Minister for Finance, Jack Chambers TD, publishes the report of the Interdepartmental Mortgage Arrears Review Group

The number of Irish mortgage accounts in long-term arrears continue to decline - from 18% of total mortgage accounts in 2013 to 6.7% this year.
Greater engagement by borrowers in arrears with the options available under the mortgage arrears resolution framework is a key objective for Government.
Parallel enhancements to the Abhaile service, the Mortgage to Rent scheme and personal insolvency solutions will provide further assistance to borrowers experiencing trouble.

The Minister for Finance, Jack Chambers TD, has today published the Report of the Mortgage Arrears Review Group. The Minister informed his Cabinet colleagues of the recommendations of the report this morning and of his intention to mandate a Mortgage Arrears Forum to take forward the coordination and implementation of the recommended reforms to the mortgage arrears resolution framework.

Minister Chambers said,

“I welcome the report of the Mortgage Arrears Review Group as a valuable assessment of the State’s response to resolving mortgage arrears. The dramatic shift in the interest rate cycle since July 2022 has had an impact on many borrowers. The report is a timely intervention and recommends appropriate reforms to assist mortgage borrowers who are experiencing distress.

It is fortunate that Ireland has a robust consumer protection framework in place and I urge any borrowers in or facing arrears to engage with their lender in the first instance. Under the Abhaile service, the Money Advice and Budgeting Service as well as Personal Insolvency Practitioners can also arrange free expert and impartial advice to borrowers in mortgage arrears to help them find a solution that keeps them in their home.”

The financial crisis of 2008 exposed the vulnerabilities in Ireland’s residential property sector. In response, the Government and the Central Bank established a set of resolution options to improve both mortgage lending standards and to address the build-up of arrears from distressed mortgage holders. A range of supports are now available for borrowers in distress through the regulatory consumer protection framework, the Abhaile service, MABS’ Dedicated Mortgage Arrears service, free legal and insolvency advice for qualifying borrowers and remedies available through the insolvency framework and the Mortgage to Rent scheme. The testament to the success of this framework is the reduction in mortgage arrears cases from 18% of total mortgage accounts in 2013 to 6.7% at end March 2024. However, more must be done. The Minster added,

“I am very conscious of the impact that long-term mortgage arrears are having on the wider mortgage market in Ireland. I am supportive of the report’s recommendation for a coordinated communications strategy to engage with distressed mortgage borrowers.”

The Group has consulted widely on the impact of mortgage arrears on borrowers and lenders. A new iteration of the Mortgage to Rent scheme was launched earlier this year and is open for new applications from qualified borrowers. Government has reviewed and extended the Abhaile service for distressed mortgage borrowers until end 2027 and the Central Bank is reviewing the Consumer Protection Code. The Minister further said:

“In parallel with various new initiatives being taken forward, the Mortgage Arrears Review Group makes several valuable recommendations to refine the options available to distressed borrowers, including further efficiencies to be made to the personal insolvency framework and enhancing the professional development of Personal Insolvency Practitioners. My Department will continue to participate with key departments and agencies in the Mortgage Arrears Forum to oversee the implementation of these reforms and to monitor future arrears trends.”

Commenting on the publication of the report, the Minister for Housing, Local Government and Heritage, Darragh O’Brien TD noted,

“I welcome my Department’s participation in the Mortgage Arrears Review Group. The Mortgage to Rent (MTR) scheme is helping eligible homeowners who are at risk of losing their homes due to mortgage arrears. In fact, since its inception in 2012, nearly 2,500 households with unsustainable private mortgages have completed the MTR process and remained in their homes. Almost 7,000 individuals are benefitting from the scheme and nearly 350 more applications are being actively progressed. By allowing homeowners with unsustainable mortgages the option to switch from owning their home to renting their home, we are helping many families to remain in the accommodation they have lived in previously and to avoid the disruption and upset they may otherwise have experienced.”

