Mr. Edmund Honohan:

My name is Edmund Honohan, senior counsel, and Master of the High Court since 2001. I always feel slightly put off that I cannot stand up while making a speech because my practice as a barrister is to stand up and walk around while so doing. I will try to assist the committee with the legal aspects of the proposals it has before it. If I were teaching law, I would ask members to write down the terms "foreclosure", "redemption", "equitable right to redeem", "equity of redemption", "sale", "possession", "repossession", "vacant possession", "execution", "squatter" and "eviction". I would ask the members to pick any four of the above and explain them, writing only on one side of the paper. These are terms with which lay litigants must deal in court. Even some lawyers appearing before me do not understand these terms. Nevertheless, this is the vernacular of litigation in the area of mortgages.

It will be of interest to the committee to know that the term "foreclosure" has been abolished since 2009. That is a regret because that word has a real human meaning to it. It denotes the precise point at which the right of the occupants to reside in a premises ceases. The fact that foreclosure has been abolished as a legal remedy to be replaced, in effect, by the order for sale, has caused some confusion in the minds of commentators. Any mortgage deed involves two parties: the mortgagee or banker and mortgagor or borrower. Each has rights. On one side there is foreclosure, which is the right of the mortgagee, while on the other side there is the right of redemption. Members may not have come across that word. Those are equal rights.

An examination of 19th century law will reveal foreclosure claims by mortgagees and redemption claims by mortgagors. In those days, redemption claims far outnumbered foreclosure claims. It was not unheard of, rather, it was more usual to have a claim by a mortgagor for redemption of the mortgage in a situation such as a person wanting to put the money on the table and demand the return of his or her property. Foreclosure and redemption were the two equal measures. Underlying them were subsidiary or ancillary reliefs such as orders for sale and for possession.

Depending on which way the case was going, the mortgagor or the mortgagee might be looking for an order for sale. Believe it or not, there were cases where the mortgagors wanted to force the banks to sell. As recently as 1997, there were English cases involving mortgagors having to take banks to court to get orders for sale. Nevertheless, the availability of sale and possession as remedies fluctuates between the mortgagor and the mortgagee. Sale and possession may be ordered as ancillary to foreclosure or in relation to redemption. It is like a tug of war between the two parties and is not fixed. In this Bill, I am relying on that key legal mechanism.

The repossession list of Thursday last included the names Derek, Joseph and Anne Maire, Colm, Stephen and Marie, Stephen and Miriam, Colm and Sharon, Paul and Natalie, Ray and Martina, Nora, Chris and Sandra, Abdul and Aleesa, Mary, Brian, Andrew and Sinead, Emma and Brendan, Marius and Claudia, Martin, Thomas, Helen, Brian and Patricia, Lisa, Clyde and another Lisa, Desmond and Adrienne, Harry and Martina, John and Antoinette, Michael, another Michael, William and Maria, William, Martina and Patrick, Mark, Gavin and Sorcha, Wesley and Carol, Geraldine and Anthony, Joseph, Patrick, Catherine, Philip and Michelle, Kerry, Sarah and Thomas, Gillian and Philip. These people are last Thursday's hidden homeless. They have lost the right to live in the houses in which they are living. There were 41 cases and, by my reckoning, 69 defendants.

Under the European Convention on Human Rights, each defendant is entitled to effective participation in the proceedings. Why, then, is there a Circuit Court practice direction by the President of the Circuit Court that the plaintiffs should write to the defendants by letter from the plaintiff or the plaintiff's solicitor stating that, except with the consent of each defendant, no order for possession will be made on the initial return date and the proceedings will be adjourned to a later date? The defendants, having received such a letter, find that of great relief and believe they do not have to turn up to court.

The Minister for Justice and Equality then says that these people will not engage. Not only that, newspapers say that they find it astonishing that only 12 defendants turned up from a list of 70 and they think that the other 58 are strategic borrowers who could not care less. If one receives a letter such as the one directed by the President of the Circuit Court in respect of one's first appearance, one will naturally walk straight past the court, whistling. The next time one is told to come in, one will decide to take a chance on it. The time after that, one will take a further chance on it. Eventually, it will be too late and the sheriff will be at the door. That is a problem and Ireland could be in trouble with the European court in relation to that practice direction.

Only a handful of defendants had legal representation. Most defendants did not attend. Five orders for possession were made, some cases were struck out and the balance were adjourned to mid-November. Do members know who these people are? No. Nor do I. How many families? How long have they been living at the mortgaged home? We can only guess; perhaps ten or 15 years. There is a dearth of sociological data or demographic information. We do not know how many of these defendants are in mortgage arrears for 720 days and upwards or how many are only three months in arrears, nor do we know how many have recently restructured loans which have under-performed. We do not know why they stopped paying. We do not know if there are any freeloaders gaming the system or whether the defendants are all collateral damage caught in the crossfire caused by the 2008 recession. The overwhelming impression anecdotally available to me and, I suspect, to members in their constituency clinics, is that these people are sub-prime borrowers who should probably never have been given mortgages in the first place. It is not their fault that public housing was unavailable back then. The crisis is not that these people are heavily in debt, it is that when they are eventually evicted, and they will be unless the committee acts promptly, there will still be no public housing for them.

