The Central Bank in publishing a revised code of conduct on mortgage arrears provides more clarity and greater certainty to lenders and borrowers as they face increased pressure to resolve their financial difficulties. For five years the mortgage debt problem has steadily deteriorated, and the latest Central Bank figures record a deeply worrying situation. By last March, almost 100,000 private residential accounts were three months in arrears, and the balance outstanding on these accounts had reached €18. 1 billion. To date, the banks have made limited progress in tackling the mortgage debt crisis, despite pressure from the Central Bank. The banks have been reluctant either to repossess properties, which would mean realising loan losses or to reach major debt restructuring agreements with borrowers, whose inability to repay loans is, in many cases, readily apparent. As the Central Bank has frequently pointed out, the banks' progress in tackling longer-term arrears cases has been slow, while their restructuring efforts have generally been "short-term in nature".

It is difficult to produce a perfect solution to the problem of mortgage arrears: one that is fair to lenders and borrowers and protects their respective rights, but ensures that a resolution of the mortgage debt issue can be achieved, and without excessive delay. The new Central Bank code, which replaces that of 2010 and which banks generally regarded as favouring the borrower, helps to redress that perceived imbalance. Financial institutions will have more powers in dealing with non-cooperative borrowers than before. The limit on the number of unsolicited calls a lender can make to borrowers in arrears – three per month – has been scrapped. Instead, lenders may now communicate with borrowers by means that are “proportionate and not excessive”. However, the Central Bank, in monitoring how the new code operates, will be concerned to ensure that banks do not subject borrowers to unnecessarily frequent contact, or to harassment.

One major change in the new code allows banks, in limited circumstances, to remove tracker rate mortgages from distressed borrowers. This can be done only as a last resort, where retention of the tracker is seen as unsustainable and where, for the bank, the only alternative option may be to repossess the home. In such circumstances, and provided the alternative mortgage that the lender offers the borrower is both sustainable and affordable, the lender can be required to switch. The new code on mortgage arrears, allied to the operation of the new personal insolvency legislation in the coming months, should help to contain and in time resolve the mortgage crisis. That is one of the key challenges facing the economy, on which both the future financial health of the banks and the pace and strength of national economic recovery will depend.