Brendan Burgess
Founder
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The CCPC made a submission to the Retail Banking Review
It included the following suggestion.
Non-performing loans reduce bank profits because they require higher provisions of capital, lead to lower interest income, generate expenses in their management and lead to an increase in funding costs due to the higher credit risks of such banks. Potential entrants may be discouraged from entering the Irish market by the risk that, if they were to enter, their profitability will be negatively impacted by a difficulty in accessing processes which enable the timely and effective resolution of non-performing loans. This may be particularly acute where the new entrant is comparing entering the market in Ireland to entering the market in another jurisdiction(s) which data indicates has a foreclosure regime which results in shorter recovery times than Ireland.
In addition to the impact non-performing loans and mortgage arrears can have on competition in the market, it is important to be cognisant of the significant distress and hardship faced by borrowers in arrears, particularly those who are subject to re- possession proceedings.
In its 2017 Mortgage Options Paper, the CCPC noted the value of further investigation into greater use of suspended possession orders by the courts, as a measure which could, by giving the borrower an incentive to engage earlier and more fully with the lender, potentially bring about efficiency, transparency and predictability to re-possession proceedings and align Ireland with European norms.
The CCPC understands that suspended possession orders are utilised at an early stage of repossession proceedings in the UK
to suspend possession orders subject to compliance by the borrower with conditions set out in an order of the court relating to
payment by the borrower of any sum secured by the mortgage or the remedy of any default.
In Ireland there is provision within Section 101 of the Land and Conveyancing Law Reform Act 2009 to allow for the suspension of a court order to take possession of a mortgaged property. In addition, an adjournment, stay, postponement or suspension may be made, subject to such terms and conditions with regard to payment by the borrower of any sum secured by the mortgage or remedying of any breach of obligation as the court thinks fit.
It is the CCPC’s understanding that the current practice in Ireland in possession proceedings is for the court to adjourn proceedings in the expectation that the borrower and lender would agree to some form of settlement – rather than reaching a court mandated solution as part of a suspension.
The CCPC submits that if suspended possession orders were used more widely in Ireland at the initial stages of proceedings this could reduce delays by avoiding the need to have repeated adjournments to allow the borrower and the lender reach an agreement under
the provisions in Ireland set out above.
A benefit of greater use of suspended possession orders in Ireland would also be that the arrangements made under a suspension order would be an order of court, as such with the associated transparency this could lead to greater standardisation in settlements and terms of orders, and more predictability.
Recommendation:
The CCPC recommends that a review of the use of ‘suspended possession’ orders by the Courts be conducted as difficulties in enforcing the security of mortgage debt have been cited as a potential barrier to entry.
It included the following suggestion.
Non-performing loans reduce bank profits because they require higher provisions of capital, lead to lower interest income, generate expenses in their management and lead to an increase in funding costs due to the higher credit risks of such banks. Potential entrants may be discouraged from entering the Irish market by the risk that, if they were to enter, their profitability will be negatively impacted by a difficulty in accessing processes which enable the timely and effective resolution of non-performing loans. This may be particularly acute where the new entrant is comparing entering the market in Ireland to entering the market in another jurisdiction(s) which data indicates has a foreclosure regime which results in shorter recovery times than Ireland.
In addition to the impact non-performing loans and mortgage arrears can have on competition in the market, it is important to be cognisant of the significant distress and hardship faced by borrowers in arrears, particularly those who are subject to re- possession proceedings.
In its 2017 Mortgage Options Paper, the CCPC noted the value of further investigation into greater use of suspended possession orders by the courts, as a measure which could, by giving the borrower an incentive to engage earlier and more fully with the lender, potentially bring about efficiency, transparency and predictability to re-possession proceedings and align Ireland with European norms.
The CCPC understands that suspended possession orders are utilised at an early stage of repossession proceedings in the UK
to suspend possession orders subject to compliance by the borrower with conditions set out in an order of the court relating to
payment by the borrower of any sum secured by the mortgage or the remedy of any default.
In Ireland there is provision within Section 101 of the Land and Conveyancing Law Reform Act 2009 to allow for the suspension of a court order to take possession of a mortgaged property. In addition, an adjournment, stay, postponement or suspension may be made, subject to such terms and conditions with regard to payment by the borrower of any sum secured by the mortgage or remedying of any breach of obligation as the court thinks fit.
It is the CCPC’s understanding that the current practice in Ireland in possession proceedings is for the court to adjourn proceedings in the expectation that the borrower and lender would agree to some form of settlement – rather than reaching a court mandated solution as part of a suspension.
The CCPC submits that if suspended possession orders were used more widely in Ireland at the initial stages of proceedings this could reduce delays by avoiding the need to have repeated adjournments to allow the borrower and the lender reach an agreement under
the provisions in Ireland set out above.
A benefit of greater use of suspended possession orders in Ireland would also be that the arrangements made under a suspension order would be an order of court, as such with the associated transparency this could lead to greater standardisation in settlements and terms of orders, and more predictability.
Recommendation:
The CCPC recommends that a review of the use of ‘suspended possession’ orders by the Courts be conducted as difficulties in enforcing the security of mortgage debt have been cited as a potential barrier to entry.