The Minister for Social Protection, Heather Humphreys TD, said,

“The publication of this important Report comes at an opportune time when the Government has approved the extension of the Abhaile service. The services provided by Abhaile enable borrowers in mortgage arrears to obtain free financial, legal or accountancy advice provided by qualified regulated professionals. MABS’ Dedicated Mortgage Arrears service also supports borrowers in mortgage arrears. The Government recently agreed to extend Abhaile and the Dedicated Mortgage Arrears services until the end of 2027 and I would urge any person experiencing mortgage difficulty to reach out for support and contact MABS who will help you find a solution.”

Welcoming the Report, the Minister for Justice, Helen McEntee TD commented,

“The Abhaile service, which is jointly coordinated by the Department of Justice and the Department of Social Protection, is acknowledged in this report as having a positive impact. Solutions available under the personal insolvency framework offer valuable options to people in mortgage arrears. I encourage anyone in arrears to visit backontrack.ie to explore those options and avail of the support available. I welcome the recommendations in the report which will further enhance the accessibility of those options for people who need them. ”]

Minister Chambers concluded:

“I would like to thank everyone who contributed to the work of the Mortgage Arrears Review Group. In particular, I would like to acknowledge the contribution of my colleague Michael McGrath in commissioning this report, reflecting the priority he placed on protecting Irish borrowers. It is never too late to explore the options available and I urge anyone with problem debt to take that first step and engage with their lenders, with personal insolvency practitioners and with MABS.”

ENDS.

Report of the Mortgage Arrears Review Group

Notes for Editors

In October 2023, the Mortgage Arrears Review Group was tasked by the then Minister for Finance, Michael McGrath TD, to review the operation of the mortgage arrears resolution framework and identify any reforms or improvements that could be made to better address the problem of long term mortgage arrears and emerging early arrears. Minister McGrath was conscious as to how the change in the interest rate cycle could have an impact on mortgage borrowers. He instructed a review be undertaken on how the resolution framework is assisting ordinary borrowers experiencing difficulties arising from cost of living increases and rising interest rates.
The Mortgage Arrears Review Group comprises senior officials from the Department of Finance, the Department of the Justice, the Department of Social Protection and the Department of Housing, Local Government and Heritage. The Central Bank of Ireland, the Money Advice and Budgeting Service and the Insolvency Service of Ireland also participate.
The purpose of the Group is to consider the impact of the mortgage arrears resolution framework, the current resolution options available through the schemes operated by state agencies and bodies, and recommend refinements and improvements to better address the economic and social impact of mortgage arrears.
The IMF conducted a Financial Sector Assessment Program in Ireland in 2022 and recommended that the Government should address the issue of mortgage arrears through a coordinated multi agency strategy for resolving arrears, informed by the granular data available of the financial situation and debt servicing capacity of borrowers.
The number of principal dwelling house (PDH) accounts in arrears over 90 days at end-March 2024 was 28,769, which is slightly lower relative to end 2022 (29,842). The number of accounts in long-term arrears (greater than one year) was 20,258 (3% of all PDH accounts) in March 2024. This represents a fall of 1,757 accounts in annual terms. Of the PDH accounts in arrears, some 5,108 accounts (or just under 11%) are currently part of a legal process, 32% of which have been in the legal system for over five years.
At end-March 2024, non-bank entities (i.e. credit servicing firms and retail credit servicing firms) held 17% of all outstanding PDH mortgages and 84% of all PDH accounts in arrears over one year. The bulk of mortgages in substantive arrears were issued in the lead up to the financial crash of 2008. As a rule, mortgages issued after 2015 in line with the subject to the Central Bank’s macro prudential measures would appear to be more robust and this is evidenced by the low take up of COVID payment breaks by those borrowers.
While the overall trend in mortgage arrears has been declining, there are still risks to the stock of performing and non-performing mortgages given ECB rates have risen rapidly and consistently between July 2022 and June 2024. The ECB deposit rate was raised by 25bp to 4% in September 2023 and has only recently reduced to 3.75% in June 2024.

