the third quarter of 2023.

Article Source – Banks need to do more for borrowers in early mortgage arrears – Central Bank – RTE

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