Ireland: Resolving The Mortgage Arrears Crisis (Volume 3/2016)

 This briefing summarises recent cases, developments and trends relevant to ongoing efforts to resolve the mortgage arrears crisis. Mortgage arrears and repossessions are a key area of focus in the 2016 Programme for Partnership Government.

RECENT CASES

Two judgments, published just before the Courts' Summer recess, are of particular interest.

Possession proceedings

In Resolving the Mortgage Arrears Crisis: Vol 2/2016, we highlighted two conflicting High Court decisions from 2015 relating to the jurisdiction of the Circuit Court in respect of possession proceedings.

The Court of Appeal's judgment in Permanent TSB Plc v Langan, delivered on 28 July 2016, has clarified the position. In the judgment, the Court of Appeal noted that the Circuit Court's current jurisdiction to deal with land-related matters is limited to cases where the rateable valuation of the relevant property does not exceed €253.95 (meaning that the property must actually be rateable for the Circuit Court to have jurisdiction). As a result, the Circuit Court did not have jurisdiction as the six properties in this case were not rateable.

While the judgment in this case related to possession orders in respect of domestic premises, Hogan J noted that his conclusions would lead to "unfortunate and unintended" results and that his judgment "has even the more serious consequence that the general jurisdiction of the Circuit Court to deal with property disputes (i.e. other than those concerning applications for possession) concerning domestic dwellings is, at least, now open to question".

For further details on the impact of this decision, read our Client Briefing: Possession Proceedings for Residential Properties - Important Update.

On 24 October, the Government published the Courts Bill 2016 (and related Explanatory Memorandum) which is designed to deal with the consequences of this Court of Appeal ruling – the intention is that the Circuit Court's jurisdiction will be based on the market value of the property concerned, rather than its rateable valuation. Where the market value is less than €3,000,000, it is proposed that the Circuit Court will have jurisdiction. We will issue a more detailed client briefing on this legislation as it progresses.

Registered land and the appointment of receivers

In Harrington v Gulland Property Finance Limited, the High Court granted an interlocutory injunction restraining a receiver from taking possession of certain registered properties owned by the Harringtons. The Court held that the Harringtons had made out an arguable case that the receiver was not validly appointed because Gulland – the party purporting to make the appointment having acquired the loans and related charge from IBRC – was not yet registered as owner of that charge in the Land Registry.

For further details, read our Client Briefing: Loan Sales: Important judgment in relation to registered land.

OTHER DEVELOPMENTS

The Abhaile initiative and the Scheme of Aid and Advice on Home Mortgage Arrears

In August, the Department of Justice and Equality published an outline of the Government's Scheme of Aid and Advice on Home Mortgage Arrears. The Scheme is aimed at ensuring that those in mortgage arrears can access free, independent financial and legal advice (the Scheme provides vouchers to eligible borrowers to enable them to obtain that advice). The Scheme is the first element of the Abhaile scheme, officially launched by the Tánaiste on 3 October 2016.

Under the Scheme, a borrower in mortgage arrears will contact MABS in the first instance and, if the borrower is eligible, MABS will direct that borrower to the relevant advisor. Eligible borrowers are those who are:

  • insolvent;
  • in mortgage arrears (in respect of their PDH); and
  • at risk of losing their home.

Five different options are available to eligible borrowers under the Scheme depending on the type of assistance that the borrower needs. Advice will be available from personal insolvency practitioners, accountants and solicitors, and support will also be provided to a borrower who decides to appeal his creditors' decision to reject a proposal for a Personal Insolvency Arrangement.

By 30 September, MABS had already issued 1,340 vouchers to eligible borrowers for financial or legal advice, or for access to legal aid, and work is ongoing to develop the panels of advisors. The Scheme will run for 3 years at a cost of €15 million.

The second element of the Abhaile scheme, an information campaign managed by the Citizens Information Board, will be launched over the coming weeks, with the aim of promoting the scheme to those who need access to it.

Lorcan O'Connor, Director of the Insolvency Service of Ireland (ISI), noted that he expected the Abhaile scheme to lead to a further increase in the number of debt relief applications to the ISI.

Mortgage lending regulations

Call for submissions

As mentioned in Resolving the Mortgage Arrears Crisis: Vol 2/2016, the Central Bank recently published a call for submissions (which closed on 1 September 2016), seeking views on its loan-to-value (LTV) and loan-to-income (LTI) regulations in respect of residential mortgage lending.

Approach of Central Bank

Fifty submissions were received and the results of the Central Bank's review, together with a feedback statement, will be published later this month. The Deputy Governor of the Central Bank, Sharon Donnery, in a recent speech to the Dublin Economic Workshop Annual Economic Policy Conference, emphasised that any material changes to the regulations would require a significant evidence threshold and that it "...would be unwise to seek to adjust the rules in response to minor and temporary fluctuations in the state of the financial cycle". In a subsequent interview with Bloomberg TV, she noted that no decision had yet been made as to whether the regulations would be amended, but highlighted that frequent tweaking of the regulations could undermine the stability that they are designed to provide - again, this indicates that the Central Bank is only likely to announce changes to the regulations if presented with strong evidence to justify change.

