6 Essential Tips for Dealing With Your Bank When You’re in Mortgage Arrears

dealing with the bank

What’s the best way to deal with your bank when in Mortgage Arrears?  The following tips will help you to proceed in the best possible way.

1. Engage with the bank before or when you first go into Mortgage Arrears.  Provide any information that the bank may request and talk to the case manager or Arrears Support Unit of the bank.

2. Enter into the MARP (Mortgage Arrears Resolution Process) with the bank.  This process provides protection while the bank assesses the borrower’s circumstances to see if the mortgage can be restructured in a sustainable and affordable way for the borrower going forward, the bank will look at both long and short term Alternative Repayment Arrangement options to give the borrower time to get back on their feet. For example, the term may be extended, or arrears capitalised to make the monthly mortgage repayments sustainable for the borrower going forward. 

3. Meet with a PIP (Personal Insolvency Practitioner).  If the arrears are in respect of the family home, the borrower will be entitled to a free consultation with a PIP who is registered under the Government’s Abhaile Scheme, which was set up to assist mortgage holders who are in arrears. 

The PIP will discuss all of the available options with the mortgage holder.  The PIP may recommend a PIA (Personal Insolvency Arrangement), which is a formal arrangement with the bank.  The PIP prepares a proposal and deals directly with the bank throughout the PIA process.

4. Keep making monthly mortgage repayments.  If you can’t pay the full amount due, continue to pay what you can afford monthly, do not stop making payments completely.

5. Cooperate and engage with the bank on a continuous basis and try not to overlook any requests for information. 

6. Meet with a specialist Debt Management Advisor, who will provide advice on how to deal with your arrears situation and outline the various options available.  The advisors may also engage and negotiate with the bank on your behalf.

 

3 Ways to Protect Your Home in Mortgage Arrears

 

image of a gouseFor many people struggling with mortgage arrears a constant question is whether the problem can be solved and whether that solution will mean their home can be protected.

Over the last while there have been several innovations introduced which, in most cases, mean that homes can be protected.

These include:

  • Bank offered solutions
  • Personal Insolvency
  • Mortgage to Rent  Scheme 

In this article, we’ll look at each way to protect your home  in mortgage arrears in turn.

Bank offered solutions

Despite much misguided commentary neither banks nor funds want to repossess homes.

However, where a borrower does not co-operate or engage with the lender there may be no other option available to the lender,

So, the first step is all about co-operation.

Co-operation means:

  1. Communicating with the lender
  2. Providing the lender with a Standard Financial Statement and supporting documentation
  3. Paying what you reasonably can in a timely and regular manner

Once you are co-operating you are protected and the lender is required to offer a solution – if a solution exists.

Solutions include:

  • Capitalisation of arrears
  • Extension of the term
  • Split Mortgage
Personal Insolvency

Under this statutory scheme, a borrower can be offered a deal once they can at least afford a mortgage based on the current market value of the property, extended over the longest period possible, and based on the lowest reasonable interest rate.

Furthermore, all other debts can be dealt with under this system.

The real strength of the system is that even if the bank or fund refuses the offer, a Court can intervene and impose the deal on the lender.

To recap:

If you can afford a mortgage based:

  • On the current market value of the property,
  • Extended over the longest period possible, and
  • At the lowest reasonable interest rate

Your home can be saved.

 

Mortgage to Rent

The Mortgage to Rent scheme is available for those whose mortgage is unsustainable and who qualify for social housing.

Under Mortgage to Rent a borrower surrenders their home to the lender who then sells the property to an Approved Housing Body or other provider. The former owner then becomes a tenant in the property on a 20 or 30-year term paying an affordable or means tested rent.

The borrower may re-purchase the property in the future if their circumstances change.

 

 

What is Mortgage to Rent and How does it Work?

mortgage to rent, houses in a line

The Mortgage to  Rent Scheme can help people to stay in their homes after they have relinquished ownership of the property due to their inability to meet the mortgage repayments. 

