Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

I will start with the issue Deputy Donnelly raised. Very careful consideration was given to what the period should be. One could argue for two months, three months or four months. There are a range of possibilities. A number of issues were factored into the two month period. It is important that people do not find themselves in a position where repossession proceedings are issued if there is a practical possibility of them entering into an arrangement. When court proceedings to repossess are taken, I am conscious that it adds additional cost on to the debtor as well as on to the creditor.

Once the legislation is in place, I hope the publicity surrounding it and the knowledge that exists will result in any individual who could find himself or herself at the receiving end of proceedings getting help from a personal insolvency practitioner considerably before proceedings are issued. I am sure it has occurred to the Deputy that it is not a coincidence that it is reasonably likely that the personal insolvency legislation will be in operation before this legislation has completed its passage through the Houses. There may be symmetry between them, and this Bill might complete its passage by the end of June and the legislation operational by the beginning of July. This legislation will not reach the Statute Book many months ahead of the personal insolvency legislation coming into operation.

Anyone who could be the subject of repossession proceedings brought under this legislation will have the facility to consult a personal insolvency practitioner before anyone may issue repossession proceedings. If repossession proceedings are brought, somebody will not receive court papers on a Monday, be in court on Tuesday and then have two months. It usually takes a number of weeks between being served with court papers and the matter coming before a court. A person in this position receiving court papers does not need to wait for a judge to adjourn a case to go to see a personal insolvency practitioner. Anybody who seeks legal advice on his or her position will immediately be told that if he or she has the funds and is not insolvent, it would be a good idea pay the mortgage and address the arrears. If the person is not in a financial position to do so, he or she will be advised to consider consulting a personal insolvency practitioner. A lawyer not giving that advice would not be giving proper advice.

In advance of the matter first finding its way into court, there will be space for someone to consult the personal insolvency practitioner. It is important that things are not unnecessarily protracted. I would anticipate that the time between receiving court papers and the end of the two month adjournment is likely to be in practical terms not less than three months. It may end up being 11 weeks rather than 12 weeks. As the Deputy will know, there is always a time gap following receipt of court papers, and that was factored into the consideration. We need to ensure people who have been not engaged or may have tried the mortgage arrears resolution process and found it did not work for them seek with some reasonable speed whatever help they can get and do not just ignore the fact there are court proceedings. That is a factor. It is not just that there are just two months - just over eight weeks. There is also the run-in to that.

If it appears possible that an arrangement can be put in place after someone sits down with a personal insolvency practitioner, the court only needs to be satisfied that significant progress has been made in the preparation of a proposal. Then the court may want to know what length of adjournment is needed to deal with that. Initially it is to ensure people do not ignore their circumstance and address it.

Deputy Mac Lochlainn talked about closing a loophole and that we are facilitating repossessions. We need to get real about all of this. All the way up to 2009, the law was very simple and straightforward. If someone was in mortgage arrears and failed to meet repayments, the relevant financial institution could initiate court proceedings and get a repossession order simpliciter. That was the law throughout the 18th, 19th and 20th centuries because banks do not lend people money to purchase homes unless they have the security of knowing that if repayments are not made, they can repossess. That is the very essence of what a mortgage is.

Of course, the last thing we want for any individual or family in financial difficulty is that they should have their home repossessed. Owing to the approach taken by the Government introducing procedures requiring banks to engage, there have been very few repossessions in this country since the property crisis hit.

In fact, in normal times, one would have expected more repossessions where people simply overreached themselves financially. Even before there were property bubbles, in normal times one might have expected more repossessions to take place, but there have been very few.

This Bill is not about encouraging repossessions, it is about ensuring that a lacuna that appeared in our law as a result of a single court decision is addressed. It is not tenable to have financial institutions which have loaned money and find that it is more complex and expensive to repossess than it need be, if people simply do not make their mortgage repayments. Most people who are not making their mortgage repayments or only paying part of them, are in that position because they are in genuine financial difficulties.

