New proposals on mortgage arrears will make it more difficult for banks and building societies to repossess homes from households in arrears.
The new rules proposed this morning by the Financial Regulator would allow people in arrears to stay in their homes longer than allowed by the current 12-month moratorium on repossessions.
Under the proposals, lenders would have to explore all viable options with borrowers in arrears and examine all alternative repayment measures.
Where borrowers are behaving reasonably, bank and buildings societies would have to wait at least 12 months before applying to the courts to repossess a home. As before, the 12-month period is measured from the time arrears first arose.
However, under the revised proposals, this period may also be measured from the time a borrower ceases to adhere to a revised payment arrangement and no further arrangements are entered into.
Effectively, this means that borrowers who are cooperating with their bank or building society will enjoy additional protection against repossession.
However, where it is clear that a borrower is not engaging with the lender, the lender may go ahead and seek repossession.
The consultation paper also provides protection for householders on tracker mortgages. It says borrowers must not be required to change from these cheaper mortgages to another type.
Lenders must put in place a Mortgage Arrears Resolution Process to handle arrears cases, and specific information must be provided to borrowers in a customer-friendly manner.
The new rules, which are subject to a consultation process, also require lenders to set up dedicated units to deal with arrears and to establish an appeals process.
The existing statutory Code of Conduct on Mortgage Arrears was introduced in February 2009 and amended earlier this year, when the moratorium on repossessions was extended from six months to 12.
The new code was broadly welcomed by politicians and industry groups.
Green Party enterprise spokesman Senator Mark Dearey the proposals would come as a relief to struggling homeowners.
"The Irish people stood by the banks in their hour of need for the good of the wider economy. Now it's time for the banks to step up to the plate and assist those in need," the Louth senator said.
Fine Gael's housing spokesman Terence Falanagan said the the extension of the one year moratorium on home repossessions was "fair" to honest home owners who entered the mortgage arrears resolution process with their lender.
"We are facing an unprecedented repossession crisis unless action is taken by the Financial Regulator and Government. That is why I welcome the publication by the Financial Regulator of new mortgage arrears resolution proposals which will see a continuing one year moratorium on repossessions once home owners are meeting commitments agreed with their lender in an arrears resolution process," he said.
"It is imperative that this code sets out guidelines as to how much of a homeowner's income a bank can reasonably request as there are no limits set at present."
The Irish Banking Federation said its members were committed to working with customers in difficulty. It pointed to a number of intiatives already in place in addition to the existing statutory Code of Conduct on Mortgage Arrears, including the IBF pledge ofn home repossession and a joint protocol on debt management.
"The forbearance policies and practices adopted by mainstream institutions are helping tens of thousands of consumers to work with their lenders in managing their mortgage and other debt repayments," it said in a statement.
"In conjunction with member banks and building societies, IBF will contribute constructively to this consultation — including focus on the practical implications of changes to lenders' processes and systems as well as the timeframe for implementation."
Insurance brokers association PIBA welcomed the proposals, but said there were some issues it would address, including a definition of arrears and an adjustment in what constitutes a family home
"We would like to see that arrears would begin to be counted only after the first 30 days from the missed payment has elapsed. Equally, we do not believe that the definition of arrears should include the period in which partial payments are being made, provided the borrower is making a genuine effort to pay," PIBA Mortgage Services director Rachel Doyle.
"If a mortgage holder moves out of their home, perhaps back to a family home, in order to rent the house with a view to improving their ability to repay the mortgage we believe this kind of scenario should be included in the definition of 'family home'," she said.
The group said there was a need for an independent appeals process beyond the ombudsman.
The proposals for the revised code are available on financialregulator.ie.
