INBS Mortgages and the CCMA

There has been a lot of noise about the INBS mortgage book which is being sold as part of the liquidation of the IBRC.  The last insight provided in the performance of these mortgages was in the IBRC Interim Report for June 2012.  Page 72 contains this table on INBS’s mortgages.

Only 41 per cent by loan amount are neither past due or impaired.  For owner-occupied mortgages 48 per cent of loans were performing while for the buy-to-lets only 18 per cent of loans were performing.  There is delinquency on a huge scale in the INBS mortgages. 

Of the mortgages around 90 per cent were SVR loans with the remaining 10 per cent on fixed rates of various durations.  INBS issued close to no tracker-rate mortgages (trackers make up less than 0.1 per cent of the mortgages).

Much has been made of the issue of whether the INBS mortgage holders will be protected by the provisions of the Mortgage Arrears Resolution Process (MARP).  This is the IBRC MARP policy document.

Under the Code of Conduct on Mortgage Arrears (CCMA) borrowers who are “not co-operating” will be “outside of the MARP and the protections of
the MARP will no longer apply” and the lender “may commence legal proceedings for repossession of the property immediately after classifying the borrower as not cooperating”.  The CCMA definition of “not co-operating” is below the fold. 

It is not clear what responsibility the new owners have to comply with the CCMA/MARP but it is probably the case that very large number of INBS mortgage holders were not covered by the MARP provisions at the start of the IBRC liquidation to begin with.

Not co-operating: A borrower can only be considered as not co-operating with the lender when:

1. any of (A), (B) or (C) apply to his/her particular case:

A) the borrower fails to make a full and honest disclosure of information to the lender, that would have a significant impact on his/her financial situation; or

B) the borrower fails to provide information, relevant to the borrower’s financial situation, within the timeline specified by the lender in accordance with Provision 34; or

C) a three month period elapses:

i) where the borrower:

(a) has not entered into an alternative repayment arrangement, and during which the borrower:

- has failed to meet his/her mortgage repayments in full in accordance with the mortgage contract ; or

- meets his/her mortgage repayments in full in accordance with the mortgage contract but has an arrears balance remaining on the mortgage; or

(b) has entered into an alternative repayment arrangement, and during which the borrower has failed to meet in full repayments as specified in the terms of an alternative repayment arrangement; and

ii) during which the borrower:

(a) has failed to make contact with, or respond to any communications from, the lender or a third party acting on the lender’s behalf; or

(b) has made contact with, or responded to communications from, the lender or a third party acting on the lender’s behalf but has not engaged in such a way that enables the lender to complete an assessment of the borrower’s circumstances; and

2. the warning letter, required in accordance with Provision 28, has been issued to the borrower and the borrower has not carried out the action(s) specified in that letter.