Scope of the Independent Financial Advice offered to borrowers under the Mortgage Arrears Information and Advice Service should be broadened – Minister Burton
The Minister for Social Protection, Joan Burton, TD, today (Thursday, 16th January, 2014) suggested that the scope of the independent financial advice offered to borrowers under the Mortgage Arrears Information and Advice Service should be broadened to become a two stage process.
The Minister was addressing a Stakeholder Seminar to discuss the recommendations of the Review of the Independent Financial Advice Service held in Dublin. The Review was undertaken to ensure that the Independent Financial Advice Service is meeting its objectives. It examined all aspects of the service including the take up of the service and its possible extension to other interested parties. A group comprising representatives from Department of Finance and the Department of Social Protection was established to oversee the review. It has been considered by the Mortgage Arrears Implementation Steering Group and the Cabinet Committee on Mortgage Arrears and Credit Availability.
Minister Burton told the Seminar: “A key message to people who are experiencing difficulties with their mortgage payments is that engagement with their bank at an early stage is vital to securing a long-term resolution and I note that both the Central Bank and lenders report that significant numbers of borrowers in arrears have not yet engaged with their lender. In order to address this very important issue, I am suggesting that the scope of the financial advice be broadened to become a two stage process.”
Stage 1 would involve a borrower being able to avail of the assistance of an accountant, of the borrower’s choosing, to complete their Standard Financial Statement in their initial engagement with their lender to find a long term mortgage resolution. As well as assisting the borrower to complete this statement, the accountant would also assist the borrower assess their options.
Stage 2 would involve an independent and confidential follow up engagement with an accountant following the receipt by the borrower of a long-term mortgage debt resolution offer. This engagement would include discussion of other mortgage debt resolution options now available.
The Minister said that the service would continue to be funded by the lender and free to the borrower. Welcoming the Review, the Minister said: “The Government’s continuing approach to tackling mortgage arrears is founded on one important premise – keeping a roof over peoples’ heads. The Government believes that these main elements of a transparent resolution process for borrowers are now in place. Within the next twelve months, it is expected that the vast majority of those who cannot pay their mortgage will have concluded a sustainable solution. Already over 49,300 mortgage holders have agreed permanent mortgages restructures with their lenders.
“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. The outcomes of your discussions today will feed into the preparation of an implementation plan to progress the reviews recommendations and I look forward to the continuing engagement of lenders to ensure that the service is best placed to assist borrowers at a time when they are seeking to sustainably re-structure their mortgages.”
Following the seminar and consideration of stakeholder views, an implementation plan will be prepared to progress the Review recommendations.
A number of concerns were raised in the Review, particularly in relation to lack of awareness and very low take-up. At end September 2013 some 11,000 borrowers had been informed about the advice service but lenders had received less than 200 invoices from participating accountants. Other issues included the scope of advice offered and whether it should be extended to experts beyond accountants.
Main Recommendations in the review report
- Information issuing to borrowers about the service should be standardised and stand-alone and not buried amongst documents. It should specify that it 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 should be given to increasing the funding to provide the service with a financial advisor 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 process.
At this stage, there appears to be no problem regarding supply, and it is important to ensure that the service is of a high quality, is regulated and has a redress mechanism. Therefore, the Group recommend no further extension until the Central Banks establishes an authorisation and regulatory framework for debt management firms under the Central Bank (Supervision and Enforcement) Act 2013.