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Mortgage Arrears Information and Advice Service

The Minister for Social Protection, Joan Burton T.D., has today (Monday, 16th December, 2013) published the Review of the Independent Financial Advice Service of the Mortgage Arrears Information and Advice Service.

The review was conducted to assess if the Independent Financial Advice Service was meeting its objectives.

The Mortgage Arrears Information and Advice Service was established in September 2012 to provide support and advice to mortgage holders in arrears or pre-arrears to assist them to assess their options. The service comprises three elements: a website, a Mortgage Arrears Information Helpline and the Independent Financial Advice Service for borrowers availing of long-term mortgage resolution.

Under the Independent Financial Advice Service, when a lender is proposing a long-term mortgage resolution proposal to a borrower on their home, the lender advises the borrower to obtain independent financial advice on the proposed arrangement. If the borrower wishes to avail of this option, the lender will pay €250 to an accountant of the borrower’s choosing for the provision of this advice.

The review was conducted by a Working Group chaired by the Department of Social Protection. A process of public consultation was undertaken as part of the review and submissions were received from consumer groups, NGOs, accountancy bodies, lenders and other stakeholders.

The review has highlighted a number of issues, including a lack of awareness and low take-up of the service.

Other issues that arose in the review included the scope of advice offered and whether it should be extended to experts beyond accountants.

Main Recommendations:

The review makes a number of recommendations to address the issues identified and ensure the service is fully optimised to assist homeowners with distressed mortgages. The review recommends that:

• Information issuing to borrowers about the service should be standardised and stand-alone. It should specify that the service is confidential and independent, that no additional fee will be charged and that the lender recommends that the borrower avail of the service.

• The scope of the advice covered by the protocol should be broadened to include advice on other mortgage debt resolution options, and in that context, consideration be given to increasing the funding for financial advice from €250 to €500.

• Separate to financial advice, legal advice should also be available to borrowers if the offer involves loss of ownership of their family home such as voluntary sale or repossession. The Mortgage to Rent scheme, which involves the lender paying €500 for the borrower to avail of legal advice, could present an operating model in this regard.

• The timing of the provision of the advice service should remain unchanged - i.e., when a long-term offer is made. However, this should be linked to all offers made under the Mortgage Arrears Resolution Target (MART) process under which the Central Bank requires lenders to propose sustainable solutions or to resolve the position of mortgages in arrears of more than 90 days.

• The review finds that the current panel of accountants is capable of serving the level of demand for the service at present and it is important to ensure that the service is of a high quality, is regulated and has a redress mechanism. Therefore, the group recommended no further extension to other professionals until the Central Bank establishes an authorisation and regulatory framework for debt management firms under the Central Bank (Supervision and Enforcement) Act 2013.

Arrangements have now been made with the Irish Banking Federation for a comprehensive information leaflet on all elements of the Mortgage Arrears Information and Advice Service to issue with annual mortgage statements to all mortgage holders as provided for in the revised Code of Conduct on Mortgage Arrears.

The Department of Social Protection will host a public seminar for all relevant stakeholders to examine and consider the recommendations of the review, after which an implementation plan will be prepared to ensure that the recommendations are progressed.

Minister Burton said: “I welcome this review and the recommendations it makes for improving this service. I want to see this service deliver for those in mortgage difficulty, and as an interim but important step to drive awareness, we have ensured that mortgage-holders will get a comprehensive leaflet on the service when they receive their annual mortgage statement.

“I’m particularly concerned at submissions stating that the Independent Financial Advice Service is not being offered to all eligible borrowers, which suggests the banks have not done all they can to make borrowers aware of the service. I will be taking that issue up with the banks and I also look forward to hearing from many of the stakeholders who made submissions at the forthcoming public seminar.”