"You would have thought it was sensible for me to say, 'You've told me you can't pay now, Is there some arrangement we can come to?' If the punter says no, the lender shouldn't have to go through the process. But now it's going to get referred to an EDR, and they're going to lose a minimum of two to three months and potentially nine months where no payments are made on the mortgage and the customer's equity is eroding," he said.
While Denovan said the intention of the regulations was to make consumers more aware of hardship provisions, he warned that the regulations could have the unintended consequence of tightening credit and locking out some borrowers.
"We're potentially getting into a situation like Italy where it takes two to three years to sell someone up. That's going to limit the availability of finance," he said.
Denovan said the MFAA would lobby to find a "happy medium" in the regulations.
"The MFAA will fight the good fight - and maybe lose - but we'll do our best."