In mortgage markets, good news and bad news often go hand in hand. Big challenges for lenders are often accompanied by large opportunities.
This good news/bad news dichotomy is easy to spot in the Irish mortgage market because of its small size and exposure to both UK and EU financial trends. In the middle of 2018, there were more than 87,000 Irish mortgage accounts – 10.9% of all mortgages — in arrears, according to the Central Bank of Ireland.
But here’s the most startling statistic: Of those accounts still in arrears, more than 40 percent have been in arrears for upwards of 720 days.
The good news is that the number of Irish mortgage accounts in arrears has actually seen 20 consecutive quarters of decline in the 90-day+ group and 13 consecutive quarters of declines in the 720+ day bucket at the end of the third quarter. After the global financial crisis in 2008, the number of homeowners falling behind on their mortgage payments rose steadily until 2013.
Since then, thanks in part to the Central Bank of Ireland’s Code of Conduct on Mortgage Arrears (CCMA) and the Mortgage Arrears Resolution Process (MARP) outlined therein, the percentage of mortgage accounts in arrears has dropped by nearly half. Through both restructuring agreements and an improving economy, that number has continued to fall.
Lender Obligations Under CCMA and MARP
The CCMA was introduced in 2009 to provide safeguards for vulnerable and financially distressed Irish borrowers. The MARP outlines how debt lenders are to handle those clients who have found themselves in arrears.
Lenders must remain positive and sympathetic; customer communications must not be aggressive, harassing, or unnecessarily frequent; and borrowers must be given ample time to complete agreed-upon actions.
The MARP consists of four steps:
- Financial information
Each step has its own rules on what information needs to be sent to the borrower, when it must be sent, how much time should elapse between communications, and what specific information must be collected.
What this means for some lenders is an extremely complex, manual process with multiple-page spreadsheets and disparate strategies for executing the customer treatment. Bank agents can find it difficult to track customer status due to the manual nature of working the account. Customers often become frustrated and report that making deals with the banks has been difficult.
On top of this, agents are working with people who are at a financial low point—stressed and likely embarrassed about their situation.
Envisioning More Effective Resolutions
What if the CCMA process could be deployed as an automated solution? Katabat has provided similar solutions for lenders working with vulnerable customers in the UK as well as financial hardship cases in Australia. These solutions have made it easy for customers to provide information to lenders about their situation, and the lenders are able to efficiently decision affordable solutions that encourage repayment.
Consistent and compliant customer communication delivered on a unified platform makes things easier on both ends.
Agents can see exactly where their customers are in the process. Customers can provide information through a 24×7 self-service portal, over the phone with an agent, or via email. Being able to correspond when and how they wish can make a huge difference, especially for those clients who are financially distressed.
Financial Institutions Must Ensure They’re in Compliance
As frameworks and laws change, the onus is on financial institutions to ensure they remain in compliance. The Katabat platform allows lenders to manage compliance risk through tight automation and digital audit trails, while storing all information in accordance with the most stringent security protocols.
It often seems like lenders and past-due borrowers are at odds with each other, but both originally entered into a financial agreement with a goal of responsible home ownership. Making communication and workflows simpler and easier will pave the way for more people to be able to honour their obligations. The long-overdue accounts are not going to disappear on their own, but there are ways to make dealing with them more pleasant for everyone involved.
No matter where lenders are located and whether they choose to focus on the good news or the bad, they need to be prepared for a possible recession. Automation of debt collections processes can benefit lenders and borrowers, especially during an economic downturn.
Are you interested in a CCMA/MARP process being deployed using Katabat’s workflow manager? Please let me know. I can be reached at firstname.lastname@example.org
Jackie Kilner is Head of Sales for Katabat’s EMEA region and is based in the United Kingdom.