In my constituency I deal with people in those circumstances. We all know of families who, a number of years ago, were in a reasonably sound place financially, but who are not in difficulties through no fault of their own. I do not think there is a Deputy on either side of the House who does not. There are also some individuals who simply decide that they will spend money on things other than their mortgage and who do have funds. There are some who may well be exploiting the current situation.

Currently, we are not in a position where banks who have lent money under the Dunne judgment are completely prevented from taking action. There are other steps that they could have taken with regard to moneys due to them, other than the simple, summary summons route to seek to repossess a house. Most of them have not done that, however, for a whole range of reasons. If this lacuna in the law was not addressed, they may decide to take alternative actions. It would be quite possible but I genuinely do not know. As a Minister, I cannot interfere in any shape or form with anything the courts may do, nor can I influence the courts in the outcome of any case. However, there is as much chance that the Supreme Court will reverse the Dunne decision as there is that it will uphold it, if I can phrase it in that neutral way, so nobody suggests that I am interfering in any way.

If we did nothing at all, we could find ourselves at some stage in the future with a court judgment where the Supreme Court states that the law is as everyone thought it was after the enactment of the 2009 Act. That would mean simply continuing the law as it was throughout the 20th century where mortgage holders did not repay their banks or other financial institutions, so there could be a repossession order.

In this legislation, we are removing any doubt or uncertainty about the security of mortgages held by financial institutions. We are doing something really important by putting in place a mechanism to try to ensure that - regarding those who either have failed to engage with the institutions concerning their financial difficulties or, to take the opposite side of this, maybe the financial institution has not been reasonable in its engagement - before there is any repossession, if there is a practical possibility of a personal insolvency arrangement, a court can adjourn matters and allow that to be explored. The initial adjournment is really about exploring whether or not substantial progress can be made in preparing a proposal.

I now want to deal with Deputy Donnelly's issue on costs. We also dealt with this matter when discussing the Personal Insolvency Bill. When it comes to dealing with the personal insolvency practitioner's costs, the fees to be paid to the personal insolvency practitioner will ultimately come out of whatever pool of money is available in the context of entering into a personal insolvency arrangement. Therefore, the fees will have to be agreed between both the debtor and the creditors. If the debtor did a deal, for example, with a personal insolvency practitioner, which was to pay him or her X at the end of the process, and the creditors were not happy with the payment of X, then X could not be paid. That is because it would be part of the arrangement as to what the fees would be. In the context of dealing with the equivalent of a debt settlement arrangement in the UK - they do not have a PIA, but have a DSA which is a look-alike - it has been found that fees settle at a particular level on average because there is a control over what the fees will be. Creditors will not agree to excessive fees because that would reduce the funds that may be available to them. We will have to see how this works out in practical terms.

In the context of this Bill, however, I cannot agree to a proposal that states that in the case of any adjournment granted under subsection (2), the mortgager will pay any costs relating to the services provided by the personal insolvency practitioner in full. One could not require the mortgager to do that. Why should the mortgager do so?

Deputy Mac Lochlainn's view is that all the financial institutions are bad, everything they have done is wrong and they should pay for everything. There is a lot the financial institutions did in the years preceding the property collapse of which I have been, and am, enormously critical. They were throwing money at people like confetti at a wedding. They were not undertaking due diligence as to people's capacity to repay. They were contributing to the explosion in property prices by being flaithiúilach with money. They were giving money not only for homes at levels that were clearly beyond the means of people to make repayments should there be any minor change in their own personal circumstances, but were also offering money for investment properties that was unrealistic to people who were not in a financial position, had due diligence been undertaken, to deal with the repayments.

I was not a Member of the Dáil between 2002 and 2007 because the electorate of Dublin South decided to send me on vacation. However, I had serious reservations from 2004 onwards as to what was happening in the property market, although there was nothing I could do about it. In the current market, we should have non-recourse mortgages for people taking up home loans. In the past, that would have ensured that the banks carried out appropriate due diligence. I believe that should currently be part of the market offering for today's home buyers.