Office for Debt Resolution proposed for Home Repossessions

18 May 2010

Congress today (May 18) called for the creation of a new Office for Debt Resolution (ODR) to ensure that householders with mortgage difficulties are not reliant on the "grace and favour of banks" to keep their homes.

The new agency would have the power to vary or revise existing mortgages to take account of changed circumstances and would strike a balance between the rights of householders and the banks.

The proposal to create a non-judicial Office for Debt Resolution was made in a presentation by Congress to the Government's Expert Group on Mortgage Arrears & Personal Debt.

Addressing the Expert Group today, Congress General Secretary David Begg said: "It is not acceptable that hard-pressed households - struggling with job loss and income cuts - should be forced to rely on the grace and favour of banks, to keep their homes.

"That is unfair and untenable, especially given the scale of the mortgage and debt problem. At the very least, householders in difficulty should have the right to know that there is a fair, independent way to deal with the problem.

"We envisage the Office for Debt Resolution operating independently of the legal system, acting to strike a balance between the rights of householders and the banks," Mr Begg said.

"Consequently, the Office would have the power to vary or revise existing loan agreements, to take account of changed circumstances. There may be up to 200,000 people living in households in difficulty with their mortgage repayments.

"They are entitled to some level of security and to be treated with the same degree of understanding already shown to those that caused the crisis," Mr Begg said.

Congress official Esther Lynch pointed out that the current banking Code of Conduct on Mortgage Arrears was inadequate and said there seemed to be a "serious underestimation of the scale of the problem."

She said the creation of the Office for Debt Resolution would provide an easy to understand alternative to the courts, providing a less intimidating atmosphere in which people can 'work through' all of their debt problem.

She said the Office for Debt Resolution would:

  • Protect family homes from repossession and from creditor practices that exacerbate financial distress;
  • Consider if there had been reckless lending or excessive penalties charged and reduce debts accordingly;
  • Have the power to modify or reduce mortgage terms and decide the schedule/ order of payment for all creditors;
  • Have the power to consider the totality of peoples' debts and conclude an arrangement that sets out an affordable payment schedule, suitable to the person's means and provision of a decent standard of living;
  • Be impartial and have a duty to ensure balanced negotiation and to prevent manipulative or intimidatory techniques
  • Have the power to suspend interest and other charges and penalties as these can exacerbate financial distress;
  • Have the capacity to address negative equity and repossessions by remodeling and revising existing loans to take account of changed circumstances;
  • Have the capacity to determine equity changes including facilitating a role for local authorities in equity purchase or buy and rent back;
  • The ODR will have the power to freeze /modify interest rates.

 

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