Your Home, Your Security: Resolving Mortgage Arrears Under the CCMA Framework

A principal place of residence (PPR) is a house or apartment that you own and occupy as your only or main residence. Since the economic downturn in 2008 and throughout the subsequent recession, Ireland experienced a mortgage arrears crisis, where many people fell behind on their mortgage repayments. More recently, the Covid-19 pandemic followed by the higher interest rates has added to these challenges, causing many more people to fall behind on their mortgage repayments.

In May 2019, the Central Bank reported that the stock of non-performing loans across Irish retail banks was ‘unacceptably high.’ Non-performing loans are defined as loans that are more than 90 days past due or are unlikely to be fully repaid.

CCMA

In response to the crisis, the Central Bank attempted to address the issue of mortgage arrears and non-performing loans by implementing the Code of Conduct on Mortgage Arrears (CCMA) in 2019. Under the CCMA issued by the Central Bank of Ireland, all relevant institutions must have a process in place to assist customers struggling with mortgage repayments.

The CCMA applies to all regulated mortgage lenders (and their collection agents) operating in the State but does not apply to credit union mortgage loans or local authority mortgages (although local authorities now have their own Mortgage Arrears Resolution Process). The rules set by the CCMA are activated in two situations concerning mortgage arears:

        1. When the mortgage is tied to the debtor’s main home, which is their primary residence.or

        2. When the mortgage is tied to the only residential property the debtor owns within the state.

The CCMA was implemented to protect individuals from the risk of losing their homes due to mortgage arrears. In general, the CCMA requires banks to wait for at least 8 months before taking legal action for repossession of the principal primary residence of a debtor and to operate a Mortgage Arrears Resolution Process (MARP) when dealing with mortgage arrears and pre-arrears debtors. Regardless of how long it takes your lender to assess your case, and provided that you are co-operating, you must be given 3 months’ notice before they can commence legal proceedings where either:

        1. Your lender does not offer you an alternative repayment arrangement for your mortgage, or

        2. You do not accept an alternative repayment arrangement offered to you.

While understanding and navigating these processes is critical, taking proactive steps to maintain your mortgage health is equally important. Here are some strategies that can help you manage your  finances effectively and reduce the risk of falling into arrears:

• Balanced Budgeting: Establishing a solid budget is crucial. Prioritising your mortgage payments and managing your finances responsibly helps ensure stability. Budgeting tools can be particularly useful in managing expenses in an ever-changing economy.

• Emergency Fund Planning: Creating an emergency fund to cover several months of mortgage payments provides a safety net during unforeseen financial challenges like job loss or health emergencies.

• Open Communication with Your Lender: Early and open communication with your lender about any potential mortgage payment difficulties is vital. Engaging proactively can lead to solutions such as loan restructuring, crucial for maintaining your financial health.

By adopting these strategies, you can better safeguard against the risk of mortgage arrears. If, however, you find yourself navigating these challenges, understanding the Mortgage Arrears Resolution Process (MARP) is crucial.

MARP

The Central Bank has described the Mortgage Arrears Resolution Process (MARP) as a: ‘a fair and transparent process … for dealing with vulnerable, financially-distressed borrowers in mortgage arrears or pre-arrears’. The MARP is the core of the 2013 CCMA and is required to be put in place to handle each of the following cases:

(a) where arrears have arisen on a mortgage account which remain outstanding for 31 calendar days from the date the arrears arose;

(b) a pre-arrears case; (where a borrower anticipates financial challenges that may lead to missed payments)

(c) where an alternative repayment arrangement put in place breaks down; and

(d) where the term of an alternative repayment arrangement expires.

The MARP must include all four of the following steps:

1. Communication with borrowers,
2. Obtaining financial information,
3. Assessment of such information and
4. A resolution.

Please feel free to contact us if you are a mortgage customer that is experiencing arrears, and you feel that the bank has not adequately complied with the four steps of the MARP process. Alternatively, if you suspect the bank has prematurely appointed a receiver do not hesitate to contact us for a consultation. We are here to assist you.