Proactivity a must when facing mortgage arrears

Most of us are all too familiar with the little mental sigh brought on by coming home to a small mountain of unopened envelopes. As a teenager I adored receiving post; now I am pleased when greeted with an unadorned mat beneath my letter box. Today any message of affection comes by email or text while the postman is commonly the bearer of bad news, the bringer of bills, eFlow notifications and loan payment reminders. It is easy to let these officious-looking envelopes build in an unopened pile.

However there is just no room for this type of behaviour in the face of the current mortgage crisis. At present one in nine homes faces repossession; that is just over 55,000 households at the last count. The debate continues as to whether Government intervention on this issue is both insufficient and overdue but the fact remains that people in mortgage arrears have actually been afforded some level of protection since 2009. Further safeguards were established with the introduction of the revised Code of Conduct on Mortgage Arrears at the beginning of this year. A crucial theme that undercuts all of this protective legislation is the need for mortgage owners’ vigilance and proactivity in relation to their debt.

The Code of Conduct on Mortgage Arrears provides a framework that lenders must follow in their dealings with borrowers who are in arrears or facing arrears with their mortgage. The aim of the Code is to avoid the repossession of family homes by putting in place alternative repayment arrangements for the mortgage where the borrower can’t make full payments. Though its provisions have been reasonably well publicised by Citizens Advice Bureaus and non-governmental organisations, many mortgage borrowers remain unaware of the protections offered by this piece of legislation. This is an awful shame because the Code is really the only route towards gaining some sort of peace of mind and preventing (or at least delaying) the repossession of a family home in the event of mounting mortgage arrears.

Among other things it requires that all mortgage lenders establish dedicated mortgage arrears support units in each of their branches, that they notify customers immediately of any arrears situation and most significantly that they negotiate some alternative temporary payment plan if the mortgage is at all viable. Alternative payment plans include interest-only payment periods, extensions of the overall mortgage period and even all out payment moratoriums. The Code also protects borrowers from the repossession of their family home for twelve months from the time that they fall behind with their mortgage payments.

Crucially, the Code requires that a person in arrears on their mortgage ‘cooperate’ with their lender. A lack of communication with a lender for three months or more will be considered as non-cooperation. This means that any mortgage owner who in fear and panic ignores communication from their bank for just three months could exempt themselves from the Code. Admittedly it is flawed piece of legislation and its weaknesses have been heavily criticised by commentators and debtors, but it is the only legal mechanism available that offers room for air to struggling mortgagees. The Code offers protection not just to those in arrears but also those in ‘pre-arrears’, people who are likely to fall behind with payments in the near future - again, the emphasis is on proactivity.

There is no ambiguity here; even when mortgage debts seem insurmountable it is obviously preferable to talk with your lender and give yourself a bit of breathing room. It becomes difficult to save the day the longer the problem is ignored. Lenders are reluctant to negotiate alternative payment plans with parties who have ignored communication for six months. Worse still, if you end up before the courts, a lack of willingness on your part to communicate with your lender casts you in a negative light; the courts do not look kindly on those who put their heads in the sand. So open those letters and contact your bank.