By Fionnan Sheahan and Dearbhail McDonald
Friday February 06 2009

THE Government is finalising a new deal to protect recession-hit homeowners from losing their property.

The country's two biggest banks will agree to a new mortgage code of conduct as part of the recapitalisation deal to boost their funds with €8bn of taxpayers' money.

Taoiseach Brian Cowen last night confirmed the code of conduct will be mandatory and will include all mortgage providers, including sub-prime lenders.

The mandatory mortgage code is expected to be announced along with the recapitalisation programme in the coming days.

It won't go as far as trade unions' demands for a two to three year window where repossessions would not be allowed.

But it will commit banks to working with the homeowner who has gone into arrears, trying to reschedule payments, referring them to budget advisers and delaying the start of legal proceedings, the Irish Independent has learned.

Mr Lenihan said the Government had raised the issue with the country's two biggest banks as part of the new recapitalisation deal.

And he warned other institutions -- including sub-prime lenders -- that the Government will not tolerate attempts to repossess homes.

"The real difficulty relates to other institutions that do not subscribe to the code of practice on repossessions. The work of the regulator is targeted at those institutions and at bringing them within a compulsory scheme.

Latest figures show around 14,000 homeowners were in arrears on their mortgage repayments.

But the Financial Regulator's statistics only gave a limited picture as it didn't cover all lenders and related to the position last June.

The Free Legal Advice Centres (FLAC) has written to the Financial Regulator raising questions about the code's failure to address how those who are in arrears or in negative equity should be dealt with.

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