Department of Finance submission

Separately, the Department of Finance published its response to the call for evidence, asking the Central Bank to consider the following:

  • the introduction of a 'capacity to pay' test which would take into account a borrower's strong rental payment record – this recommendation arose from concerns that borrowers with strong rental payment records in respect of high rents could find it difficult to save for a mortgage deposit as a result of making those payments);
  • increasing the allowances given to lenders in the existing regulations by allowing lenders to advance 20% (rather than 15%) of PDH loans above the LTV limit, and 25% (rather than 20%) above the LTI limit, with those increased allowances being targeted at first time buyers; and
  • increasing the existing 90% LTV limit for first time buyers from €220,000 to €320,000.

ESRI commentary

The Economic and Social Research Institute, in its Autumn 2016 Quarterly Economic Commentary, analysed the implications of the Central Bank's LTV and LTI limits on the Irish housing and credit sector. It noted that the limits had caused lending in the Irish market to contract, but that the impact on the housing sector had, to date, been negligible. However, it forecast (over a longer period of time) that housing supply will decrease more significantly than it would have if the regulations had not been introduced.

Non-performing loans

On 12 September, the European Central Bank (ECB) published (for consultation) its draft guidance to banks on non-performing loans (NPLs). It sets out several 'best practices' that the ECB will expect to see followed, and recommends that banks with a high level of NPLs establish clear strategies to manage and reduce their NPL levels. The draft also sets out various options on viable forbearance solutions, and banks will be required to set targets for reducing NPL levels. A useful summary of the draft guidance is here. As part of country-specific information published in connection with the draft guidance, the ECB noted in respect of Ireland that:

  • in December 2015, Ireland had a total NPL ratio of 19% (18% of which related to household debt);
  • the high volume of cases going through the Irish court process, and the timelines associated with possession proceedings for PDH properties are a key challenge for Irish banks.

The consultation closes on 15 November 2016. Once the guidance is finalised, it will not be legally binding but banks will be required to explain (on request by the ECB) any substantial deviations from the guidance.

Variable mortgage rates

On 21 July 2016, the Central Bank announced that holders of variable rate mortgages will be granted further protections from 1 February 2017. The new protections will benefit personal consumers (i.e. individuals acting outside their trade, business or profession) in relation to variable rate mortgages (excluding tracker mortgages). For further information, read our Client Briefing: Variable rate mortgage holders given further protection.

The Central Bank's most recent Retail Interest Rate Statistics contained interesting information regarding variable rate mortgage loans in the Irish market. In particular:

  • interest rates on variable mortgage loans for house purchases are among the highest in Europe, averaging 3% in August 2016 (the equivalent euro rate is 1.87%); and
  • two-thirds of all new mortgage loans for PDHs and BTLs in Ireland from August 2015 to August 2016 were on variable rates – significantly above the European average.

Mortgage switching

In a statement to The Irish Times earlier this month, the Central Bank indicated that it had begun research into the area of mortgage switching. It expects to complete this work early in 2017, and will use the results to decide whether any specific measures need to be introduced in this area.

Personal insolvency

The statistics published by the ISI on 17 October 2016 for Q3 2016 showed a 134% increase (when compared to Q3 2015) in the numbers applying for Personal Insolvency Arrangements (PIAs), a 20% increase (again, compared to the same quarter last year) in the number of protective certificates granted, but a 3% decrease in the number of PIAs approved (whether by the creditors or by the Court).

RECENT TRENDS

The statistics on residential mortgage arrears and repossession relating to the second quarter of 2016 have recently been released by the Central Bank. We are still awaiting statistics for this period from the Courts Service of Ireland.

In terms of the key trends, these are as follows:

Arrears

11% of all residential mortgage accounts continue to be in arrears at the end of June 2016, marking the twelfth consecutive quarter of decline. A total of 82,092 of residential mortgage accounts were in arrears at the end of June 2016, being a decline of 4.5% relative to the previous quarter. The rate at which residential mortgage accounts in arrears are declining has increased relative to the decline of 2.6% recorded in Q1 2016.

Proceedings issued

The second quarter of 2016 saw 1,243 legal proceedings issued in the Irish Courts for the enforcement of security in respect of PDHs; a notable decrease on the 1,895 proceedings issued in first quarter of 2016. The 1,243 proceedings issued marks a 51% decrease in the number of proceedings issued as against the same period in 2015, when 2,533 proceedings were issued.

PDHs actually repossessed

The total number of PDHs ultimately repossessed on foot of Court orders made in the High Court and Circuit Court in the second quarter of 2016 came to 101. This is lower than any quarter in 2015 and represents a 27.4% decrease on Q1 2016.

CONCLUSION

The continuing decline in the level of arrears is very positive. However, the mortgage arrears issue remains at the top of the political and regulatory agenda, and the approach that the Central Bank ultimately decides to take following its call for evidence on its mortgage lending regulations is likely to receive significant coverage. We will issue a further client briefing once the Central Bank has confirmed whether it intends to introduce changes.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.