Ombudsman's findings on appeals on CCMA

[Brendan Burgess]

Here are two case studies from the Financial Services Ombudsman's [broken link removed].



Case Study 5 - Complained about lender's refusal to grant an interest-only period - Not upheld
[FONT=&quot]rtgage – Request[/FONT]
[FONT=&quot]f[/FONT][FONT=&quot]or “Interest Only” Repayments[/FONT]

[FONT=&quot]P[/FONT][FONT=&quot]r[/FONT][FONT=&quot]ovide[/FONT][FONT=&quot]r refused a request for[/FONT] [FONT=&quot]‘inte[/FONT][FONT=&quot]r[/FONT][FONT=&quot]es[/FONT][FONT=&quot]t only’ repayments on Mortgage account on the basis that similar requests had been allowed in the past but despite this, the situation had deteriorated further. Only option now was to consider voluntary sale or surrender of[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e property. Ombudsman cannot direct the Provider to exercise its commercial and lending discretion in any particular manner, but[/FONT]
[FONT=&quot]c[/FONT][FONT=&quot]a[/FONT][FONT=&quot]n ensure that the Provider abides by the Code of Conduct on Mortgage Arrears. In this case[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e Code was complied with, however the reasoning behind the decision was not communicated appropriately to the complainant[/FONT] [FONT=&quot]an[/FONT][FONT=&quot]d the complaint was partly upheld with compensation of €300 being directed, as a result.[/FONT]

[FONT=&quot]Finding Complaint partly upheld[/FONT]


[FONT=&quot]A [/FONT][FONT=&quot]c[/FONT][FONT=&quot]omplain[/FONT][FONT=&quot]t was made to the Ombudsman in relation to a Mortgage Account in circumstances where the Provider refused to facilitate a request by the Complainant to be placed on[/FONT]
[FONT=&quot]“inte[/FONT][FONT=&quot]r[/FONT][FONT=&quot]es[/FONT][FONT=&quot]t [/FONT][FONT=&quot]on[/FONT][FONT=&quot]l[/FONT][FONT=&quot]y[/FONT][FONT=&quot]” [/FONT][FONT=&quot]r[/FONT][FONT=&quot]ep[/FONT][FONT=&quot]a[/FONT][FONT=&quot]yment[/FONT][FONT=&quot]s [/FONT][FONT=&quot]fo[/FONT][FONT=&quot]r five years. The Complainant’s proposal was to facilitate a repayment of other debts and some works to the mortgaged property and he indicated that after the five year period his intention was to repay the[/FONT] [FONT=&quot]enti[/FONT][FONT=&quot]r[/FONT][FONT=&quot]e mortgage debt or alternatively, repay the principal by way of periodic lump-sum payments.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e Provider pointed out that previous forbearance had been granted to the Complainant and given the period[/FONT] [FONT=&quot]whic[/FONT][FONT=&quot]h had elapsed since the repayment difficulties had first come to light, it[/FONT]
[FONT=&quot]w[/FONT][FONT=&quot]a[/FONT][FONT=&quot]s unwilling to approve any ongoing forbearance. It suggested instead that the Complainant consider voluntary sale or surrender of the property.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e Ombudsman noted that the loan was drawn down on a repayment basis but the Provider had previously, on six prior occasions, offered forbearance[/FONT] [FONT=&quot]t[/FONT][FONT=&quot]o the Complainant in the form of interest only periods or a moratorium. He also noted that the Complainant had sufficient income to meet the full[/FONT] [FONT=&quot]r[/FONT][FONT=&quot]ep[/FONT][FONT=&quot]a[/FONT][FONT=&quot]yments[/FONT][FONT=&quot], [/FONT][FONT=&quot]bu[/FONT][FONT=&quot]t was unwilling to do so, as this would necessitate the freeing up of other assets held. The Ombudsman noted that the Complainant was in effect seeking to enlist the Provider as a joint investment partner in the maintenance and restoration of the mortgaged property. He took the view that the Complainant was not entitled to hold the Provider responsible for his personal circumstances which had delayed the necessary works to the property during recent years and he was not entitled to insist that the Provider forego its legal right to full repayments for a period, so[/FONT] [FONT=&quot]a[/FONT][FONT=&quot]s to enable the Complainant to renovate the property whilst protecting his[/FONT] [FONT=&quot]othe[/FONT][FONT=&quot]r investments and allowing him to discharge other debt.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]Th[/FONT][FONT=&quot]e Ombudsman noted that the Provider cannot be compelled to exercise its commercial and lending discretion in any particular manner; the Ombudsman can simply consider whether the Bank has complied with its legal obligations to the mortgage[/FONT] [FONT=&quot]holde[/FONT][FONT=&quot]r and in particular under the Code of Conduct on Mortgage Arrears. In this instance the documentation illustrated ongoing and detailed engagement by the Provider with the Complainant in relation to his request for an extended interest only period. The Ombudsman was satisfied that the Provider had met its obligations pursuant to the Code of Conduct on Mortgage Arrears and in those circumstances the substantive complaint was not upheld.[/FONT]

