Regulator questions bill to force banks to do mortgage deals
THE Central Bank has questioned proposed legislation to force banks to do deals with families in deep mortgage arrears.
The aim of the legislation is to avoid repossessions and instead push lenders into doing deals with financially stricken families.
But the Central Bank warned that the bill, if enacted, would interfere with the ability of banks to repossess properties, and suggested it would have the effect of driving up variable mortgage and fixed interest rates.
In a lengthy letter to the Oireachtas Committee on Justice, Central Bank deputy governor Ed Sibley criticised the Mortgage Arrears Resolution (Family Home) Bill.
The bill has been proposed by Fianna Fáil’s Michael McGrath and is being considered by the committee. Mr Sibley stated in the 10-page letter: “…the ability to undertake secured lending is ultimately dependent on the power to realise the security if needed.
“This is a cornerstone of secured lending and, by extension, an effectively functioning mortgage market. This bill could have significant ramifications for secured lending in Ireland, and consequently, important implications for mortgage pricing and the supply of credit to the wider economy…” The bill aims to provide for the setting up of a mortgage resolution office by the State.
This would provide for a non-judicial mortgage resolution order for family home mortgages. It would also provide for an independent appeals process against decisions of the mortgage resolution office.
But Mr Sibley told Justice Committee chairman Caoimhghín Ó Caoláin in his letter that the bill would have unintended consequences, even though it was well intentioned.
It may even slow down voluntary restructuring deals by banks, and would adversely impact property rights, contracts between banks and borrowers.
The bill makes no provision for dealing with non-mortgage debt, which the Mr Sibley implied was a weakness in the proposed legislation.
And the European Central Bank would need to be consulted about the bill, he added.