A call from a central bank chief to lenders to finally fix the mortgage arrears problem has been welcomed by debt counselors and mortgage brokers.

Vice Governor Ed Sibley told a banking sector audience that banks “must do more” to resolve the arrears crisis which in the Republic is characterized by long-term arrears from the latest financial crisis in ten years ago.

Mr Sibley told bank executives that lenders were not meeting their commitments to the regulator.

“More specifically, he identified the inadequate use of existing tools to achieve sustainable restructuring, inconsistencies in approaches to personal insolvency agreements, inadequate consideration of the demographic diversity of borrowers and the need for more great collaboration in finding system-wide solutions for those in the deepest levels of distress, ”according to a central bank statement on the speech.

Leased lenders

However, Mr Sibley also praised the lenders for their treatment of customers in distress since the onset of the Covid economic crisis last year.

Even before the Covid crisis, Ireland’s arrears crisis was still among the most severe in Europe. According to new figures, 95,000 home loans – or 13% of all home mortgages in the Republic – have been classified by lenders as facing deficits, Sibley said.

Debt brokers and advisers have long complained that long-term arrears continue to rise 10 years after the financial crisis, with 5,416 accounts overdue for more than 10 years. They said no other country in the world would put up with the protracted nature of the crisis.

Critics also said that the offers of restructured mortgages, such as the capitalization of arrears, made by lenders were not in the financial interest of distressed borrowers.

Loan sales

They also pointed out that the Central Bank and the government have effectively approved the sale by banks of distressed mortgage portfolios. Critics said loan sales had done little to resolve the arrears crisis.

However, one of the country’s leading debt experts, Paul Joyce, who is also a senior policy adviser at the Free Legal Advice Centers (Flac), said he welcomed the “piped music” in the schools. Mr. Sibley’s comments calling on banks to offer borrowers in difficulty a sustainable restructuring. mortgages.

Mr Joyce said new research from Flac suggests clients are facing “enormous difficulties” in securing lasting restructuring deals from lenders. He wants the Central Bank to take into account all types of household debt in its research, including unsecured debt.

Flac last month published the first in a series of household debt research articles focusing on unsecured debt and is preparing to publish mortgage debt research.

Rachel McGovern, director of financial services at industry group Brokers Ireland, also welcomed the comments.

“It is time to face something that we Brokers Ireland have long supported, which is that restructurings such as the capitalization of arrears are indeed a method to kick the box,” said Ms McGovern. .

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