Central Bank governor urges banks to tackle mortgage arrears

The Central Bank has vowed to get tough on banks not doing enough to help customers in mortgage arrears

Central Bank Mortgage Arrears

Mortgage arrears have reached ‘extraordinary’ levels that have never been seen before according to the Central Bank of Ireland’s governor, Patrick Honohan. He has promised that the Central Bank will keep in constant contact with lenders who are not doing enough about their mortgage arrears.

Attending as a main speaker at a Central Bank conference on the issue of distressed property markets this week, Mr. Honohan highlighted the importance of banks to show responsibility in being vigorously proactive in contacting mortgage holders who have fallen behind in their repayments. He mentioned the use of debt write downs as a solution, but only for people who are ‘truly over-indebted’ or facing insolvency.

An applied approach by the banks can be positive for both the bank itself and the borrower as to avoid having to go through the costly and laborious process for personal insolvency arrangements (PIA). From a cost perspective, it is better for a lender to amend loan agreements with a borrower as opposed to banks bearing the additional cost of going through the PIA process.

However, Mr. Honohan admitted the prospect of repossessions, in particular properties owned by investors, is very real. But while there will be concessions for people who cooperate with their bank in resolving their debt, those who don’t make genuine efforts to tackle their mortgage arrears will face consequences.