[FONT=&quot]I[/FONT][FONT=&quot]n [/FONT][FONT=&quot]ci[/FONT][FONT=&quot]r[/FONT][FONT=&quot]cumstan[/FONT][FONT=&quot]c[/FONT][FONT=&quot]e[/FONT][FONT=&quot]s [/FONT][FONT=&quot]h[/FONT][FONT=&quot]o[/FONT][FONT=&quot]we[/FONT][FONT=&quot]v[/FONT][FONT=&quot]e[/FONT][FONT=&quot]r where the evidence before him disclosed[/FONT] [FONT=&quot]a failure by the Provider to properly communicate its reasoning to the Complainant, and a particular letter[/FONT]
[FONT=&quot]ha[/FONT][FONT=&quot]d recorded an incorrect conclusion in respect of the level of income available, the Ombudsman took the view that a compensatory payment of €300 should be made to the Complainant, to be offset against the arrears on the mortgage account.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e [/FONT][FONT=&quot]c[/FONT][FONT=&quot]omplain[/FONT][FONT=&quot]t was partly upheld.[/FONT]

 

[Brendan Burgess]

[FONT=&quot]Case Study 6[/FONT] - Complaint about reckless and inappropirate lending - not upheld
[FONT=&quot]Mortgage Arrears / Inappropriate Lending[/FONT]

[FONT="]T[/FONT][FONT="]w[/FONT][FONT="]o mortgages in respect of[/FONT] [FONT="]a home had fallen into arrears. Complaint was that the provider had not entered into a mutually acceptable solution, had been reckless in its lending in the[/FONT]
[FONT="]fi[/FONT][FONT="]r[/FONT][FONT="]s[/FONT][FONT="]t place and that options had not been explored under the Central Bank Code of Conduct on Mortgage Arrears. After examining the evidence before him the Ombudsman was unable to uphold any of the complaints cited.[/FONT]

[FONT=&quot]Finding Complaint not upheld[/FONT]
[FONT=&quot]Th[/FONT][FONT=&quot]e Complainants in this case held two mortgages in respect of their principal private residence, both of which had fallen into arrears. A complaint was made[/FONT] [FONT=&quot]t[/FONT][FONT=&quot]o the Ombudsman that the Provider had failed
(i) to enter into a proposed resolution / mutually acceptable solution,
(ii)[/FONT] [FONT=&quot]t[/FONT][FONT=&quot]o take responsibility for its part in enabling the Complainants’ loans (due to an overvaluation of the property) and
(iii) to explore and document all options for alternative repayment arrangements pursuant to the Central Bank’s Code of Conduct on Mortgage Arrears[/FONT] [FONT=&quot]an[/FONT][FONT=&quot]d the associated Mortgage Arrears Resolution Process.