Members of the committee should brace themselves. This is the Joint Committee of Finance, Public Expenditure and Reform and Taoiseach. Evicting one occupier costs money. The wholesale eviction of many thousands over the next four or five years will cost millions of euro and the taxpayer will foot the bill. A judgment of the European Court of Human Rights regarding a difficult eviction said:

The council applied to the High Court for enforcement of the order for possession. On 24 July 2000, the High Court ordered the sheriff to execute the warrant for possession. The sheriff’s officer, the bailiffs and the West Yorkshire police carried out a planning and risk assessment. The sheriff’s officer attended the site and requested the applicant to vacate the plot. He refused.On 1 August 2000, early in the morning, the council commenced enforcement of the eviction, in an operation involving council officers, the sheriff’s officers and numerous police officers. The applicant stated that also police helicopter, police dogs, control centre, numerous police vehicles and detention vans were employed.

The operation lasted five hours. The judgment continued:

The applicant stated that it was not until late afternoon that their own caravan was returned to them. During 3 August, the Council returned their possessions, including a washing machine, drier, microwave, gas bottles, kettle and clothing. This was dumped on the roadside some distance away from the applicant’s caravan. The Government stated that on 1 August the Council removed from the plot to safe storage goods and personal property that the applicant and his family had failed to take with them.

I predict that sometime soon after the banks have sold on their junk mortgages to the private market, county registrars will be presented with court execution orders to be executed, not a couple of times a month but ten or 12 times a week. Who is going to pay for this expensive procedure? The public purse. Taxpayers will spend millions of euro on evictions. Does that sound right to the committee?

The graph I have reproduced in my statement was taken from the Nevin Economic Research Institute's working paper entitled Ireland's Housing Emergency. It shows a relatively flat level of repossessions at 150 per quarter until the beginning of 2014, when the figure doubled overnight to in excess of 300. Why so? What event caused this change? I can think of no significant factor that might account for the sudden change other than the sudden arrival of vulture funds into our distressed mortgage mess. If that is so, one must presume that if the banks are now proposing to finally sell of their huge numbers of deeply indebted loans to the private sector, perhaps increasing the non-bank proportion of non-performing housing loans fivefold from less than 10% to over 50%, we can expect a further significant jump in repossession cases. There were 41 cases of repossession on Thursday last. In two years' time, the average list might be 200 per sitting. On any cost-benefit analysis, this is taxpayers' money down the drain. It is only a first payment of the many additional bills that must be paid for when the homeless are being provided for.

In the paper that I furnished to the committee, I quoted parts of Professor Kenna's book concerning Irish legislation on homelessness. He sends his apologies for not being able to attend today. In his book, he made the interesting point that, under the 1998 Act, homelessness was defined as a first step in Irish law to identify the rights of the homeless in order to underpin them with some legal protection. I quoted him on page 3 of my submission. In his book he said, "the Housing (Miscellaneous Provisions) Act 2009 creates a new approach to housing need.", and made the following technical point:

This represented a conceptual shift from the notion of “in need of such accommodation” of the 1988 Housing Act, thus defining housing need within a new and narrower focus ... The criteria has shifted from the notion of housing need in the universalist or basic needs sense, to the newer eligibility for “social housing support.

What he really means is that it is Government or national legislative policy not to cater for the homeless but to start a process of allocating as between different sectors of society. That involves competing interests and competing claims between different types of homeless persons. It is alarming to think about the amount of litigation that will proceed on the basis of arguments between different classes of people who claim to have a higher priority for accommodation, even on a temporary basis, than the next group. The number of cases will start to skyrocket.

I have brought with me a copy of a report from the House of Lords in England dated 2 April 2015. In it, Lady Hale describes a claim by a lady with five children who was told that there was no property available to house her temporarily in Westminster and so she was offered a house in Milton Keynes. The person concerned challenged the offer and insisted she should be given a place in Westminster or in the next borough down the road. The case went as far as the Houses of Lords in England and the person won her case. That is the kind of litigation that we will be faced with if we are going to deal with the housing of the homeless on the basis of allocating scarce resources. That seems, unavoidably, to be where we stand because we do not have social housing.

Is there a will? An ad hocgroup behind me has promoted and lobbied this action. They asked me about it and I told them not to expect the banks to find a solution. They said there is a will but nobody can suggest a way. They have turned to their sworn enemy, namely, the grinding wheels of the law and asked whether the law can help sort this out. I said that the banks are trying to figure out how to sell and the Government is trying to figure out how to buy. This seems like an opportunity to sit down and do a deal.

A headline in last Wednesday's edition of The Irish Times read, "Banks ponder shifting troubled loans off balance sheets as ECB pressure mounts." The banks are trying to sell. The Government or somebody who may be operating off-balance sheet should be buying.

