Mortgages arrears review calls for lifting of €3m ceiling for insolvency deals

A Government-commissioned mortgage arrears review group has called for a removal of the current €3 million secured debt limit for individuals to secure insolvency deals, under measures aimed at tackling more than 20,000 long-term arrears cases in the State.
A debtor with secured debts in excess of €3 million is not currently eligible to make a proposal for a personal insolvency arrangement (PIA), unless all secured creditors agree to disregard the cap.
“The removal of this eligibility criterion would increase access to a statutory debt solution for a broader cohort of borrowers with unsustainable debt,” said the report, published on Tuesday by Minister for Finance Jack Chambers.
The group, made up of officials from various Government departments and State agencies, also recommended the Insolvency Service of Ireland (ISI) be allowed to issue certificates protecting insolvent individuals from legal proceedings from creditors while they are applying for a PIA.
Currently, such certificates can only be issued by a court, for periods of up to 70 days, though extendable by up to a further 40 days under limited circumstances. Allowing the ISI to do this would “simplify and expedite” the process, it said.
The report has also proposed that courts, which must rubber stamp PIAs drawn up by insolvency practitioners, be allowed to suggest amendments to arrangements put before it – in order to improve the efficiency of the process.
The report said the mortgage arrears framework put in place in the wake of bursting of the property bubble in 2008 – including the establishment of a Central Bank arrears resolution code of conduct and the ISI – has been successful. The level of Irish arrears cases has fallen from a peak of nearly 18 per cent in 2013 to 6.8 per cent at the end of March.
“It is a testament to the efficacy of the mortgage measures, alongside the changes made to retail banks’ prudential frameworks in response to the [great financial crash], that the modest increases in early arrears observed since mid-2022 [when official interest rates started to rise sharply] would not indicate a systemic problem in the mortgage market as was the case in 2008,” it said.
However, the report noted there are still around 20,000 mortgages in arrears of more than one year, with nearly 6,000 in arrears of between five and ten years, and nearly 5,000 in arrears of more than ten years.
A Central Bank report in 2021 highlighted that only about 45 per cent of borrowers in long-term arrears had engaged with their lenders to find a resolution. Of those that had engaged, only 57 per cent had the capacity to pay more than half their outstanding mortgage balance.
The arrears review group called on banks and servicing firms that manage loans for nonbank lenders to improve their customer service standards, where necessary, in order to improve engagement levels.
“Poor standards of customer service when dealing with vulnerable borrowers will exacerbate the difficulties in achieving the required engagement from borrower,” it said. “The group is of the strong view that engagement with borrowers needs to be improved.”
Minister Chambers said he supports the recommendations and that he plans to set up a mortgage arrears forum to co-ordinate their implementation.