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Finance Committee tells Central Bank: legal letters to crisis mortgages aren't 'sustainable'

A draft copy of the committee’s report on mortgage arrears seen by contains strong words for the Central Bank.

THE JOINT OIREACHTAS Committee on Finance has strongly criticised the approach to mortgage arrears employed by the Central Bank.

In a draft copy of the Committee’s report into the mortgage arrears crisis, which will be published this afternoon, the Committee rejects the Central Bank’s acceptance of legal solutions as “sustainable”.

In the draft report, a copy of which has been seen by, the committee states that it:

…rejects the Central Bank’s general acceptance of legal solutions as “sustainable” and requests the Minister to step in in line with his own comments that legal letters are not satisfactory solutions.

The issuing of a legal letter to a borrower has been accepted by Dame Street as proof that the loan is being sustainably managed, and has allowed banks to shift large amounts of non-performing loans into the category.

Honohan defence

Appearing at the Finance Committee in April, Central Bank governor Patrick Honohan said that he sympathises with borrowers that have received letters from banks threatening legal action, but said it showed banks were deploying solutions.

At the time Honohan said: “Most of us agree that getting to grips with the problem is essential, even if the process of getting to grips with the problem is initially unpleasant.”

The report states that the Committee is “clear in calling for renewed vigour and purpose in accelerating the resolution of the mortgage appears crisis”.


Aside from rejecting the Central Bank’s acceptance of legal solutions as “sustainable”, the Committee recommends several further measures, including:

  • Every bank in the Mortgage Arrears Resolution Target (MART) process should offer the same solutions to lenders in difficulty
  • The Central Bank should analyse whether pressure to hit MART targets and avoid financial penalties is hindering the process
  • Solutions for borrowers in arrears whose properties are in positive equity should be considered
  • An urgent review of the Mortgage-to-Rent scheme is required, as it is not fit for purpose in its current incarnation
  • In “almost all cases” a borrower that has agreed to sell their home should not continue to be burdened with debt
  • Consideration should be given to a debt-for-equity solution, with the Central Bank responsible for cooking up an analysis of this strategy and potentially implementing a pilot study
  • An expanded role for the Financial Services Ombudsman

The draft report also casts a critical eye over the effectiveness of the MART process at keeping people in their homes, stating:

The Committee notes with regret the increasing number of people losing their family homes since the MARTs began and believes that the banks have failed to grasp the full potential of the process to reach fair and sustainable solutions which keep families in their homes.

Read: Honohan “not happy” about mortgage sales to vulture funds>

Read: ‘The entire system is rubbish’: Just 40 houses bought through mortgage-to-rent scheme>

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