maxim in retail banking is that early engagement with distressed borrowers is a valuable tool for improving ultimate recoverability. in particular, emerging inability to pay instalments in full can induce a borrower to pay nothing at all, thereby risking a spiral into an unsustainable level of indebtedness. identifying pre - arrears situations and engaging with them and with early arrears cases can be very cost effective in arresting this spiral in the level of indebtedness arising from arrears. therefore, although what follows is about dealing with 90 - day plus arrears cases, efforts to address and stem the early cases should not be neglected. new legislation the new personal insolvency act offers new avenues of recourse for insolvent persons, including importantly the pia which could allow insolvent debtors to earn a “ fresh start ” through a period of being subject to what will likely be a relatively onerous payment plan, but without necessarily having to surrender an owner - occupied home. importantly, this avenue by construction is available only to insolvent borrowers, and therefore not to those who “ can pay ”. the terms of the legislation should help anchor some of the expectations of distressed borrowers and their lenders in arriving at bilateral solutions. given what international experience shows of how little is often recovered in net terms by creditors from payment plans, a well - designed loan modification bilaterally arranged between borrower and insolvent debtor can be better for both than the net outcome of a pia or bankruptcy. the different elements of the cure process there are several successive tasks for the lender in the typical mortgage arrears cure. it begins with the lender engaging with the borrower. the lender needs to assemble updated information in order to discover the customer ’ s current circumstances and how it has differed from the position at the original underwriting. then, taking account of current and prospective circumstances, if the contract is, or can be put on a sustainable basis, the lender needs to decide what revised schedule of payments ( if any ) should be offered. ( the attempt to cure a distressed mortgage may not always avoid repossession or voluntary surrender. ) and then the lender needs to ensure that the customer complies with the revised schedule. in the ccma, designed to provide appropriate and effective consumer protection measures and to ensure that borrowers are treated in a fair and transparent manner, the central bank bis central bankers ’

indebtedness. credit unions are unsecured creditors of many distressed borrowers ; unsecured debt on credit cards is also found to be high for many borrowers ; utility arrears are also commonly observed. a mortgage loan modification which leaves borrowers with insufficient resources to deal with their arrears with credit unions, credit cards and on utilities is unlikely to remain fully serviced. this inhibits the mortgage lender from making an effective modification proposal. therefore agreements with other creditors are likely to be an essential part of any effective and sustainable mortgage modification. it is for this reason that the central bank has been facilitating dialogue between the main creditors with a view to enabling them to arrive at an operational framework for dealing in a manner that is satisfactory to all with multiple indebtedness situations. in essence, the main creditor needs to take a holistic view of the borrower ’ s position including other indebtedness and ensure that the entire debt is sufficiently restructured ( a point explicitly made in the ccma ). to be sure, the main secured mortgage creditor can enforce their security, but as this is certain to leave a large unsecured amount owing to the main creditor, the main creditor still needs to have regard to the position with regard to unsecured debts of the borrower. one way of seeing the potential here is to recognise that the ultimate alternative that faces all parties, in the event that no agreement ( even pia ) can be reached, is the debtor ’ s bankruptcy. bankruptcy will inevitably involve deadweight losses – procedural expenses, losses through foreclosure sales, etc. the different creditors should therefore assess the possibilities of any deal relative to the position they would experience in a bankruptcy. many classic analyses of bargaining suggest that participants should generally expect to share the gains of any deal broadly proportionately relative to what each creditor would get from the bankruptcy. although this is not exactly the way in which bankers and credit unions frame arrangements that they can envisage employing for such circumstances, i expect that the restructuring “ waterfalls ” ( or decision trees ) that they have been discussing will in the end amount to much the same thing. furthermore, this approach can be extended to the pia. after all, a personal insolvency practitioner proposing a division of the recoverable amounts that is consistent with this framework can expect that the creditors will accept it. indeed, in cases where the unsecured creditors have not signed - up to a