Important information to help people in mortgage arrears

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1 Important information to help people in mortgage arrears September 2015

2 Contents Talk to your Lender 3 Explore your Options 4 Contact a Trusted Third Party for Advice - MABS (Money Advice & Budgeting Service) 8 - StepChange Debt Charity 10 - Insolvency Service of Ireland 11 2

3 Talk to your Lender Banking & Payments Federation Ireland represents Ireland s principal mortgage lenders. These lenders are committed to working with borrowers who face genuine difficulty in maintaining mortgage repayments because of changed financial circumstances. If you find yourself in this situation, here s what you should do: Contact your mortgage lender as soon as possible in this way your lender may be able to identify a possible solution for you. Don t ignore the problem that s the worst thing you can do. Look at your financial situation to make sure that you re maximising your income and draw up a budget based on your most important spending commitments. To help you do this, complete what s known as a Standard Financial Statement (SFS). Respond to communications from your mortgage lender. At all times your lender is willing to engage to see if a solution can be found for the problem you are having in repaying your mortgage. 3

4 Important Information to Help People in Mortgage Arrears Explore your Options If it is possible to offer you an alternative repayment arrangement, the Society will initially try to discuss this with you over the phone or face to face and will write to you to confirm full details of this and of the effect it will have on your mortgage loan. It is important that you fully understand the implications of any alternative repayment arrangement. If you have any questions, please contact the Society s ASU. The Society will explore a number of alternative repayment arrangements in order to determine which, if any, may be appropriate to your circumstances. The alternative repayment arrangements may include: 1 Temporary Transfer To Interest Only this is where you only pay the interest on your mortgage for an agreed period of time. At the end of your moratorium, your payments will increase. This is because the Society recalculates your full monthly mortgage payment amount to the level required to repay your mortgage in full over its remaining term. 2 Part Capital Part Interest Only this is where you pay the interest on your mortgage, as well as a reduced amount of capital, for an agreed period of time. At the end of your moratorium, your payments will increase. This is because the Society recalculates your full monthly mortgage payment amount to the level required to repay your mortgage in full over its remaining term. 3 Temporary Transfer To Interest Only With Reduced Payments this is where you pay no capital and less than the monthly interest due on your mortgage for an agreed period. At the end of your moratorium, your payments will increase. This is because the Society recalculates your full monthly mortgage payment amount to the level required to repay your mortgage in full over its remaining term. 4

5 4 Full Capital and Interest Moratorium this is where you make no payment towards your mortgage for an agreed period of time. At the end of your moratorium, your payments will increase. This is because the Society recalculates your full monthly mortgage payment amount to the level required to repay your mortgage in full over its remaining term. 5 Extending your Mortgage Term this means extending the duration of your mortgage in order to reduce your full monthly mortgage payment amount to a level that is affordable to you. As you are borrowing the money over a longer period of time, the total amount of interest that you will pay over the lifetime of your mortgage will increase. 6 Arrears Balance Capitalisation the Society may apply this option, subject to you demonstrating for a period of six consecutive months, your ability to pay the full monthly mortgage payment amount required to fully repay your mortgage balance (including existing arrears) over the remaining term of your mortgage. Once you have demonstrated this, the Society will stop reporting your mortgage account as being in arrears to the Irish Credit Bureau. This option does not remove the mortgage arrears but instead means you are repaying your arrears over the full remaining term of your mortgage loan. Please be aware, however, that the total amount of interest that you will repay to us will increase, as you will pay interest on the arrears balance that has been added. Please note that the Society will not do this without your agreement. 5

6 7 Changing Your Mortgage Product this option may be considered if another type of mortgage product could be better suited to your circumstances. For example, changing from a fixed rate to a variable rate product. 8 Split Mortgage this option may be considered if you are unable to afford your full monthly mortgage payment amount. If the Society agrees to split your mortgage loan, we will create two balances; the first being an affordable balance (an amount you can afford to pay) and the second being a warehoused balance (no payments will be made on this amount for an agreed period of time). The size of your affordable balance is determined by the full monthly mortgage payment amount you are currently able to afford. All of the monthly payment you make will be used to repay this balance and you will make no payments to your warehoused balance. Following the split we will continue to review your account on a regular basis. If your financial circumstances improve then we will discuss the transfer of some, or all, of your warehoused balance to your affordable balance. It is important to understand that no interest will be applied to your warehoused balance, but this warehoused balance remains payable in full on or before the end date of your mortgage loan. - Income - overall indebtedness - Remaining term of mortgage - Customers age - Ability to meet future commitments Step 4 continued: In the event that it is not possible to offer you an alternative repayment arrangement, the Society will contact you in writing and outline any other options that may be available to you. These arrears resolution options may include: 6