There is political consensus, cross-party political will, to secure, as a primary objective of public policy, the retention of families in their homes. I quoted from both the Fianna Fáil and Fine Gael manifestos. I am sorry but I did not look at the Sinn Féin manifesto. I also quoted from the action plan put forward by the former Minister for Housing, Planning, Community and Local Government, Deputy Coveney where he proposed, at page 49, that we should ask the NTMA to examine the feasibility of establishing a funding vehicle that could be capable of facilitating investment in social housing in such a way that does not impact on the general government balance. On the same page, it is stated, "If significant [changes] in respect of both the commerciality and the on-/off-balance sheet treatment of such a vehicle can be addressed satisfactorily, the objective is to establish a Special Purpose Vehicle (SPV) by early 2017 to acquire properties". I am not sure what progress has been made on that proposal. It is obvious, however, that progress needs to be made.

My proposal is simple. Believe it or not, it involves a small rejigging of the position of the possession order as between the mortgager and mortgagee - as between foreclosure and redemption - so that those in occupation of the premises will be allowed possession pending sale. So, they have lost the right to live there, the place is going on the market, the place will be sold, there will be a date for the completion of the sale and, at that point, they will be obliged to quit. They will not be evicted until the property is actually required by the new owner. People may think that does not get them very far. It will., however, because it bridges over that period between the bank deciding to sell and a purchaser, in the form of a co-op, emerging on the scene and saying they are going to buy. If the co-op buys, then those who are occupying the premises remain in possession and their new status can be negotiated. The possession pending sale is the key relief proposed in the Bill in regard to the occupants, and that includes tenants.

The other feature of the proposal is what I like to call the "non-compulsory purchase order". The phrase occurred to me as encapsulating, very clearly, the fact that it is quite obvious that banks want to sell. If they want to sell, we will buy. If they do not want to sell, we will not buy. We are not going to compel them to sell. We are not going to compel them to become landlords. We are simply saying that if they are going to sell then they must give the co-op a put-and-call option. In effect, we have first dibs. We say, "Okay, that property is on the market. We are now entitled under law to make you an offer." The offer, unfortunately, would not be not a very generous one. Under the Bill as drafted, the offer is the value of the property currently on the balance sheet of the vendor. I am sure that is rather disturbing news for banks because they will say they have written down the value to very little. I will say:

Yes, you have and you have got the tax breaks accordingly so you have now got to face up to whether or not you want to accept this offer, which is basically to take it off your balance sheet and put into the balance sheet cash to the same value that is in the balance sheet or refuse the offer. You are quite entitled to refuse the offer. If you want to refuse the offer, then the property will be sold in a fair market either by means of a compulsory purchase order or an order for sale pursuant to court supervision.

Why reinvent the wheel? As I have said, we have legislation relating to co-ops since 1893. The mutuality of membership adds immeasurably to the feeling of community solidarity. Not only that, but it is a model tried and tested worldwide. I have discovered astonishing information on the housing co-operative movement around the world. There are housing co-operatives in Pakistan. The total housing stock in that country is 19 million units, with the figure for co-operative housing stock standing at 2 million.

In Germany, and these are the people who are going to be telling us about our balance sheet and EUROSTAT statistics, 30% of all rental housing is controlled or managed by 1,800 housing co-operatives that is comprised of 6 million housing units. These are people who I think would understand that if one goes to Brussels and says, "We want to put some public money into a co-op system." They would say, "But sure, why did you not ask us before?" We would reply, "Oh, we had to ring Timothy Geithner." The latter is now off the scene.

We now go to Brussels and say "The co-op system is the way to build social housing from here on." We do not actually go out with the local authorities and build; we create co-ops. They create working communities that assist one another and survive market forces.

It is shameful, given Ireland's history of remarkable land reforms at the turn of the 19th century, that we should now think that new ideas might be too complicated. Were they smarter legislators back then? No, but they kept amending and improving until they got it right. By my count, the Oireachtas has already amended the codifying Land and Conveyancing Law Reform Act 2009 four times, on each occasion, changing the law about mortgages. Cui bono? What is sauce for the goose is sauce for the gander. The Oireachtas should change it again and get it right this time.

Here is an interesting historical fact: Ireland's land reforms had a head start on Scotland's. We had the Great Famine. In 1848, shocked by reports of "wholesale evictions on Christmas Day, by the universal practice of unroofing peasants' cottages and by the crowds of starving and helpless families seeking union relief", the House of Commons took action. Chief Baron Palles said, "These facts were then well-known to parliament". Parliament banned them. He mentioned the name of the relevant case and added "I am myself old enough to remember the names of two towns in the south of Ireland - 'Schull' and 'Skibbereen' - being used in general conversation as places typical of the worst horrors of the famine".

The good news is none of the 60 persons I named at the outset will be evicted next December 25 but who here can be confident they will not be evicted the following week? Members are the gatekeepers of legislation. They should not pass the buck.