Wednesday, March 13 14:29:29
The Government today unveiled a raft of measures to finally tackle the home mortgage problem that crucially includes writedowns on some loans.
The steps put greater emphasis on writing down debt, while acknowledging some borrowers will have to volunteer to surrender possession of properties.
Repossession should and will remain the last resort - the purpose of the strategy is to ensure that, wherever possible, the banks offer a sustainable solution that allows families to remain in their home, it said.
Last week, the Central Bank published information for mortgage arrears in the period up to December 2012. This shows that the rate at which mortgages are falling into arrears for more than 90 days is declining. And the number of early arrears cases under 90 days cases has reduced.
However, the statistics also highlight the scale of the problem. 94,500 mortgage accounts for private dwellings are over 90 days in arrears - and 23,500 are in arrears for over 720 days.
Deputy Governor of the Central Bank, Matthew Elderfield, said the resolution of mortgage arrears is a key priority for the Central Bank and is important for the restoration of the banking system and economic and financial stability, as well as the fair treatment of borrowers.
"We are therefore setting performance targets for the banks to end the impasse on arrears and to ensure that sustainable solutions are put in place for borrowers. These targets will be backed by rigorous new provisioning standards and the possible imposition of higher capital requirements. Now is the time to see real delivery from the banks' on this critical issue."
Banks will be forced to reach sustainable solutions with 20pc of borrowers in arrears by the end of July.
That figure will increase to 30pc by the end of the third quarter of 2013 and 50pc by the end of the year.
The Central Bank has also published a new code of conduct on mortgage arrears.
That will see the restriction that blocked banks from making more than three unsolicited contacts with customers per month dropped.
The Central Bank has not found the banks were harassing customers in its site visits to banks, but was concerned that the limited contacts were hampering lenders dealing with arrears.
The new policy will see borrowers afforded breathing space to deal with banks while blocking banks from harassing customers.
Significantly, as part of the new targets for banks, regulators are openly asking lenders to include debt forgiveness if it is appropriate.
In the Central Bank's definition of a sustainable solution, it includes repayment of "a revised principal sum" - in other words some of the debt being written down if the bank offers a deal to a customer.
The Central Bank hopes to increase the use of split mortgages.
This would see a home loan divided into two parts, with the customer paying the first part and the second part would be parked without interest accruing in some circumstances.