European Parliament should intervene and take action to protect vulnerable mortgage holders

The leader of the Fianna Fail Group on Dublin City Council, Cllr Mary Fitzpatrick, today called on the European Parliament to take urgent action to protect Irish people who are left vulnerable when their mortgages are sold on to unregulated or non-bank entities.

Cllr Fitzpatrick said she will be writing to Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe Party (ALDE), to which Fianna Fail is aligned in the European Parliament, alerting him to this issue and asking his advice on what role the Parliament can play in the absence of any meaningful action by the Government here.

Cllr Fitzpatrick said there needed to be greater consumer focus and safeguards built into the bank resolution process so that customers are not exposed to aggressive interest rate increases and action for repossession if their loan is sold on.

Mortgage holders whose loans are with a financial institution regulated by the Central Bank of Ireland currently enjoy the projection of the Code of Conduct on Mortgage Arrears and have recourse to the Office of the Financial Services Ombudsman if a dispute arises with their lender. In the event that their loans are sold to an unregulated their party they lose these rights and potentially are exposed to higher variable rates, more interest surcharges and a heightened risk of action for repossession.

Cllr Fitzpatrick said last week, for example, the liquidator of the Irish Bank Resolution Corporation (IBRC) completed the sale of two-thirds of the former Irish Nationwide loan book to two US investment groups. While the purchasers have said they will comply with the Code of Conduct on Mortgage arrears this will be a voluntary action and not enforceable in Irish law. Customers of Dankse Bank, Bank of Scotland or ACC could also find themselves in the same situation as these institutions are also in the process of exiting the Irish market.

She pointed out there are 13,000 mortgage holders at IBRC whose loans were put up for sale by the liquidators. About two thirds were sold and the balance will transfer to NAMA at least in the short term and may be offered for sale again in the future. Also, there are 100,000 residential mortgages in arrears for more than 90 days and any of these could be put up for sale by their bank which would put the customers in the same position as the IBRC mortgage holders.

“The Government have promised legislation in 2015 to deal with the sale of mortgages to unregulated entities”, Cllr Fitzpatrick said. “That is too late. We need action now. Voluntary compliance with the Code of Conduct is inadequate, it does not address the issue of who would enforce the code in the event of a dispute arising. In addition there would be nothing to prevent a buyer from hiking interest rates after they take control of the mortgages”.

Cllr Fitzpatrick, the Fianna Fail candidate for Dublin in the European election, said taking out a mortgage is the biggest financial commitment most of us make in our lives. The economic crash has added further stresses with thousands of families having trouble keeping up their repayments.

“Now, to add another layer of pressure, the Government are leaving vulnerable mortgage holders whose loans have been sold on in this precarious financial no-man’s-land”, Cllr Fitzpatrick added. “As the Government is not acting to protect them I am calling on the European Parliament to intervene and take action as a matter of urgency to safeguard the rights of these vulnerable consumers. In this regard, the European Parliament honouring its commitment on the bank re-capitalisation deal promised in June 2012 would assist with banking debt and bring greater certainty to the financial markets. “

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