Thousands of people in Ireland cannot afford their mortgage. Falling into mortgage arrears  puts them in danger of having their home repossessed and ultimately of being evicted. Naturally this is a very difficult experience for people, who have often lived there for many years and established roots in their local communities. 

The Mortgage to Rent Scheme is designed to help these people by enabling them to stay in their home without the debt burden of owning the property.

The Mortgage to Rent process works like this:

  1. Borrower’s mortgage is deemed unsustainable
  2. Borrower qualifies for social housing based on the level of their income
  3. The house is deemed suitable to the borrower’s needs
  4. Borrower surrenders their home to lende
  5. Lender sells the property to an Approved Housing body or other qualifying participant of the Mortgage to Rent Schem
  6. Borrower becomes a tenant of the Approved Housing Body or Local Authority and pays an affordable rent
  7. Borrower retains the right to re-purchase the property in the future

The upshot of Mortgage to Rent is that the borrower remains in their home paying an affordable rent and their tenure is secure. Should their circumstances improve they can re-purchase the property in the future.

For more information on Mortgage to Rent please call the New Beginning team on 01-5240000.

Court Directs Debt Write Down on Family Home Mortgage

Earlier this month a case came before the Courts in Dublin involving a borrower who had significant arrears on her home mortgage with Permanent TSB. The borrower had other unsecured debts as well.

The full mortgage was €333,785 and the value of the borrower’s home was €160,000. The interest rate on the loan was 3.25%.

The borrower had met with our Personal Insolvency Practitioner who had proposed the following arrangement:
• Write down of mortgage by €173,000 from €333,000 to €160,000
• Continuation of interest rate and term
• Write down of unsecured debt by 92%

PTSB objected to this proposed arrangement and the matter came before the Courts where judgement was delivered early this month.

PTSB raised several objections.

The primary objection was around an alternative offer they made which involved ‘parking’ €97,000 of the debt at 0% for the duration of the loan. The monthly payments under the PTSB proposal were €1121 while the monthly payments under our proposal were €924.

The Judge expressed concern as to how the borrower was going to afford to pay €97,000 at the end of the mortgage period when she would be 71 years of age and her working life would be over.

Balancing both positions, and taking account of PTSB’s argument that it was being unfairly prejudiced, the Judge directed that the proposal made by the Personal Insolvency Practitioner should come into force.

The position for the borrower now is as follows:
• Her home mortgage is sustainable and will be fully cleared at the end of the term
• Affordable payments will be made to unsecured creditors for a period after which the balance (92%) will be written off in full.

The position for PTSB is as follows:
• It has a long term, sustainable, secured and performing loan at an attractive interest rate which is an excellent asset on its balance sheet. Furthermore, it no longer needs to spend resources on arrears support or on enforcement.

4 Steps in the Mortgage Arrears Resolution Process (MARP)

Being in Mortgage Arrears is a difficult position. But there is help at hand.  The MARP system is in place to help you negotiate your arrears with your lender. Crucially, during the MARP process a lender cannot institute legal proceedings against a borrower.

MARP stands for the Mortgage Arrears Resolution Process. It’s a system devised by the Central Bank of Ireland which requires all lenders (banks and funds) to adhere to a process for borrowers who fall into arrears with their mortgage.

There are 4 steps in the Mortgage Arrears Resolution Process. If you’re in mortgage arrears you’ll want to know what each of these steps are and what they mean for you.

 

4 Steps in the Mortgage Arrears Resolution Process

MARP STEP 1: All About Co-Operation

In order to be protected by MARP you must be a Co-Operating borrower. This means that you must supply the lender with a Standard Financial Statement (SFS) and supporting documentation. This form is available online or from your lender and care should be taken in filling it out.

Once you have supplied a SFS form you are protected.

 

MARP STEP 2: Lender Carries Out an Assessment

The lender will consider your SFS. Based on that consideration they will propose a resolution if that is possible.