The Mortgage Arrears Framework

The multi-dimensional framework to address mortgage arrears, as outlined in the Keane Report, comprises several elements:-

The Code of Conduct on Mortgage Arrears – Consumer Protection Code Review

Central Bank of Ireland is conducting a comprehensive Review of the Consumer Protection Code 2012. The purpose of the Review is to deliver an updated and modernised Consumer Protection Code, which is centred on firms securing customers’ interests .
The consolidation of the Code of Conduct on Mortgage Arrears (CCMA) into the Consumer Protection Code along with a number of enhancements to existing CCMA requirements, forms part of the Review
The CCMA sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. It requires lenders to manage all such cases sympathetically with the objective of assisting people to meet their mortgage obligations. Information on the CCMA and how it works is publicly available from the Central Bank.
Central to the CCMA, is the Mortgage Arrears Resolution Process (MARP) which lenders must apply when dealing with arrears and pre-arrears customers. MARP and the other CCMA protections must be followed even if the lender sells the mortgage to another entity, as these protections remain with the loan.

Abhaile service

Abhaile, the National Mortgage Arrears Resolution Service, commenced in 2016 and provides free, expert financial and legal services to borrowers in home mortgage arrears. MABS’ Dedicated Mortgage Arrears Service, established in 2015, works in parallel to the Abhaile service.
The aim of Abhaile is to identify and put into place solutions to arrears that will enable the borrower to remain in their home wherever possible.

Abhaile is overseen and funded by the Department of Justice and the Department of Social Protection and is delivered by the Insolvency Service of Ireland, the Legal Aid Board, the Citizens Information Board, the Money Advice and Budgeting Service and the Department of Housing, Local Government and Heritage.

Personal Insolvency

A Personal Insolvency Arrangement (PIA) is one of three debt resolution mechanisms introduced by the Personal Insolvency Act 2012 for people who cannot afford to pay their personal debts. These mechanisms offer different solutions to people in different situations.
In respect of secured debt (i.e. mortgages) a PIA facilitates the agreed settlement and/or restructuring of secured debts up to a total of €3 million (as well as unsecured debts) over a period of up to 6 years. The cap of €3 million may be exceeded and the limit of 6 years can increase to 7 years in some situations.
As a general rule, people applying for a Personal Insolvency Arrangement must declare that they have co-operated with their mortgage lender under the MARP for at least 6 months and have been unable to agree an alternative repayment arrangement. There are exceptions for borrowers who may not have been offered an alternative repayment arrangement by the lender or may not have accepted the solution offered.

Mortgage to rent

Under the Mortgage to Rent (MTR) scheme, a borrower can remain in their home and agrees to give ownership of the home to the MTR provider. This means the borrower becomes a social housing tenant of their local authority or an Approved Housing Body (AHB). The arrangement is entered into voluntarily and agreed between the borrower, their lender and the MTR provider. To be eligible for MTR, borrowers must be in arrears with little or no prospect of a change in circumstances, qualify for social housing and must be residing in the relevant property.

Recommendations of the Mortgage Arrears Review Group.

The central finding of the Group was that the mortgage arrears framework works well for those borrowers who engage with their lenders and with the available independent debt advice from MABS and from Personal Insolvency Practitioners. The evidence of the reduction in long-term mortgage arrears since 2013 points to the success of the framework.
There is a significant issue of non-engagement with the framework by a particular cohort of borrowers in long-term arrears. Addressing this issue will be a challenging task which will require close monitoring of the impact of several reforms to elements of the framework that are already underway. The report recommends the following:

o An interdepartmental mortgage arrears forum monitors the implementation of the recommendations of the report.

o A communications sub-group, reporting to the forum, examines and advises on the most appropriate channels for engagement and how key messages are delivered to raise awareness.

o Improve data collection in the financial and legal systems.

o Prioritising of longer-term arrears cases in the Abhaile service.

o Improve the engagement between MABS debt advisors and Personal Insolvency Practitioners.

o Further improvements to lenders’ customer service standards.

o Survey lenders’ experience with the legal process.

o Monitor performance of the Mortgage to Rent scheme.

o Further amendments to the personal insolvency regime.

o Professional development of Personal Insolvency Practitioners with respect to relationship breakdown.