7 Mortgage to Rent this is a scheme designed to help customers who are unable to afford their current mortgage loan and whose property is in negative equity. In order to participate in this scheme, you will need to satisfy a number of qualification criteria. If this becomes an option for you, it will mean you will be required to voluntarily surrender your property and become the tenant of an approved Housing Body. Choosing this means that you will no longer own your property, but you will still be liable for any shortfall debt on your mortgage loan after your property is sold to an approved Housing Body. The shortfall debt is any amount owed to us, which is not recovered from the sale of your property. Voluntary Surrender this is where you vacate your property, the Society takes possession of your property, and you enter into a legal agreement with us. You will remain fully liable for any amount you owe the Society which is not recovered from the sale of the property. Voluntary Sale This is where the Society allows you an agreed period of time to sell your property at an agreed price. You will remain fully liable for any amount you owe which is not recovered from the sale of the property. If you decline an alternative repayment arrangement offered to you, and do not exercise your right of appeal, the Society may classify your situation as falling outside of the MARP and the Society is able to commence legal proceedings immediately. 7

8 Contact a Trusted Third Party for Advice If you need advice and assistance to deal with mortgage arrears or other debt, you can contact the State s Money Advice and Budgeting Service (MABS). The MABS service is a free, independent, confidential and nonjudgemental service which is provided by skilled and experienced advisors for people who are in debt or at risk of getting into debt. The MABS Helpline, , is open Monday to Friday, 9am to 8pm. The MABS face-to-face service is available in over 60 locations nationwide see to find your nearest MABS office. 8

9 MABS can help you to: Develop a budget that works for you and your family. Find out if there are any entitlements you should be getting and help you to access them. Complete your Standard Financial Statement (SFS). Develop a plan to pay off your debts always prioritising your family home. BPFI and MABS have drawn up agreed steps for dealing with unsecured debt - such as personal loans, overdrafts and credit cards. These cover how lenders are to work with you - a borrower with a loan. They also cover the time lines for lenders to help you with your request to restructure your loan. This is where the lender may lower the payments, extend the term, freeze the interest or settle some of your loan. Give you information and advice on your mortgage debt and all of the options open to you, even if you re facing repossession proceedings. Deal with your creditors. Negotiate on your behalf if it s needed. Visit for further information. 9

10 Following work with BPFI, StepChange Debt Charity will shortly be providing free, expert debt advice to people who are struggling with debts with more than one lender. StepChange Debt Charity is an independent charity with over 20 years experience. They will look impartially at your income, outgoings, debts and assets. They will then advise you as to the best solution for your particular circumstances. Where it s the most appropriate solution, StepChange Debt Charity will work on your behalf to put a new repayment plan in place with lenders. This will help you to better manage your debts and, where possible, help you to remain in your home. Visit for more information. 10

11 The Insolvency Service of Ireland (ISI) is an independent, Government organisation set up to help sort out your personal debt problems and to get you back on track. If you owe money and cannot afford to repay it, one of the following options may be open to you: Debt Relief Notice: you may apply for this through MABs or another approved body. If you have unsecured debts below 35,000, a low income and few assets this gives you freedom from your debts normally after three years. Debt Settlement Arrangement: you may apply for this through a Personal Insolvency Practitioner (PIP) - your outstanding unsecured debts are written off over a period of time, normally up to 5 years. Personal Insolvency Arrangement: you may apply for this through a Personal Insolvency Practitioner (PIP). This allows you to settle and/ or restructure your secured and unsecured debts over a period of time, normally up to 6 years. (A mortgage is a typical example of a secured debt.) Bankruptcy: you may apply to the High Court to be declared bankrupt. Visit for further information. 11

12 Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.