To begin with the lender will propose a short-term solution, which is usually for 3/6 months. There are a variety of short term solutions, but commonly they require the borrower to pay as much as they can pay.

 

MARP STEP 3: Offer of Resolution

You will receive an offer of resolution. Offers of resolution may include:

  • Paying interest only, or interest and part of the capital, for a period
  • Permanently or temporarily reducing the interest rate
  • Deferring repayments (or part) for a period
  • Extending your mortgage term
  • Changing the type of mortgage that you have
  • Adding arrears and interest to the principal
  • Warehousing part of the mortgage (including through a split mortgage)
  • Reducing the principal
  • A "deferred interest" or other voluntary scheme

Where the lender determines the debt to be unsustainable they may commence enforcement proceedings.

 

MARP STEP 4: Appeal

There is a right to appeal any decision made by the lender to an appeals system within the lender. Following this you can also make an appeal to the Financial Services Ombudsman.

 

 

Being in mortgage arrears is a very difficult time in your life.  It's important to make sure you're informed about your borrower rights and debt negotiation protocol in Ireland.  You can find more information about debt negotiation, insolvency and mortgage arrears here on the New Beginning website - and if there is a specific question you have please feel free to send me an email on info@newbeginning.ie.  

4 Ways to Deal with Unmanageable Debt

overview of desk with calculator and 4 hands

Being in debt is not an ideal situation for anyone. However, the best way you can help yourself is to be informed about debt management solutions. This article will help you understand 4 options for managing your debt.

The  4 ways in which to deal with unmanageable debt are:

1. Leave matters alone
2. Direct negotiation
3. Personal Insolvency
4. Bankruptcy

When a client comes to New Beginning we assess their circumstances and advise which of these options is best.

In many ways, they follow a sequence.

In other words, where doing nothing is not an option we look to direct negotiation. Where that is not working, we look to Personal Insolvency and finally if nothing else works there is the option of bankruptcy.

Doing nothing may seem a poor option though in some cases it is best advice – either in the short of medium term. Once people understand the laws and systems around debt they can move on with their lives, even if the actual problem has not been fully resolved.

Direct negotiation has its ups and downs and depends on the type of debt and the lenders involved. We deal a lot with the funds who can be very reasonable or very aggressive depending on who is behind the debt and the position it is adopting at that point in time. Often funds will make silly demands which need to be treated with a certain contempt. 6 months later when the fire has gone out a better deal can be struck.

Personal Insolvency is a very powerful tool – especially for homeowners. The law now provides that a Court can enforce a deal on a bank or fund where a home is concerned.

Bankruptcy is the final option and must be approached with caution. Professional advice should always be taken before seeking an adjudication in bankruptcy across a whole range of areas. We have come across cases where people have been adjudicated and have some very unpleasant surprises that could have been avoided if proper advice had been taken.

New Beginning is the only entity in Ireland that can provide all solutions.

We are licensed by the Central Bank to engage in direct negotiation with creditors. Since 2013 anybody providing this service needs a licence and the licence means that certain standards will always be maintained. For example, all of our advisers are fully qualified to the standards demanded by the Central Bank. It is interesting that many people offering such services are not qualified and this puts borrowers at great disadvantage.

New Beginning has its own Personal Insolvency Practitioners and we also partner with a larger firm of Personal Insolvency Practitioners to ensure that our clients get the best service possible.

Finally, we have lawyers and experts available to bring clients through the bankruptcy process where that is necessary.

In addition to all this New Beginning Financial Services have experts in pension law to advise people on the best protection measures available to gain best benefit from the laws that protect pensions in insolvency and bankruptcy.

At New Beginning, we now offer funding services for our commercial clients and we are ramping up our Mortgage to Rent offering over the coming months.

For more information on us and our services and how we could help you call us on 01-5240000 or email us on info@newbeginning.ie