Responses to mortgage arrears and personal debt
- Introduction
- Expert Group on Mortgage Arrears and Personal Debt
- Inter-Departmental Mortgage Arrears Working Group
- Indebtedness generally
- Legislation proposed in 2012
Introduction
The growing problems of mortgage arrears and personal debt have received wide consideration. This document covers recent developments and proposals in this important area. The proposed Personal Insolvency legislation aims to address many of the issues – see ‘Legislation proposed in 2012’ below.
Expert Group on Mortgage Arrears and Personal Debt
This group of experts was established in February 2010 to work with the Government on its response to the issue of indebtedness. It was chaired by Mr Hugh Cooney.
In November 2010 it published its final report (pdf), building on an interim report (pdf) of July 2010. Many of the recommendations were incorporated into the revised Code of Conduct on Mortgage Arrears (pdf).
The remaining additional recommendations of the Expert Group are listed in the table below, along with developments and proposals to date, including the recommendations of an Inter-Departmental Mortgage Arrears Working Group.
Inter-Departmental Mortgage Arrears Working Group
An Inter-Departmental Mortgage Arrears Working Group, chaired by Mr Declan Keane, reported (pdf) in 30 September 2011. It dealt with most of the remaining recommendations of the Expert Group. These responses are summarised under 'Developments and proposals' in the table below.
In addition, the Group recommended the establishment of an independent mortgage support and advice function, operating in regional 'mortgage support clusters'. This function would be linked with MABS but the Group recommended that it be funded by mortgage lenders.
| Recommendations of Expert Group (not incorporated in revised CCMA) | Developments and proposals |
| A Deferred Interest Scheme should be introduced for borrowers who can pay at least 66% of the interest. This would give borrowers up to 5 years to get back on their feet. | Several lenders set up Deferred Interest Schemes during 2011. |
| Lenders should consider facilitating borrowers in negative equity who wish to trade down to a more affordable home | The Inter-Departmental Group proposed the options of “trade-down” or "split” mortgages where appropriate. An implementation group in the Department of Finance is dealing with these types of mortgage, as well as the mortgage-to-rent schemes (see below). The Central Bank has set out for lenders general criteria under which it will consider allowing the provision of negative equity mortgages. |
| Where a mortgage is unsustainable, assessment for social housing should be done before repossession takes place. | Social Housing Assessment Regulations, which came into effect on 1 July 2011, allow for the unsustainability of a household’s current mortgage to be taken into consideration in assessing the household’s need for social housing. |
| A mechanism should be put in place to allow repossessed borrowers to remain in their homes for a time, allowing the housing authority time to source appropriate accommodation | The Inter-Departmental Group proposed 2 new mortgage-to-rent schemes whereby people eligible for social housing can switch to renting their homes as social tenants. These schemes are now being piloted. |
| The Expert Group is not recommending debt forgiveness, nor a State-funded mortgage-to-rent scheme. | The Inter-Departmental Group did not recommend blanket debt or negative equity forgiveness. The proposed Personal Insolvency Bill (see below) provides for a structured system of debt settlement. |
| New bankruptcy legislation should be introduced. | The draft Scheme of a Personal Insolvency Bill was published in January 2012 and the full Bill is expected to be published in June 2012. Some changes came into effect in October 2011 (see below). |
| A statutory non-judicial debt settlement system should be established. | The Inter-Departmental Group recommended that such arrangements should be set up at the same time as the reformed bankruptcy legislation. The draft Personal Insolvency Bill provides for the establishment of an Insolvency Service. |
| The time limit for discharge of debt should vary in line with the total value of debt. | The draft Personal Insolvency Bill provides for debts under €20,000 to be written off after a year, in certain circumstances. |
| The system of credit reporting in Ireland should be revised, as should the way the Financial Regulator [Central Bank] reports mortgage arrears. | |
| The Mortgage Interest Supplement (MIS) scheme should be revised, including a change to the qualifying conditions that will allow you to claim MIS if your partner is in full-time employment, provided you pass a means test. | The Department of Social Protection has also published a report
on revising the terms of this scheme. Legislation will be required
to implement changes to MIS.
The Inter-Departmental Group recommended that MIS should be curtailed once new options (such as mortgage-to-rent) become available. |
Indebtedness generally
The Law Reform Commission's report on Personal Debt Management and Debt Enforcement (pdf), which was published in December 2010, includes recommendations on several possible changes to the law on the enforcement of debt.
The Civil Law (Miscellaneous Provisions) Act 2011 (Section 30) updated some of the rules on bankruptcy. Subsection 30(g) of the Act provides:
- For the automatic discharge of a bankruptcy after 12 years and
- For a bankrupt to apply for a discharge after 5 years.
This subsection of the Act came into force on 10 October 2011.
The draft Personal Insolvency Bill provides for discharge after 3 years, as well as other changes to bankruptcy rules.
Legislation proposed in 2012
The Scheme of a draft Personal Insolvency Bill (pdf) has been published. The press release gives details of the proposed provisions. The full Bill is due to be published in June 2012.
The Joint Oireachtas Committee on Justice, Defence and Equality has published a report of hearings it held in relation to the draft Scheme.
MABS is expected to have a role in administering the Debt Relief Certification Scheme proposed under the draft legislation.
Language
Related Documents
- Consumer protection codes and mortgages
Mortgage lenders must adhere to codes of conduct when dealing with customers. Find out more. - Mortgage-to-rent schemes
Two pilot schemes to allow people in mortgage difficulty to switch to renting their homes. - Budget 2012
Budget 2012 was announced on 5 and 6 December 2011. Summary of the main changes.
Contact Us
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