Dinny McGinley (Donegal South West, Fine Gael) | Oireachtas source

On behalf of the Government, I will respond to the motion on mortgage arrears. The debate over the past two days has highlighted the crucial importance, for both social and economic reasons, of addressing this very serious problem. Thousands of over-indebted households are now trying, as best they can, to deal with the economic legacy left by the previous Administration.

Central Bank involvement is fundamental to the resolution of the mortgage arrears crisis. It has the power to require banks to finally start addressing the mortgage arrears cases on their books. It will no longer be acceptable for banks to apply short-term solutions to cases in which there has been a fundamental and long-term change in the position of the borrower. Durable long-term restructures will have to be applied where appropriate. The Central Bank has now set a rolling plan to require the main banks to propose sustainable solutions to 30% of their arrears customers by the end of this month, to 50% by the end of the year and to 70% by the end of March next year. The first targets for concluded solutions have also been set, at 15% by the end of this year and 25% by the end of the first quarter next year. It has been suggested these targets are insufficiently ambitious. While there is a certain sympathy with this sentiment, the most important requirement is to get the process under way and have it operating in an effective way. It can then be expected to pick up steam as the process continues. There will now be an incentive for banks to provide reasonable offers. If the offers made are reasonable I expect they will be broadly accepted by customers. In this regard, for co-operating borrowers the code of conduct on mortgage arrears requires mortgage lenders to explore all of the options for an alternative repayment arrangement. In addition, if a borrower is not satisfied with a bank's proposal, the new statutory insolvency frameworks are now available where appropriate. The fact that the Insolvency Service of Ireland is now in a position to accept and process insolvency applications is very much welcome.

The Central Bank audit process will be crucial to ensure the banks propose sustainable solutions to mortgage holders. This is an essential part of the overall mortgage arrears resolution process. While the banks state they have met the first targets for the end of June, this must now be independently assessed and verified. It is expected the Central Bank will complete the audit of the first returns under the mortgage arrears resolution process as soon as possible and will disclose the outcome of the audit process.

On an overall level, two fundamental principles underpin the overall Government approach. Most importantly, there is a need to ensure that co-operating mortgage holders who are experiencing real difficulty are, where possible, assisted in remaining in their homes. However, any framework and range of supports for mortgage holders must be able to distinguish between those who cannot afford to pay the mortgage on their primary home and those who choose not to pay.

The principle of a fresh start for people facing genuine difficulty in dealing with their mortgage commitments is very necessary. We cannot leave a significant number of families in limbo because they have no certainty about their future financial situation. However, neither can we allow situations to arise in which people who have the capacity to repay their debts renege on their commitments. Any reduction in repayment discipline by debtors who have the clear capacity to meet their obligations will only impose further costs on the wider population.

The Government is dealing with the mortgage crisis it inherited. It has now developed and provided a suite of measures designed to address the problem of over-indebtedness. This strategy will, over the coming period, deal with unsustainable debt situations and do so in a way that is as fair as possible to borrowers and lenders, but also in a way that seeks to minimise the costs involved for wider society.

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