Concern over mortgage solutions offered to distressed borrowers

The country's main banks have met their targets for providing solutions to struggling mortgage holders, the Central Bank announced today.

However, it raised concerns about the sustainability of some solutions being offered to customers in mortgage distress.

Banks are required to propose solutions for 20 per cent of mortgages in arrears of more than 90 days by the end of June, rising to 30 per cent by the end of September.

According to an audit by the Central Bank, the county's six main mortgage lenders - AIB, Bank of Ireland, Permanent TSB, Ulster Bank, ACC Bank and KBC Bank - made sufficient proposals to meet these targets, and in some cases exceeded them.

As part of the audit, the Central Bank said it examined processes of determining and proposing sustainable solutions in the banks against its own sustainability guidelines.

It said number of issues were identified which will need to be addressed if the solutions being proposed are to be sustainable in the long term.

Specifically, the Central Bank said short-term loan modifications were proposed in some cases where there was no tangible evidence of a borrower’s circumstances improving, or clarity on the ultimate long-term solution.

It also identified resolution proposals where there was “an absence of requisite information”, such as verification of borrower income or property value.

In other cases, it pinpointed the absence of “legal follow up” in cases categorised under a legal resolution heading on the banks’ books.

The issues, however, were not enough to result in any of the lenders failing to hit their targets, the Central Bank said.

The audit found that, as of the end of September, the six lenders had issued proposals to 43 per cent of mortgage accounts in arrears, exceeding the 30 per cent target required of them.

"We are now starting to see some signs of progress in addressing the significant issue of mortgage arrears," director of credit institutions and insurance at the Central Bank, Fiona Muldoon, said.

“The audit process, while highlighting some key issues which require attention, shows evidence of long-term loan modifications being offered to borrowers who are no longer able to afford the original repayment requirements.”

“The latest data on mortgage arrears is also encouraging, with indications that the level of new arrears cases is declining and an emerging pattern of stabilisation in the numbers generally.”

“We expect that lenders will continue to progress and develop their approaches to ensure that future sustainability targets will be achieved. With indications the banks are now offering long term sustainable solutions to customers, the Central Bank continues to encourage meaningful engagement between lenders and borrowers.”