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AN EU DIRECTIVE requires Ireland to oblige non-entity banks and credit purchasers to start offering forbearance to mortgage holders, Master of the High Court Edmund Honohan has told an Oireachtas committee.
Speaking to committee members today, he said the public have a right to be informed about the EU Directive on Credit Servicers and Credit Purchasers, which contains new guidelines for forbearance, including, where possible, partial debt forgiveness.
The Europe-wide process for dealing with mortgage indebtedness is due to be signed into Irish law by 29 December of this year.
EU member states have an element of discretion in terms of transposing the directive, but Honohan states Ireland should transpose it in full.
The directive sets out that EU Member States should have appropriate forbearance measures in place at national level.
When deciding which forbearance measures to take, creditors should take into account the individual circumstances of the consumer, the interest rate they are paying and the ability to repay, it states.
The directive sets out that forbearance measures should be able to consist of certain concessions to the consumer, “such as a total or partial refinancing of a credit agreement, or a modification of its existing terms and conditions”, which includes:
Non-bank entities hold around 112,000 mortgages in Ireland, many of which were sold on from retail banks.
While the perception is that these are non-performing loans in arrears, the committee was told that is not the case with many mortgage holders having never missed a payment with their commercial bank before being sold on.
The purpose of the directive is to promote a governing framework and provide for a new EU wide authorisation for credit servicers to be overseen by national competent authorities, which in Ireland’s case will be the Central Bank.
Honohan said it is a “bit of good news” that should be put out there, in the hope that it can get “enough momentum behind it” that mortgage holders who are in distress in the run up to Christmas “would stay the course”.
He told the committee that his chief concern with the new EU directive is that judges will not know the detail of the new legal position it creates.
There is an “information deficit in how judges are operating now”, he said, stating that it shouldn’t fall on the lay person to have to explain the new position to the courts.
It is his concern that the changes “will not be picked up on”, he stated.
Honohan said an “obligation arises now on the Central Bank in keeping the public informed on forbearance”.
Describing it as a significant change in the law, it specifically mentions debt forgiveness, he told committee members.
Sinn Féin’s Pearse Doherty and other committee members said they had been dealing with a multitude of cases of people having their loans and mortgages sold on to non-entity banks.
Fianna Fáil’s John McGuinness said he knows many families who have had their lives destroyed dealing with vulture funds and credit servicers, stating that he hoped this new framework would make a difference.
One of the “great benefits” of the directive, is it states that forbearance should happen before court proceedings commence, said Honohan.
Doherty asked if it is is Honohan’s view that a reasonable offer from a lender cannot be classed as reasonable offer if it doesn’t offer partial forgiveness, as set out in the directive.
“Yes, that is it,” he said.
Honohan said the directive says this system should be in operation and says the state should oblige lenders to offer forbearance.
“That is hard law, there is no way of getting around that,” he said.
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SOMEBODY along the road will HAVE to pay for this………. as per usual it’ll be the non delinquent mortgage holders……. regardless of ECB interest rates stabilising/ falling anytime soon the rates in Ireland will remain highest in Europe
@Ken Mc Carthy: ahh give it a break Mr. Dudley Doright. Banks that buy distressed mortgages for little or nothing should be in a position to offer debt reduction and restructuring. At the moment they are looking for market rates which is scandalous. To allow a business to turf a family out on the streets when a resolution could be agreed that would benefit both parties is the most logical and humanitarian thing to do.
@Mr. Man: obviously my comment went miles over you head…….everybody wants to be empathic & sympathetic to those in mortgage distress / arrears.However, The simple fact is any & all debt ‘forgiveness’ MUST be paid by someone along the line ( you can’t be so naive to think any financial institution will ‘absorb’ the debt??). The irish approach is for those who pay their mortgage diligently to ‘pick up’ the tab for those unfortunate enough to face arrears / difficulties…..hence, mortgage interest rate are & always have been highest in Europe.
@Ken Mc Carthy: your only ever one accident or illness away from not being “diligent” enough to pay your mortgage. But there’s always one moanbag that gets up in arms at the thought of anyone less fortunate then them getting any sort of help has pulling there hair out. And btw the reason we have one of the highest interest rates is that the banks in Ireland can do whatever they please. The antics of 2008, and lack of convictions is proof of that
@Ken Mc Carthy: here’s an interesting perspective for you and your concerns. People in distressed financial circumstances are far more costly to you and the state than debt forgiveness. Also regularly mortgages are sold off from one bank to another for cents in dollar everyday yet here you are concerned about the cost of a possible neighbour or family member or work colleague but nothing about banks doing it to you. Your point is taken although its at best uniformed and it reveals your solipsistic values.
@Mic JHintl:
I agree with your point that debt forgiveness is very often actually the cheapest option for either the state or the bank involved but Kens point that eventually that cost comes back to the customer, of the bank or the state (taxpayers) is also valid.
All costs, all taxes are paid by the end user.
@P.J. Nolan: yet the cost I mentioned also comes back to the taxpayer at a greater cost so my point still stands and so does my accusation of Ken.
@Ken Mc Carthy: yes there will be a number of people who will pay for this mistake. Directors of these funds that have been set up as charities for tax purposes, professional indemnity insurers, directors for the firms of solicitors, estate agents, Any agents employed or acting on behalf of these funds, like lock smith’s, private security companies! Ignorance of the law is not a defence. The Master of the High Court has now informed the legislators and as you have read this article. You as a now enlightened member of the public are aware of what the Master has informed us all of what is going on with these funds and how they operate, under the noses of our legislators. All parties involved with these funds MAY soon find it impossible to obtain professional indemnity.
Does “non-bank” include funds…. Which aren’t a bank? I think it does. Think about that!
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