Bernard Durkan (Kildare North, Fine Gael) | Oireachtas source

I apologise for arriving late but I was otherwise engaged. Whether I was engaged productively, I do not know. We will have to wait and see.

Mr. Joyce made an important point on indebtedness in general. It was bad lending that was visible to all and sundry at the time. It had to be. Otherwise, those concerned could not occupy the spaces they were in at the time. We should not forget that the Central Bank, which allowed all these things to happen, was also represented at the European Central Bank, further extending the ridiculous nonsense that went on and what they called hope value for property. Mortgages were granted on the basis of paying interest only. What was that about, for God’s sake? What did the lenders expect to happen? Did they expect the interest to go away or never to include the capital? If they did, why did they not say that? They did not do so. They quickly closed over and made sure the capital was involved as well, putting the borrower in a worse position than before.

Let me outline the problem I see at this stage. The unfortunate removal of the ban will have an effect it is not meant to have and people will get scared. They are scared enough already. On the way to and from work, we see people who live in tents on the footpaths and so on. That is not the way it should be. It is a reflection on our society, especially when we had many methods available to help people out until things got out of hand. The lending institutions felt that, after four or five years, people should be able to make all the payments all over again. It does not work that way. Massive borrowings multiplied on top of the unfortunate borrower. It does not go away.

I once knew a guy whose response to those in arrears with their mortgages was to increase them by a quarter to regain lost ground. I responded by asking how the people got into arrears in the first place and why a bigger burden should be piled on. It was the daftest thing I ever heard.

There are two or three points we need to be aware of. The local authorities largely opted out of the business of loaning, including to first-time buyers. All the initiatives such as private subsidised sites were phased out quickly, which was not right. Then the local authorities took the same tack as the banks. They have credit committees that assess the ability to pay of the individual householder or potential householder. That is fine but the only problem is that local authorities are not banks but housing bodies. They have opted out. The market was filled by a range of bodies, including those we are talking about, because they were the only ones available. It was not a good decision, and we will still be paying the price in another ten years.

Two points come to mind on solving the multiplicity of problems in front of us now. In this regard, consider the deposit required by people to house themselves for the first time, for whatever reason, even though they may have been in a rented property for five years, and in some cases ten, never having had arrears. They have to come up with a massive amount of money to buy a house. It is crazy stuff and totally contradictory. It is as if somebody designed the system in such a way as to ensure tenants could never get out of their rented houses. The other ridiculous situation is that, if it is possible to get an affordable mortgage, its value is less than rent would be in many cases.

I referred last week to the things that annoy me about the insolvency situation and drive me up the wall. Consider the circumstances that arise when six months, or maybe two or three years, are spent trying to put together something a borrower can live up to. That is the important part because it is no good coming to an agreement the borrower cannot live up to. One may be just about to close a deal on which everyone agrees when some insolvency group somewhere announces that a 95% write-off took place. The borrower immediately asks why he or she cannot have such a write-off. We discussed this here last week. When you dig deep, you find the borrower referred to by the insolvency group got no write-off as the debt was an impossible or residual debt sitting on the counter that nobody could deal with because it was uncollectable. The lending institution would have dug around the tree, taken away the assets and sold them off individually, with nobody knowing the price. Then, asset stripped, the property would have been in negative equity, with no collateral at all. Obviously, such a property would be a burden on the lender’s counter so the lender would decide to write it off as uncollectable, or as a debt that could never be paid off because of the lack of resources and assets. The problem, as we know, is that if one knew what was achieved through the sale of the various assets in the run-up, we would be in a better position to make a judgment, and so would the client.

Incidentally, not all the lending institutions were bad. Some of them went to great lengths to help out and recognised there was bad lending and that they had some responsibility for it. Occasionally, clients did not live up to scratch and decided they could do better. Usually, one did worse. Therefore, there are many issues. I recognise those lenders who were amenable to settlement and who met the client, with the public representative or other individual, to do their best to be accommodating. The crucial thing is the affordability of the settlement. It is no use at all if it is not affordable.

I refer to all the unfortunate people terrorised by the magnitude of the task before them. When the curtain was lifted, they discovered they could never repay their loans, amounting to multiples of what they ever had. Many of these people had been visited by gurus from the financial institutions who told them they were sitting on a goldmine, that they were wasting their money and that they should invest it so as to live happily ever after. The sellers knew full well what they were selling at the time. Then the crash came and the borrowers owned nothing, but the lending institutions knocked on their doors fairly quickly. I, and I am sure the Cathaoirleach, have dealt with cases in which the banks were on the telephone three, four or five times every day and visited borrowers at home, and in some cases their workplaces, to remind them of their responsibilities. In other words, the banks were terrorising the borrowers into circumstances in which they would be frightened.

Some borrowers were so frightened that the whole scenario ended up, unfortunately, in disaster and serious issues took over where people were not able to live with it. These are statistics. Nobody says anything about these people and they have vanished into oblivion. When I talk to staff of lending institutions about what happened, all they say is, "That was really unfortunate, that is the best we can do about them." In some cases, people up to nearly 60 years of age were inveigled into arrangements to buy a house that they did not need because they already had quite a good house. When it was all over and done, the house that these people had was gone and the house that they borrowed against was also gone because it was full of negative equity.

The first thing that should always be remembered is that a full and final settlement is the only way to go about any of these cases The financial gurus tell me that it is not the way and there are other ways. My answer to them is that there is no other way because when a full and final settlement is not effected, there is always the possibility that the lending institution will come back, even though it is invisible. In those situations we must be vigilant again because these kinds of things will all happen again.

Like everyone else, I have talked to clients. I have no way of verifying this because there were fraught family law cases going on at the same time where everything became unclear but one half of the family were disinherited to the extent that they were homeless or near enough homeless afterwards. All of that was because maybe the other partner in the household had where he or she may work for a lending institution or have major interests in that area. All kinds of funny things occurred. By saying that I do not mean funny as in mirthful but peculiar things happened regarding the signing of documents and the discovery of documents that never took place. Last night I had to deal with such a case. All the people who were involved in that, except the borrower, disappeared. They could not be met at a counter or at a meeting. One could not meet them anywhere full stop. That situation still exists when we approach for a full and final settlement and people will be asked whether they have an offer. I do not know what I am offering so I need to know the following. What is their attitude? Who is going to make the decision? Is it the guy upstairs or the person on the front desk who will make the decision? I know that it is not the poor, unfortunate person on the front desk. Some of those people are very nice, very compassionate and very anxious to help people but that is not the same when a matter goes to the gurus upstairs who say that a loan is unsustainable. It was unsustainable on the day the money was lent in the first place but there is no penalty for that but there should be. I believe action should be taken because people were led astray, particularly when the lending institutions were in possession of financial knowledge that was good or bad.

Finally, like the Chairman, I have no problem with the committee inviting various groups to come in here. We will certainly find people who will give us examples of cases that they dealt with. If people do not want to come before the committee, we can talk about these matters in their absence but it is fine as long as they have been informed.