Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank all Deputies who contributed to the debate last night and this morning. I fully accept that some mortgages are beyond rescue and that there must inevitably be an increase in the number of repossessions or voluntary surrenders. Nobody is suggesting otherwise. In fact, some mortgage holders would be better off as a consequence of such action because it would allow them to start afresh.

I acknowledge, too, that the banks must be cautious in safeguarding the capital they have been given by the taxpayers of the State. That is an indisputable fact. I also accept that there are people who are choosing deliberately not to meet their mortgage payments, those who have been described as strategic defaulters. We have called for an independent assessment to ascertain the extent of such practice. It would be very simple for the Central Bank to conduct sample testing of mortgage accounts in arrears and provide independent verification of the scale of strategic defaulting. That would be very helpful to the overall discussion.

However, none of these facts represents an excuse for the banks not making every conceivable effort to rescue mortgages that can be saved. The bottom line is that the vast majority of mortgages in arrears can be rescued if the will is there to do so. The Minister said last night that repossession of the family home should be the very last resort. However, we had categorical confirmation at the meeting of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform two weeks ago, at which Deputies from all parties contributed constructively, that it had not been the initiative of last resort for the banks. I am aware of cases, for example, where no forbearance was offered by the banks and the first action they took was to issue a threatening legal letter. The reality is that the banks have made a mockery of the targets set. Up to 15,000 individual mortgage holders in arrears have had legal letters issued to them or already had proceedings initiated against them. It is a matter of concern that the Government has not responded more strongly to the evidence given by the banks two weeks ago. I am sure that neither it nor the Central Bank anticipated, when the targets were set last March, that the banks' response would be to rely heavily on the issuing of threatening legal letters. Their representatives claimed at the finance committee that they had exceeded these targets. When we probed that claim, however, it became clear that they had been relying on these letters in order to do so.

Any mortgage arrears case which results in the property being handed back to the banks is not a sustainable solution to the distressed mortgage problem, rather it is a termination of that mortgage. I have acknowledged that there will be cases where a mortgage will have to be brought to an end. In the vast majority of cases, however, such a response is not necessary. It is simply not good enough that we do not have an agreed definition of sustainability in the context of solutions for individual distressed borrowers. It remains a matter for the banks to decide whether an offer is sustainable. It is not good enough that the Central Bank has not even begun its audit of the banks' performances against the targets to the end of June. It should have commenced that audit in July. It is not good enough that the pressure for targets to be set for concluding agreements has come from the troika. RTE broke that story last week and we have since had confirmation of it from the Central Bank. It is not good enough that the banks are treating people inconsistently, as we have seen in the case of split mortgages, for instance. It is not good enough that we do not have a definition of strategic default, nor an independent verification of the extent thereof. It is not good enough that borrowers are not legally entitled to a solution to their arrears problem where they meet certain criteria. It is not good enough that people who are most in need of the new insolvency service will potentially be denied access because of the structure of the fees being charged by insolvency practitioners.

What is needed are long-term sustainable solutions such as permanent interest reductions, split mortgages and debt for equity deals. I made the point last night that however bad the situation was - it is very bad- it would get a whole lot worse if the ECB decided to increase its main refinancing interest rates. When the thousands of families relying on historically low tracker mortgage rates begin to experience that hike, we must have a proper architecture in place to handle the ensuing crisis. We do not have such an architecture at this time. The Government and the Central Bank must do more in that regard.

I thank Members for their contributions to this useful debate. We will have many questions for the Governor of the Central Bank, Mr. Honohan, when he appears before the finance committee next week.

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