The Irish Expert Group on Mortgage Arrears and Personal Debt today published interim recommendations on measures to assist in dealing with the difficulties created by mortgage arrears.

On the publication of the recommendations, the Chairman of the Group, Hugh Cooney said: "The Group believe the range of recommendations identified in our Interim Report can be implemented swiftly and should have the capacity to significantly improve the position of families in arrears. The recommendations will result in: 1)  Improved communication 2) Standardised Documentation 3) Consistent policy and experience and 4) A range of forbearance measures."

The Group recommends that urgent consideration be given by the responsible Government Departments and relevant organisations to the implementation, in the shortest possible timeframe, of measures for the comprehensive reform of both judicial bankruptcy proceedings contained in the Bankruptcy Act 1988 and the establishment of an effective and cost efficient non-judicial debt settlement process.

The Group said it believes that the recommendations to be contained in the Final Report of the Law Reform Commission on Personal Debt Management and Enforcement, expected later this year, will be crucial to the reform process.

The Group's proposed measures include the following:

• Lenders ceasing to charge Penalty Interest or Arrears Charges to borrowers who are taking part in the Arrears Resolution Process
• Code of Conduct on Mortgage Arrears to be amended and extended
• All Lenders must develop a Mortgage Arrears Resolution Process and Framework
• The Department of Social Protection should make amendments to their existing Mortgage Interest Supplement Scheme

Cooney said: "We are pleased to note that the Financial Regulator has committed to consult without delay with the relevant parties on our recommended amendments to the Code of Conduct on Mortgage Arrears (CCMA).

 On behalf of the Group I would encourage all lenders to take immediate steps to implement the recommendations relevant to them.

 We believe that the reform proposals in relation to the MIS Scheme will assist in delivering a more equitable and simplified scheme that will ensure a more balanced approach between the lender, the borrower and the State.

 The Group intends to swiftly move on now to the next phase of its work, where we will evaluate all proposals received by the Group as well as practices in other jurisdictions and their applicability to the Irish context.  We will also give consideration to broader structural changes such as loan modification and the options for borrowers with unsustainable mortgages.  The final report is expected to be completed by the end of September.

 Our Group recognises the challenge and complexity of the next phase of work, we are determined to bring forward targeted solutions that are fair and appropriate to the current circumstances of Irish homeowners."

The Minister for Finance, Brian Lenihan T.D. and Minister for Communication, Energy and Natural Resources, Eamon Ryan T.D. today commented: “These recommendations are pragmatic and capable of speedy implementation.  They will result in improved communication between householders in arrears and their lenders; a more consistent assessment process by lenders of options for borrowers in difficulty and the introduction of an industry-wide Mortgage Arrears Resolution Process (MARP) including a range of forbearance measures.  All of these will be of real help to those in difficulty.”

The Minister also welcomed recommendations in the Interim Report supporting significant reforms of the Mortgage Interest Supplement Scheme which have been approved by Cabinet today. These changes will allow an eligible couple where one person is in full-time employment to qualify for the Mortgage Interest Supplement. They will also allow the payment of the Supplement while a house is up for sale.

The Minister noted the commitment by the Financial Regulator to amend the Code of Conduct on Mortgage Arrears to take account of the Group’s recommendations. “I am sure the lenders will continue to play their part in upholding the Code of Conduct and in implementing the interim recommendations.”

The Interim Report addresses the more straight forward problems uncovered by the Group during its data gathering phase.  “I accept, as the report makes clear, that there are more complex issues to be addressed in the area of mortgage and personal debt. I also agree with the report’s conclusion that any solution to the problems facing those borrowers who are facing more severe difficulties will need to be targeted and robust   but also fair to those who are making strenuous efforts in these difficult times to meet their repayments. We must also be careful to ensure that any proposed solutions do not reverse the significant progress we have made in repairing our banking sector and thereby putting at risk the taxpayers’ investment.”

The Minister for Communications, Energy and Natural Resources Eamon Ryan also welcomed the interim findings: “The group was established on the basis of renewed Programme for Government commitments on protecting the family home and helping those in debt. The group is working well and these interim recommendations should be implemented by the banks, the regulator and all agencies without delay.

The people of Ireland stood by the banks in their hour of need for the benefit of the whole population. It is incumbent on the banks to similarly stand by vulnerable people in our society who find themselves in difficulty through no fault of their own.

Our economy is on the road to recovery. We are dealing with our national debt. These new measures will go some way to deal with individual debt. They are designed to take away people’s fear of approaching their banks and working through their debts.

We do not want the recovery stifled by a legacy of the boom years. These measures will go a considerable distance to help in this regard.”

The Central Bank and Financial Regulator today said that the interim report contains a number of recommendations for the Central Bank and Financial Regulator, many of which will be addressed by bringing forward changes to the code of conduct on mortgage arrears including the introduction of an industry wide standard Mortgage Arrears Resolution Process (MARP) and improved communication for mortgage borrowers in arrears. The report also recommends banning penalty interest or arrears charges for borrowers who are taking part in the MARP and for arrears statistics to include the number of rescheduled mortgages.

Head of Financial Regulation, Matthew Elderfield, said: "We have participated in this group and are committed to acting swiftly to implement the recommendations of the Group where we are able to do so. We intend to implement the report’s recommendations to provide more help to customers by banning arrears charges, improving lender communication with borrowers and implementing a standard industry-wide mortgage arrears resolution process. I call on lenders to implement now the recommendations to improve the position of those in arrears ahead of formal action by us. I would also like to encourage consumers who feel they are in financial distress to contact their lender at an early stage before an arrears problem gets out of hand. Lenders must treat you fairly. "

The Central Bank said a consultation will be published in August proposing new regulations to address and implement these immediate priorities by amending the statutory code of conduct on mortgage arrears and the Consumer Credit Act will be published in August. It is intended to publish a revised Code by November 2010. Prior to implementation of these requirements on a statutory footing, firms should move to adopt the measures set out in the report. In order to address the recommendation that lenders should not impose charges on borrowers who are engaging with them, the Financial Regulator will also be engaging with each lender on those charges which are applied under the Consumer Credit Act and previously approved on an institution by institution basis. It will also explore whether legislative change will be necessary to fully implement this recommendation. It is anticipated that the arrears statistics can be amended to reflect rescheduled loans by the end of 2010.

The Central Bank and Financial Regulator will continue to work with the Group and other stakeholders during the next phase of its work to give consideration to broader structural changes to address mortgage arrears and personal debt issues.