Mr. Lorcan O'Connor:

I thank the Chairman and the committee for the opportunity to contribute to its deliberations on the issues of housing and homelessness. I am joined by Ms Anita Jordan and Mr. John Warren. It is hoped that following the opening statements we will be able to answer any questions committee members might have.

As members are well aware, mortgage arrears is one issue among many that impacts on the issues of housing and homelessness. While it is not possible to keep every borrower who is in financial difficulty in their home, my message today is that there are a number of options open to such borrowers, that the personal insolvency Acts offer statutory protections to people in relation to their family home and that these should always be considered in advance of allowing repossession proceedings to commence.

I will start by giving the committee a brief overview of the Insolvency Service of Ireland, often referred to as the ISI. The Insolvency Service of Ireland is an independent statutory body established in 2013. Its main objective is to return insolvent persons to solvency. The service offers four debt solutions, including the debt relief notice, which is a solution for borrowers with very little income and few assets. This solution allows for the complete write-off of debts up to €35,000. The second solution is the debt settlement arrangement, which is a solution that allows borrowers to settle their unsecured debts for a period of up to five years, with any remaining balance at that point being written off. The third solution is the personal insolvency arrangement, known as the PIA. It is similar to the debt settlement arrangement in that it, too, deals with unsecured debts but it also settles or restructures secure debt, which includes family home mortgages. It also contains some specific protections for borrowers in mortgage arrears who wish to retain their family home. The ISI also administers the functions assigned to the official assignee in bankruptcy.

Personal insolvency can result in mortgage default and the ultimate loss of a home.

For tenants, personal insolvency can have a similar outcome due to an inability to meet rent obligations. The solutions provided by the Insolvency Service of Ireland, ISI, can help in either scenario. Our debt solutions deal with all levels and types of personal debt and they are life changing. In appendix 4 in our submission, I have shared some of the feedback from our customers on the solutions provided by the ISI and what it has meant for them. The reality is that thousands of borrowers in Ireland are insolvent and in fear of losing their home. For the short time I have today I intend to focus on the protection our solutions can provide to mortgage borrowers, in particular the personal insolvency arrangement, PIA, which enables a borrower to remain in the family home.

It is worth highlighting the importance of being able to remain in the family home and the fact that it is recognised in the PIA. A PIA is a court-approved agreement between creditors and a borrower that allows for the restructuring and write-off of debt while keeping the borrower in the family home in the majority of cases. We know that borrowers can feel intimidated at the prospect of dealing with a lender and we also know that when a person is behind on repayments, phone calls and letters from creditors can be overwhelming. Once a borrower decides to apply for a PIA, the personal insolvency practitioner will help in the negotiations with the lender. The first stage in the process involves the court issuing a protective certificate, which means the borrower is immediately protected from the lender, for an initial period of 70 days, from their creditors either enforcing their debts or contacting them while the personal insolvency practitioner works out an arrangement that will keep the people in the family home.

We give examples of successful PIAs in appendix 1 of our submission and features of many PIAs put in place to date include solutions like extension of mortgage term; a reduction in mortgage interest rate; and write-off of unsecured debts, with the average being 90%, which is important as the demands from unsecured creditors can often undermine an otherwise sustainable mortgage on a family home. We have also seen a large number of split mortgage solutions, with complete clarity as to what happens to the warehoused amount. That is certainly an important element and a necessity according to legislation. We have also seen some write-off of negative equity on the mortgage. In the minority of cases where creditors have rejected a proposed PIA developed by a personal insolvency practitioner, since the end of last year insolvent borrowers can now seek a review by the court. This legislative enhancement, in effect, means the so-called "bank veto" has been removed.

I will turn to the sensitive issue of repossessions. The fact that a borrower is facing repossession does not necessarily mean he or she will automatically lose the home. The Land and Conveyancing Law Reform Act 2013 contains a provision allowing for the adjournment of a home repossession case for up to two months to enable a borrower consult with a personal insolvency practitioner to explore if a personal insolvency arrangement can be put in place. Over the past year, representatives of the ISI, in association with the Money Advice and Budgeting Service, MABS, were present at courthouses around the country, providing borrowers attending repossession hearings with information on their options. It is important for borrowers to realise that even if they have received letters stating that their mortgage is unsustainable or threatening repossession, it is still not too late to sort out their financial difficulties. The first step is to contact a personal insolvency practitioner.

