Anyone who is struggling to pay their mortgage will have to engage in lengthy and sometimes complicated interaction with their Bank often yielding precious little results for the energy expended.
This can be a mix of time consuming, stressful and intimidating and many people feel they are constantly on the back foot.
However there are structures and procedures in place to assist borrowers and by following these and other strategies the process can be a lot less daunting.
If you run into difficulty with your mortgage either by being in arrears or before you go into arrears (pre-arrears) you are afforded the protection of the Code of Conduct for Mortgage Arrears.
The Code was initially introduced in 2010 but was significantly revised in June 2013 and it lays out the Mortgage Arrears resolution Process (MARP). This is a formal process which all banks are obliged to follow in dealing with those in mortgage arrears or per arrears.
At the outset it must be noted that under the Code there is a significant imbalance in power between the bank and borrowers and this imbalance was increased with the revisions in June 2013. Whilst the following might not guarantee your lender will engage constructively and agree with your proposals you will be better prepared for dealing with your bank.
These are general guidelines and you should obtain legal and financial advice before signing any documents from your lender. This may require you funding such advice by using payments to creditors however it is important to get professional advice before signing anything.
The MARP Process
-In theory the process is designed to assess a borrower’s financial statement and come to an agreement, based on a set of options, for a sustainable mortgage for that borrower.
-You may request in writing that the lender liaise with a third party nominated by you. The lender must comply with this request but correspondence from the lender will only go to you from the lender.
-You must fill out a standard financial statement (SFS). It is vital that the details are absolutely correct as this is the financial information that will be used by the lenders Arrears Support Unit (ASU) in agreeing to solutions.
– Ask in advance, in writing, what options your lender offers. Your lender must explore all options for alternative repayment arrangements that it offers. Note this may allow any lender to exclude some of the list of options from its MARP process.
-Your lender must document each option considered and why a particular option/s was chosen.
Practical Advice for those in MARP
-You should open your own MARP file and ensure that the process is at all-times documented.
– Confirm regularly with your lender that you are cooperating with them. Under the revised code a borrowers response to all communication from lenders must be ‘meaningful’ and a lender can unilaterally decide a borrower is un-cooperative, thus removing them from the MARP process with 20 days’ notice.
-Keep telephone contact to a minimum and make a note of any telephone conversations you do have. Most smartphones have free apps available to record calls but if you use this you must advise the caller that you are recording the call.
-Note all unsolicited communications (which must not be excessive, aggressive or intimidating but can be unlimited in number).
-Follow up any calls/meetings in writing with your understanding of decisions made and commitments given.
– Find out who is in charge of the lenders ASU (arrears support unit) and correspond with him or her. If you are regularly assigned to different staff bring this to the attention of the unit head.
-Get an email address for the person you’re dealing with. Some lenders use central call centers and if it is not possible to get a specific persons email address send communication to the head of the lenders arrears department and let them worry about it getting to the right person.
Potential Options under MARP
There are a range of possible options available to borrowers under MARP. No lender facilitates all these options despite political utterances to the contrary however Borrowers should request that all options are considered. More than one option can be used at the same time. The options are:
- Interest only payment for a specified period
- A permanent or temporary reduction in the interest rate
- Payment of interest and a part of the capital for a period
- A payment break for a period
- Extending the term of the mortgage
- Changing the type of mortgage, except in tracker mortgages unless agreed
- Capitalising the arrears and interest
- Any voluntary scheme such as deferred interest scheme
- Equity participation (lender takes a share, principal is reduced)
- A split mortgage (serviced part warehoused part with or without interest on the warehoused part depending on the lender)
- A debt write off
Borrowers should be aware that, unlike the previous code, a bank can now insist that a tracker rate is sacrificed if an advantageous alternative repayment arrangement is offered. It is highly advised that should a borrower be faced with this option to get professional financial advice immediately.
If you are not happy with the outcome of MARP
-A lender is not obliged to offer an alternative repayment arrangement and it may decide that the mortgage is unsustainable. If it does this you are entitled to get the reason for this in writing.
-It may offer you an arrangement that you do not believe is sustainable
-If either of the above occurs you are entitled to appeal in writing to the lenders Appeals Board. You are entitled to at least 20 business days to appeal and should include all relevant information and include all relevant arguments for alternatives in your appeal.
– A further complaint may be made to the financial services ombudsman (FSO) but this seems to be an appeal on process only.
If your appeal fails
– If an appeal fails, the lender may issue legal proceedings against the borrower for repossession.
– The lender must not apply to the courts to commence legal action for repossession of your property until every reasonable effort has been made to agree an alternative arrangement. If you are cooperating with the lender, they must wait the later of 8 months from the date your arrears were classified as a MARP case or 3 months from the date of a letter of offer, or non-offer, from the bank before applying to the courts. If you are classified as non-cooperating court proceedings can be initiated immediately.
-Time negotiating and agreeing payment arrangements counts- thus note any lender delay in this respect.
– Time complying with payment arrangements does not count.
– Time appealing decisions does not count – thus no repossession action should be brought while the borrower is co-operating and any appeal is being processed.
Personal Insolvency Act as an alternative
-You do not have to appeal the lenders decision – you may instead decide to go to a PIP (Professional Insolvency Practitioner) and apply under the 2012 act for a personal insolvency arrangement (PIA) (or a debt settlement arrangement as an alternative).
-However you must make a declaration in writing that you have cooperated for at least 6 months under MARP AND you have not been able to agree a payment arrangement or the lender has declared the mortgage unsustainable.
-Critically, creditors at the creditors meeting must vote in sufficient numbers in favour of the proposal and there is no guarantee that a proposal from a PIP will be accepted.
This is not usually a preferred option but it is one if your lender and other creditors will not agree a payment plan. To apply you need evidence of correspondence between you and your creditors showing you not being able to agree on a payment arrangement or a deal on your debts. So it is essential that you don’t forget to correspond with ALL you creditors in writing and keep this correspondence.