Mortgage regulation has developed over the past 20 years. Previously there was a focus on conduct matters, where senior managers were expected to ‘do the right thing’ in terms of providing services and products that met customer needs at a fair value. Now, there is an evolving situation around product matters specifically. It is now apparent that regulators have given up on leaving it to senior managers to put customers first, and now the Courts are beginning to make noises too.
In the UK, firms are focusing on how they amend processes, procedures, policies and products to comply with the FCA Consumer Duty fair value requirements. Although we hear several firms are finding the tight implementation timelines challenging, we know most will hit the regulatory deadlines. However, now a Court has intervened in the ‘fair value’ debate and significantly changed the outlook.
An Irish Circuit Court has approved a formal personal insolvency arrangement that will require a mortgage servicer to give a borrower a rate of 2.5%, fixed for 25 years. Such a low rate over such a long term, is just not currently available in the market, so the implications are huge. Frankly, this situation would have been hard to contemplate before now. Campaigners now believe that this decision offers the hope of a ‘roadmap’ towards some financial security for up to 32,000 Irish homeowners with mortgages that are unaffordable.
While the ruling will have the most immediate and radical impact in Ireland, lenders in other jurisdictions should take note. The Irish Minister for Finance is said to have welcomed the court ruling which forces a financial services company to halve the mortgage rate it was charging a distressed borrower. It is clear, in Ireland at least, that ministers, courts and regulators are likeminded in applying the rule of law to enforce fair value for vulnerable mortgage customers. In our experience, other jurisdictions are likely to follow – watch this space.
Whether you operate in the Irish market, or elsewhere, give us a call to discuss the implications of this decision for mortgage servicers, mortgage lenders and holders of mortgage portfolios.