BANKS HAVE agreed to foot the bill for independent financial advice for distressed borrowers under a new advisory service to be announced by the Minister for Social Protection tomorrow.
Under the service, borrowers offered long-term mortgage forbearance, including a split mortgage where part of the debt is frozen for a time and a trade-down mortgage, get the financial advice from an accountant free of charge.
The Department of Social Protection has arranged for the banks to pay the €250 cost of a consultation meeting with a practising accountant and, in exceptional circumstance, two meetings to assess mortgage deals offered by lenders.
Borrowers can choose a practising accountant from an approved panel listed on keepingyourhome.ie, which is run by consumer groups the Citizens Information Board and Money, Advice and Budgeting Service.
Three accountancy professional bodies have signed up to the service: the Institute of Chartered Accountants Ireland, the Association of Certified Chartered Accountants and the Institute of Certified Public Accountants.
Minister for Social Protection Joan Burton said the free service would be launched tomorrow following the conclusion of negotiations with the accountancy bodies. It will work in addition to the new personal insolvency service, which will monitor arrangements between lenders and distressed borrowers.
The Government is not proceeding with an overarching personal debt management service considered as an option in the programme for government.
The department has opted to have the service vetted by the accountancy bodies, which are self-regulated, instead of by a new State agency.
The Central Bank and the Department of Finance have asked all banks operating in Ireland to develop a range of long-term mortgage solutions for distressed borrowers before the new legislation comes into effect.
Other long-term solutions include extending the term of a mortgage to lower repayments, moving the borrower to long-term interest-only payments and mortgage-to-rent where the owner of a home cedes ownership and agrees to rent as a tenant.
Accountants can also be asked for advice where the bank wants the borrower to agree to a sale of the property or where the property will be repossessed.
They cannot specifically advise clients whether to accept or reject a proposal from a bank but must explain technical terms and what would happen if they failed to meet the terms of an agreement.
More than one in five home loans were in some form of financial difficulty at the end of June, according to the Central Bank.
At the end of June there were 168,637 owner-occupier mortgages, or just over 22 per cent of the 761,533 home loans in the State, either in arrears or modified to help borrowers make some form of repayment. This was up from 162,572, or 21.3 per cent, three months earlier.
