Seven mortgage lenders in Ireland have been found to be in breach of the Code of Conduct on Mortgage Arrears (CCMA) following inspections by the Central Bank of Ireland.
The regulator said “weaknesses of varying degrees” were identified across four areas: resolution of arrears in a timely fashion, transparency of borrower communications, fair process and process improvements and controls. The Central Bank is thought to be particularly concerned about breaches of fair process, which it views as the essence of the CCMA framework.
The CCMA, which was introduced in January 2011, sets out how lenders must treat the 117,263 residential mortgage holders in arrears with their payments. It identified practices where the lender continued with legal action, notwithstanding the fact that an alternative repayment arrangement (ARA) had been agreed with the borrower.
Lenders also continued to seek additional ad-hoc payments from borrowers on top of agreed revised repayments without formally assessing their ability to make these additional payments. In addition, some lenders were found to have an internal policy that permitted unilateral changes to the standard financial statement after it was completed by the borrower.
There was also a policy that permitted the lender to remove borrowers from the Mortgage Arrears Resolution Process solely because they had not agreed to an ARA over the telephone. “We also identified cases where lenders continued to call borrowers directly and/or did not liaise with third parties, even though borrowers had formally nominated these persons to act on their behalf,” the regulator said in a statement.
Some 350 borrower files were inspected and the Central Bank has given the lenders until November 30th this year to address their shortcomings or possibly face sanctions, which could include fines of up to €10 million. The seven lenders were not named but are thought to include the big players in the mortgage market, including AIB, Bank of Ireland, Permanent TSB and Ulster Bank.
Cyril Roux, the Central Bank's deputy governor for financial regulation, said it was "imperative that firms have proper systems and controls in place" to ensure they are delivering appropriate solutions for consumers. "The Central Bank will be taking the appropriate actions to ensure that lenders address these weaknesses," he said.
David Hall, chief executive of the Irish Mortgage Holders Organisation (IMHO), said it was "deeply concerning" that the banks were not named by the regulator alongside their breaches.
“We would call on the Government to remove the consumer protection function from the Central Bank and introduce a regime that provides all mortgage holders . . . access to a minimum offering of products to keep them in their family homes,” Mr Hall said.
