The Financial Regulator’s decision to impose a twelve-month moratorium on house repossessions for all mortgage lenders, and not just for the two main banks, will provide welcome relief for some hard-pressed homeowners. The decision reflects a rapidly worsening mortgage repayment situation. But it does not adequately address the problem.
In contrast, the Oireachtas Committee on Social and Family Affairs has recommended that a moratorium of 24 months should apply before a claim for home repossession can be brought before the courts.
Establishing a level playing pitch for mortgage lenders is an important first step. Requiring AIB and Bank of Ireland to apply a 12-month moratorium, while their competitors operated a six-month stay on legal action, was vulnerable to legal challenge.
Moving on from here and accommodating the interests of various competing parties will be difficult. As things stand, a 12-month moratorium only applies where the borrower actively engages with the lender. If that period is extended, debtors will have to be actively encouraged and advised on how to resolve their problems.
The number of repossession orders before the courts doubled in 2008 and amounted to 758. Figures from the Financial Regulator suggested that 26,000 homeowners were more than three months in arrears at the end of last year. And the Oireachtas committee has provided a figure of 35,000.
The situation requires urgent action on a number of fronts. Foreclosure serves nobody’s long-term interests. In that regard, the Irish Banking Federation has announced it will explore the scope for further initiatives that would provide protection for borrowers.
On a related front, the Government should introduce legislation amending bankruptcy laws that are more stringent than those in Britain and the United States. This applies in particular to personal insolvency. The Law Reform Commission recommended such action last year and there is a commitment to that effect in the revised programme for government. A statutory, non-courts-based, debt-settlement regime is required that will be both cheaper and quicker than the current system.
Crucially, it should be designed to provide protection for the homes of businessmen while encouraging the banks to deal more quickly with the issue of impaired loans.