Protect homeowners in default, Bank told

Michael Noonan wrote to the Central Bank in June requesting a review of how banks and non-banking entities were treating mortgage customers in arrears.

It is understood that the Bank will present its findings to the finance minister in late September. Mr Noonan wrote to Philip Lane, governor of the Bank, on June 15, noting that the “recently published programme for partnership government contains a number of commitments in relation to promoting and protecting home ownership”.

In the letter, which was released to The Times under the Freedom of Information Act, the finance minister added: “I would welcome the early assessment of the Central Bank as to the range of available sustainable restructure solutions offered by the banks and non-bank entities to facilitate those in mortgage distress in the resolution of their mortgage arrears.

“There is little publicly available information on the solutions offered by non-banks in particular, and any additional information on their activities in this area would be most welcome. I would also ask that the assessment should also consider how the options available may impact on the distressed borrower’s capacity to remain in the primary residence.

“The assessment should take account of the success of financial institutions in addressing the requirements of their overindebted borrowers and the extent to which the institutions have exhausted all available options before moving to the legal process.”

Methods for dealing with mortgage arrears was one of the issues that proved hardest to resolve in talks between Fine Gael and independents when the government was formed this year.

Over the past few years, private equity funds have bought mortgage books from banks that were leaving the Irish market. Opposition politicians have raised concerns that these “vulture funds” could seek to bypass restructuring options available to distressed mortgage holders, and move straight to repossessions.

One of the policies in the programme for government was to “establish a dedicated new court to sensitively and expeditiously handle mortgage arrears and other personal insolvency cases, including through imposing solutions”. A national service would be set up, it said, to “standardise the supports available to borrowers”. Hearings in the new court could be held privately at the request of the debtor, it added.