Code of Conduct on Mortgage Arrears (CCMA)

Code of Conduct on Mortgage Arrears (CCMA) and its effect in light of the Stepstone Mortgages Case

The Code of Conduct on Mortgage Arrears (CCMA) (the “Code”) issued to all mortgage lenders in February 2009 introducing a six month moratorium on applications for repossession of a borrower’s primary residence. In February 2010 a revised code issued extending the moratorium period to 12 months. The current code became effective in January 2011, following consideration of the recommendations set out in the Final Report of the Mortgage Arrears and Personal Debt Group, issued on 16 November 2010.

The Code is issued under section 117 of the Central Bank Act 1989 and the Central Bank has the Power to administer sanctions under Part III C of the Central Bank Act 1942 for contravention of the Code. It applies to all regulated mortgage lenders operating in Ireland with the exception of Credit Unions in respect of loans where the mortgage/charge is secured on the borrower's primary residence. The CCMA expressly applies to all arrears cases as of January 2011.

The following are some of the general provisions of the Code:

• Each branch of the lender must have at least one person responsible for dealing with arrears and pre-arrears cases and for liaising with the Arrears Support Unit (ASU).
• The Lender must draw up and implement procedures for dealing with arrears cases, pre-arrears cases and Mortgage Arrears Resolution Process ("MARP") cases.
• The lender must have management information systems in place to capture information on its handling of these cases. Training must be provided to staff dealing with Borrowers in arrears and pre-arrears.
• The lender must ensure all requests by Borrowers for information regarding applications for state support in dealing with arrears are processed within 10 business days of receipt of the request.
• Since the introduction of the revised code in January 2011 lenders are restricted from imposing charges and/or surcharge interest on arrears arising on a mortgage account in arrears to which the code applies and in respect of which the borrower is co-operating with the MARP.

Standard Financial Statement
A lender must use a standard financial statement (SFS) to obtain financial information from a borrower in arrears or pre-arrears and advise the borrower that they may wish to seek independent advice on completion of the SFS. On the recommendation of the Expert Group, this standardised form of Financial Statement was introduced by the Central Bank to ensure that assessment of borrowers cases will be based on a common analysis of their financial circumstances.

Repossessions
A lender may not apply to court to commence legal action for repossession of the borrower’s primary residence until every reasonable effort has been made to agree an alternative payment arrangement. Where the borrower co-operates the lender must wait a minimum of 12 months from the date the borrower is classified as a MARP case (i.e. day 31) before applying to court to commence an action for repossession of the borrower primary residence. The twelve month moratorium period commences on day 31 but does not include certain periods such as:

• Any time period in which the borrower is complying with the terms of an alternative payment arrangement;
• Periods during which the borrower has the opportunity to consider making an appeal, when the appeal is being processed by the Appeals Board or where a complaint to the Financial Services Ombudsman is being considered;
• For pre-arrears cases the period from when the borrower first contacts the lender in relation to difficulties and an alternative payment arrangement being put in place.

It was further announced in September 2012 that in cases where a lender proposes longer-term mortgage resolutions borrowers will be advised to obtain independent financial advice on the proposed arrangement and, should the borrower wish to avail of this option, the lender will pay €250 to an accountant of the borrower’s choosing for the provision of this advice.

For advice on any of the abovementioned issues or if you have a Banking or Security query please contact your usual contact at Byrne Wallace Shields LLP.