The Complainants requested that[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e Provider “write-down” the balance on their accounts, taking into account the reduction of the [/FONT][FONT=&quot]v[/FONT][FONT=&quot]alu[/FONT][FONT=&quot]e of the mortgage which the Complainants suggested was primarily caused by the initial inflated valuation placed on[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e security by the Provider’s auctioneer and valuer. The Provider indicated that it was not its policy[/FONT] [FONT=&quot]t[/FONT][FONT=&quot]o accept any sum less than the full redemption balance and on appeal by the Complainants, its Appeal Board reiterated that it does not adjudicate on debt forgiveness.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e Provider contended that it had complied with the Provisions of[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e Code of Conduct on Mortgage Arrears and had engaged with the Complainants pursuant to its MARP.[/FONT]

[FONT=&quot]I[/FONT][FONT=&quot]n examining the evidence before him the Ombudsman noted that the valuation referred to by the[/FONT] [FONT=&quot]Complainant[/FONT][FONT=&quot]s [/FONT][FONT=&quot]date[/FONT][FONT=&quot]d from 2006 and on its face, indicated that it was for mortgage purposes only, and that no inspection of the property had been undertaken. The valuation[/FONT] [FONT=&quot]als[/FONT][FONT=&quot]o indicated that it was not for the use or benefit of any third parties, whether they had an interest in the property or not. He also noted that the General Mortgage Loan Approval Conditions made it clear that the valuer’s report was required by the Provider solely for its own use.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e Ombudsman was satisfied on the basis of the evidence, that the valuer’s report had been procured by the Provider solely for mortgage purposes, and for its own use only.

With regard to the Complainants’ submissions in respect of the[/FONT] [FONT=&quot]facilitatio[/FONT][FONT=&quot]n of their borrowings,[/FONT] [FONT=&quot]h[/FONT][FONT=&quot]e noted that this was in essence an allegation of reckless or inappropriate lending. Although the Financial Services Ombudsman’s Bureau is a non-judicial forum for the investigation, mediation and adjudication of certain complaints, the Ombudsman noted that the existence or not of an actionable[/FONT]
[FONT=&quot]w[/FONT][FONT=&quot]r[/FONT][FONT=&quot]on[/FONT][FONT=&quot]g of “reckless lending” had been the subject of a High Court decision in January 2010, when the Court[/FONT] [FONT=&quot]ha[/FONT][FONT=&quot]d indicated, inter alia, that “...more fundamentally, the argued for tort[/FONT]
[FONT=&quot]o[/FONT][FONT=&quot]f reckless lending does not exist in law as a civil wrong. It is not within the competence of the Court to invent such a tort. ....[/FONT][FONT=&quot]”[/FONT][FONT=&quot]. [/FONT][FONT=&quot]Th[/FONT][FONT=&quot]e Ombudsman noted that prior to borrowing the monies, the Complainants had[/FONT] [FONT=&quot]bee[/FONT][FONT=&quot]n advised to take legal advice and this was noted in their signed acceptance of the loan offer, in 2006. He was satisfied therefore that the evidence available did not support the Complainants in their assertion of any wrongdoing on the part of the Provider in respect of the facilitation of the borrowings.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e Ombudsman also considered the conduct of the Provider in the context of the Code of Conduct of Mortgage Arrears which outlines the necessary steps to be taken by a Provider in considering any forbearance requests from a[/FONT] [FONT=&quot]bor[/FONT][FONT=&quot]r[/FONT][FONT=&quot]o[/FONT][FONT=&quot]we[/FONT][FONT=&quot]r[/FONT][FONT=&quot]. [/FONT][FONT=&quot]H[/FONT][FONT=&quot]e took the view that the Provider had endeavoured to assist the Complainants and had agreed[/FONT]
[FONT=&quot]t[/FONT][FONT=&quot]o certain forbearance measures[/FONT] [FONT=&quot]o[/FONT][FONT=&quot]v[/FONT][FONT=&quot]e[/FONT][FONT=&quot]r a number of years in relation to the particular borrowings. The Ombudsman indicated that the consideration of any write-down was entirely at the Provider’s discretion and fell outside the Mortgage Arrears Resolution Process. He was satisfied that[/FONT] [FONT=&quot]th[/FONT][FONT=&quot]e Provider had complied with the Code of Conduct on Mortgage Arrears and that the evidence disclosed no wrongdoing on the Provider’s part.[/FONT]

[FONT=&quot]Th[/FONT][FONT=&quot]e complaint was not upheld.[/FONT]


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