In the submission at appendix 1, I have included examples of some real-life cases where borrowers were faced with repossession and in court but, having contacted a personal insolvency practitioner, they reached a solution that kept them in the family home. The first case described is a husband and wife with two school-going children. They consulted with a PIP last summer but had resigned themselves to being homeless by Christmas. They had already contacted the local authority to see if alternative accommodation could be made available but were told that, unfortunately, the list was so long it would be highly unlikely to come about.

It just so happened that a personal insolvency practitioner was in court that day. Those borrowers had not been aware of the existence of a PIP or what they could do, but having engaged with that PIP, the PIP was able to put a solution in place and, I can only assume, the borrowers were able to enjoy that Christmas in their family home. They now have certainty in respect of that family home until the death of the longest-surviving spouse, so they no longer have to worry about losing that home, in effect, for the rest of their lives.

Where an insolvency arrangement under the personal insolvency Acts is not possible given a person’s particular circumstances, bankruptcy may be the right course of action for him or her. As members will be aware, the bankruptcy term has recently been reduced to one year and under the amended bankruptcy legislation the family home can revest in a bankrupt person in specific circumstances. The official assignee, the official who manages the estates of bankrupts, is based within the ISI. Appendix 2 in the pack given to members sets out how he deals with the family home in bankruptcy. I am happy to talk through this appendix if members wish me to do so. While there are specific statutory protections around the family home under the personal insolvency Acts, it is not correct to say that a borrower will automatically lose his or her home in bankruptcy.

I now wish to turn to the issue of communications and supports for debtors. Since our establishment, the ISI has directly assisted over 3,000 borrowers. When one considers the number of people often involved in respect of mortgages, including extended family and children, one can multiply the number of people affected. As members will see from the testimonials contained in their pack, the feedback from those borrowers who have availed of our services is very positive. While not everyone in financial difficulty will need to avail of our services, and borrowers should always try to resolve their difficulties with their lender in the first instance, it is also clear that the ISI needs to get the message out to those in need that there is help available.

In May of last year, the then Government agreed a number of measures to support mortgage holders who are in arrears. Included in these measures was a requirement for the ISI to have a sustained awareness campaign. The ISI recognises the importance of communicating effectively and we have developed a campaign specifically aimed at debtors, known as the “Back on Track” campaign, to drive awareness of our debt solutions. We have developed a new website and new materials that are easy to understand, copies of which I have left with the committee secretariat. A variety of outreach and awareness-raising initiatives are also ongoing, along with various activities, including advertisements in several media. The ISI continues to expand this campaign, with plans for a renewed campaign to be rolled out later in the year.

In January of this year, the Minister for Justice and Equality announced a new scheme of access to independent legal and financial advice for those in mortgage arrears. In recent months, the ISI has been working closely with a number of other stakeholders, including the Department of Justice and Equality, the Department of Social Protection, the Citizens Information Board, MABS, the Courts Service and the Legal Aid Board to launch the scheme. It is expected to be launched in the near future. I believe this scheme will play a very important role in helping to address the issue of mortgage arrears. Borrowers will now get the appropriate professional advice they need when they need it and there will be no cost to the borrower. MABS will act as the gateway to this service and will refer cases to personal insolvency practitioners where appropriate.

It was clear to all observers during the recent election campaign and during Government formation talks that housing and homelessness are at the forefront of people’s minds and, by extension, so was the issue of mortgage arrears. The debt solutions offered by the ISI, which I have briefly outlined, can help. Whether it be a mortgage holder in arrears or a tenant unable to meet their rent due to other debts, our solutions restore people to solvency, aim to keep them in their homes and allow them a fresh start.

Many of the 3,000 borrowers we have helped faced the threat of losing their home but no longer have the stress or the strain that insolvency can cause. I expect the numbers availing of our services to increase significantly in the coming months. This will be assisted by the new service of access to advice, to which I have just referred, further publicity campaigns, additional commitments contained in the new programme for Government and, no doubt, the valuable work of this committee.

I thank the Chairman for the opportunity to make these opening remarks. I am happy to take any questions.