Stephen Donnelly (Wicklow, Independent)

I will not try to change the outcome. However, I will use this opportunity to explain the Bill's objectives, the problems it will address and how it would complement the upcoming personal insolvency Bill.

I have asked for some briefing notes to be passed to the Deputies in the House. In preparing the Bill I did some analysis of the current state of mortgage arrears. The notes that have been circulated show three possible scenarios for what could happen. As of September 2011, according to Central Bank figures, one in 12 mortgages in Ireland was in arrears of more than 90 days. If one adds the mortgages that have been restructured, some of which may be viable but are still causing enormous hardship for the borrowers, the figure goes up to one in ten. If the arrears of less than 90 days are added, it goes up further. It is of serious concern that the rate if increase in mortgage arrears is not happening linearly but exponentially. What I mean is that we are not seeing 5,000 new arrears cases per quarter, but it is increasing by 10%, 11% or 12% per quarter. Very worryingly in the last four quarters for which we have data the rate by which that percentage is increasing is rising. I believe it was approximately 10%, 11%, 12% and then 13%, which is of serious concern. The top line of the graph I have handed out shows what would happen if the rate we have seen during the past four quarters continued for the next two years. It shows a cataclysmic outcome whereby almost one in two mortgages in the country would be in arrears of 90 days or more. The middle line shows what I believe is most probable. This maintains the percentage growth in arrears for the next eight quarters at the average percentage growth we have seen for the past two years, approximately 12% per quarter. If this happens, we will be faced with one in four mortgages in arrears of 90 days or more in only two years. The potential scale of this mortgage arrears problem is absolutely vast. It is no longer a marginal thing.

We thought we capitalised the banks to deal with this. We made €7.5 billion available to them through the BlackRock stress-testing but they are not passing it on. Representatives from Bank of Ireland were before the Joint Committee on Finance, Public Expenditure and Reform and they admitted, after being asked five or six times, including through an intervention from Deputy Alex White, that they had not passed on one single penny. Representatives from Allied Irish Banks, AIB, said they did not know but they got back to the committee and stated that they only passed on €600,000 in full legal surrender in any call on this debt. They have made provisions in their balance sheet but that does not help the borrowers. The banks are not passing on any of this money. I suggest the reason they are not passing on the money is because they do not have to. At the moment, the law is weighted entirely in their favour. The Bill proposed by the Minister, Deputy Shatter, goes a considerable way to correcting that imbalance and I suggest that my rather more humble Bill helps in one particular case and complements the Minister's Bill.

I will outline a quick case study. A couple from Wicklow came to my constituency office. She is a public sector worker whose income has fallen in recent years. He is a local businessman. The family home and the business premises are in arrears and negative equity. The reason they are in arrears is because the bank has raised the variable mortgage interest rate approximately four or five times in the past year and this has doubled their mortgage payments and forced them into arrears. Every Deputy is dealing with the social consequences of what is taking place on a daily basis. In this case, one thing I cannot get out of my mind is that the lady said that they are now watching the amount of toothpaste they put on their toothbrushes because they are left with so little money that they do not have money for toothpaste. This is the situation they are in.

If the bank decided to take possession of their home, it could be stopped for one year because of the moratorium but, ultimately, the judge would have to enforce possession. He or she would be allowed to apply no discretion or make the case that the borrowers had made a reasonable offer and that the bank had essentially forced them into arrears through its actions and that it is not reasonable for the bank to take the house. This is at the nub of what the Bill tries to do.

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