Banks told to halt repossessions ahead of reforms
BANKS were called on to adjourn all attempts to repossess family homes ahead of new Government moves to give the courts the powers to overrule banks which pull the plug on formal debt deals.
The Government’s long-awaited mortgage arrears package will also expand the role of the Money Advice and Budgeting Service (MABS) in assisting borrowers in arrears.
The proposals will also introduce changes to the mortgage-to-rent scheme to allow more homeowners to qualify for it.
The package of relief measures was finally agreed by Cabinet yesterday after months of negotiations. Central to the package is an appeals process for homeowners whose debt deals have fallen through.
People who apply for a formal debt deal under the auspices of the Insolvency Service and have it vetoed by the bank will be able to get the deal reviewed and possibly forced on the bank by a circuit court judge.
Many of these people are facing bankruptcy, with a strong chance of losing their homes.
The change will effectively mean an end to the banks’ veto on debt deals. Banks have been reluctant to accept personal insolvency arrangements (PIAs) as they involve writing off debt.
Under the Government’s plans, banks will be forced to accept deals proposed by Personal Insolvency Practitioners (PIPs) if the courts deem them reasonable.
The legislation underpinning the new process will be enacted by the Dáil’s summer recess.
Justice Minister Frances Fitzgerald said: “If he (the judge) thought the deal was fair and reasonable, the court would be in a position to impose the solution.”
“We would hope in fact that cases wouldn’t have to go to court. But this would serve as a strong motivation for everyone to reach a deal without the court process. But the court process is now there and clearly can be used to impose a settlement,” she said.
Environment Minister Alan Kelly said the package will “change the relationship between mortgage holders and banks and rebalance it.”
On the issue of reducing the maximum bankruptcy term from three years to one, Mr Kelly suggested strongly that such a move will be agreed.
The Oireachtas Finance Committee is to examine the proposal, put forward by Labour TD Willie Penrose, and report back before the summer recess.
The changes were broadly welcomed by the Irish Mortgage Holders Organisation (IMHO), the Free Legal Advice Centres (FLAC) and the Association of Personal Insolvency Practitioners.
Levy
David Hall of the IMHO called on banks to adjourn all repossession cases pending the implementation of the changes.
Meanwhile, Finance Minister Michael Noonan said he has the option of increasing the levy on banks that refuse to pass on interest-rate reductions to variable-rate customers.
In a report to the Department of Finance, the Central Bank is understood to have said it should not interfere with the setting of rates.
Tánaiste Joan Burton has previously suggested hiking the levies on banks should be considered as a Government response. Asked about such a move, Mr Noonan said: “We’ll see. The question of a levy is an open question but it’s not particularly applied to mortgage arrears.”