PROPOSALS TO protect homeowners in arrears will push up borrowing costs for other mortgage-holders, according to the Bank of Ireland.
Planned changes to the existing code of conduct on mortgage arrears would also be viewed negatively by international markets, the bank warns in a submission to the Financial Regulator.
All the banks which made submissions are seeking to have the regulator’s proposals diluted. In particular, they object to proposed limits on the number of unsolicited communications a bank can send to a mortgage-holder in arrears and to plans for an independent appeals process where disputes arise.
Under the proposed changes, householders in arrears who are behaving reasonably will be protected against repossession. Banks could only apply to the court to repossess a home at least 12 months after a revised payment arrangement had broke down.
There are also protections against banks forcing customers off cheaper tracker mortgages.
Bank of Ireland says it has serious concerns about the proposals in terms of their speed of implementation and the potential for some customers to use them to create an “unwarranted delay” in the arrears process. It says the proposed limit of three unsolicited communications per month is a blunt instrument and recommends that no specific limit should apply.
The bank also says it is concerned that people with more than one property and who are in arrears could exploit the revised code by moving from one property to another to frustrate the banks and its attempts to secure arrears.
It says the planned third-party appeals mechanism is not necessary because each lender has its own independent appeals process. An additional mechanism would lead to “spurious appeals” by some lenders trying to delay the process.
Lenders have a legal right to rely on security, but any dilution of this right would be viewed by international markets as an indication that Irish institutions were no longer allowed to manage fully their exposures to arrears. The consequences would be higher funding costs for lenders and higher prices for mortgage borrowers.
Ulster Bank said under the proposals, customers could make only three repayments over 36 months and be entitled to a further 12 months before proceedings could begin.
KBC Bank Ireland describes the limit on communications as unrealistic and extreme and claims it will result in lenders being unable to engage meaningfully with borrowers.
The bank also claims the proposals could lead to a situation where some borrowers claim to be facing financial distress or deliberately default on repayments to maintain their tracker rates. The Money and Budgeting Service says borrowers on fixed rate mortgages who can’t afford repayments should be allowed to switch to an alternative product such as a variable rate without penalty.
