The Mortgage Arrears Resolution Process (MARP), laid out in Provision 18 of the CCMA, is a process whereby lenders and borrowers are expected to work together to come to an alternative payment arrangement when a borrower is in default of his/her mortgage repayment and has accrued arrears.
The MARP applies in three instances: (i) when a borrower is in pre-arrears, (ii) already in arrears or (iii) when an existing alternative payment arrangement breaks down. Its aim is to provide an alternative solution to the lenders enforcing their security through taking possession of the property and subsequently selling it.
The Code of Conduct on Mortgage Arrears (CCMA) issued by the Central Bank sets out the manner in which banks must deal with borrowers who are either in arrears with the mortgage on their family home, or are faced with the prospect of entering mortgage arrears.
There was a new CCMA issued this year which came into effect on Code is ultimately for the lender to assist the borrower in meeting his or her mortgage obligations. The Code specifically applies to mortgages secured on a property that is the primary residence (family home) of the borrower – it does not apply to residential investment properties. Lenders are expected to deal sympathetically with borrowers and the CCMA explicitly recognises that each case of mortgage arrears is unique and needs to be considered on its own merits.
The latest CCMA can be found here
There are four stages to the MARP: Communication, Financial Information, Assessment and Resolution.
- Once a borrower finds himself or herself in arrears with his/her mortgage payments the MARP process will begin by the lender communicating with the borrower about this.
- The lender will ask the borrower to complete a Standard Financial Statement (SFS) form outlining the borrower’s financial position (average income and expenditure).
- The lender’s Arrears Support Unit (ASU) will assess the SFS provided by the borrower and on that basis determine whether an alternative payment arrangement may be entered into and if so, what form of alternative payment arrangement is best suited to the borrower’s particular circumstances. The ASU must assess the SFS in a timely manner and each case on its individual merits.
- Once a suitable alternative payment arrangement has been decided on the basis of the assessment this arrangement will be put in place. Any legal proceedings for possession will be put on hold while the terms of this arrangement are respected.
- There is also an appeals process for borrowers to appeal decisions of the lender; however, under the new CCMA this is not included as part of the MARP.
Whilst a borrower is engaged in the MARP and the process is ongoing, the lender may not issue legal proceedings for possession.
Once the borrower has exited the MARP the lender must give the borrower 3 months’ notice that they will be issuing legal proceedings for possession, except where the borrower has been deemed not co-operating in which case the borrower may issue proceedings immediately.
A recent case demonstrated that a lender cannot be granted a possession order unless they have fully complied with the Code of Conduct and the MARP. In the case, the borrowers fell into arrears with the repayment of their mortgage and the lender engaged the Mortgage Arrears Resolution Process (MARP) with them. Subsequently there were a series of alternative repayment arrangements made between the lender and the borrowers. The borrowers completed a Standard Financial Statement (SFS) which was assessed and the bank decided that there was no alternative arrangement suitable for the borrowers given their circumstances.
The bank then informed the borrowers that they would be taking proceedings for possession and that the borrowers didn’t have the right to appeal this decision. It was ultimately found that the Bank was not entitled to an Order for Possession due to non-compliance with Code and that there was a right of appeal.
The MARP does not apply in the following circumstances:
- The borrower is deemed non co-operative.
- The MARP comes to an end, for example if an agreed alternative payment arrangement is no longer possible.
Once the MARP no longer applies this allows the lender to commence legal proceedings to recover possession of the mortgaged property. This can be either three months from the borrowers exiting from the MARP, or eight months from the date the arrears rose, whichever is later.
It is important for borrowers to co-operate and engage with the lender during the MARP; if co-operation ceases, the protections of the MARP no longer apply and then the lender may begin legal proceedings for repossession.
According to the CCMA a borrower can only be considered as not co-operating with the lender when:
- The borrower fails to make full and honest disclosure of information that would have a significant impact on his/her financial situation or fails to provide information which is relevant to his/her financial situation within a given time.
- A 3 month period elapses and the borrower has not entered into an alternative payment arrangement and has failed to meet his/her mortgage repayments or meets his/her mortgage repayments but has an arrears balance. (It is important to note that this only in cases where there has been no alternative payment arrangement entered into.)
- A 3 month period elapses where the borrower has entered into an alternative payment arrangement and fails to meet full repayments according to the terms of the arrangement and has also failed to make contact or communicate with the lender or has made contact and communicated with the lender but has not engaged in a way which enables the lender to assess his/her circumstances.
- A 3 month period elapses where the warning letter has been issued (in accordance with provision 28 but the actions specified therein have not been carried out. According to provision 28, prior to classifying the borrower as not co-operating, the lender must write to the borrower informing him/her that they must take specific actions in order to enable the lender to complete an assessment of the borrower’s circumstances. The lender must stipulate that the borrower has 20 business days to carry out these action to avoid being classed as not co-operating. The lender must outline the consequences for the borrower of being classified as not co-operating.
The key consequences of being classified as not co-operating are:
- The borrower is no longer in the MARP and protected by the provisions of MARP; legal proceedings can commence immediately.
- In addition, being classified as not co-operating can affect the borrower’s eligibility for a Personal Insolvency Arrangement under the 2012 Insolvency Act and also adversely impact the borrower’s credit rating.
According to provision 29 when a borrower has been classified as not co-operating, the lender must inform the borrower of the following:
- that legal proceedings can commence immediately;
- that the borrower is now outside of the MARP and the protections of the MARP will no longer apply;
- other options that may be available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower and his/her mortgage loan account, including:
- an estimate of the associated costs or charges, where known, and where it is not known, a list of the associated costs or charges; the requirement to repay outstanding arrears, if this is the case;
- the anticipated impact on the borrower’s credit rating; and
- the importance of seeking independent advice in relation to these options;
- the borrower’s right to appeal the lender’s decision, including that the borrower must make the appeal in writing and set out the grounds for the appeal; and
- the borrower’s right to consult a Personal Insolvency Practitioner, notwithstanding the fact that the classification as not co-operating may impact on the borrower’s eligibility for a Personal Insolvency Arrangement.
Once the bank has complied with the MARP and once there has been a default on repayments lenders are then entitled to seek an Order for Possession. However, it is advisable to keep making whatever payments you can towards your mortgage and as regularly as possible as this will make it more likely that the bank will consider you for a restructure of your mortgage.
It is important that if you are unable to meet the full mortgage payment amounts that you contact the lender as soon as possible and engage and co-operate with your lender to work out an alternative payment arrangement with them.
There are a number of guidelines in the Code of Conduct on Mortgage arrears outlining when the bank can seek to enforce right of possession (and also when they can’t):
- According to provision 56 of the Code, the lender must not apply to the courts to begin legal proceedings for repossession until every reasonable effort has been made to agree an alternative payment arrangement or the borrower has been classified as not co-operating.
- According to provision 45 of the Code, where a borrower is co-operating with the lender the lender must wait for at least 3 months from the end of the MARP or 8 months from the commencement of the arrears, whichever is later, to bring legal proceedings for repossession of a borrower’s primary residence.
- According to provision 59 of the Code, where legal action to obtain an order for possession has commenced the lender must try to maintain contact with the borrower periodically and if an alternative repayment arrangement is agreed between the parties before an Order for Possession is granted, the lender must seek an Order from the Court to put the legal proceedings on hold.
Yes, there is a relationship between the MARP and the 2012 Personal Insolvency Act. In order to be eligible to apply for a Personal Insolvency Arrangement (PIA), the borrower must have been considered to be co-operating, and have participated in the MARP for a minimum of 6 months.