Arthur Morgan (Louth, Sinn Fein)

Behind the headlines of the banking crisis, bank guarantees and proposals for recapitalisation lies a human story. The credit crunch and subsequent recession is not only putting developers out of business and constructions workers out of jobs, it also is putting people out of their homes. According to Threshold, every week an increasing number of people are having their homes repossessed because of difficulties in paying their mortgages or are being threatened with illegal eviction as some landlords attempt to hike up rents. This of course is against the general trend in respect of rental rates at present and approximately ten families a week experience such threats. Earlier this year, Threshold estimated that at least seven families were having their homes repossessed by the banks every week and as many as ten families in the private rented sector were being threatened with, or actually evicted from, their homes.

Moreover, yesterday's newspapers reported that according to the Financial Regulator, almost 14,000 people were unable to meet their monthly repayments on home loans. The same report indicated that 1,000 people have run up mortgage arrears with sub-prime lenders. According to yesterday's edition of the Irish Independent:

Figures gathered from 24 mortgage lenders by the Financial Regulator show that 13,931 mortgage accounts were three months in arrears by June this summer. This was up from 11,252 at the end of December 2006, a rise of 24pc over that period.

However, the scale of the crisis is probably worse, as a significant number of cases of voluntary surrenders never make the headlines. While it has been suggested by certain mortgage experts that there may be a substantial number of voluntary repossessions, the exact number may not come into the public domain as the banks will try to keep a lid on it. John Monaghan of the Society of St. Vincent de Paul spoke recently of personally knowing of 16 cases of voluntary surrender, one of which involved a sub-prime lender.

When responding yesterday to the crisis facing families with mortgage and rent payments, the Minister of State spoke with breathtaking arrogance and again demonstrated that Ministers are on a different planet. He accused Members of "foaming-at-the-mouth scaremongering" and "wide-of-the-mark claims" but the facts to which they have referred have been taken from reports such as that produced by Threshold, as well as the number of cases of repossessions that come before the High Court on a weekly basis. Last Monday, almost one third of cases listed before the weekly chancery summonses resulted in an order for possession. This is simple fact, not scaremongering.

It is clear to everyone but the Minister of State that this is a crisis and it beggars belief that his only response is to give people "sound advice on what action to take" and to "warmly welcome the publication by the Financial Regulator of best practice guidance". Despite all the reports of the rising numbers of people who are in default of their mortgage repayments, the Minister of State did not come up with a single new initiative to deal with this emergency. There is no doubt that repossession orders, evictions and defaults in mortgage repayments are tied to rising unemployment. More than 100,000 people have been laid off in the past 12 months and the unemployment rate could rise to 10% by the end of 2009. Due to the Government's mishandling of the economy and the public finances over the past 11 years, take home pay rose at a far greater rate than did unemployment benefit. There is a substantial difference between people's average pay and unemployment benefit. This means that workers who now face unemployment and are on welfare will take a significant cut in their income. As Ireland has the highest mortgages and rent payments in Europe, this obviously has placed the homes of hundreds of thousands of people in jeopardy.

The problem is further compounded by the reported delays of up to 12 weeks in processing applications for jobseeker's allowance. If job losses rise as expected over the next 12 months, the delays in processing jobseeker's allowance can only increase. In addition to the economic impact, the real human costs are almost unquantifiable. Repossessions and illegal evictions significantly increase people's level of housing need and increase their risk of homelessness. As with social housing and homelessness, the Government is failing to address this specific level of need and all indications suggest the problems are going to get much worse.

Nevertheless, many things could be done, if the political will to do them existed. The Government could intervene to halt repossessions and illegal evictions. It could use its political and financial influence with both banks and wayward landlords. The Government could introduce a two-year moratorium on repossessions, while requiring lenders to conclude an affordable mortgage and debt payment arrangement, which would protect a minimally adequate standard of living. The Government also could increase the resources allocated to the money advice and budgeting services, MABS, to ensure that debtors are guaranteed access to MABS personnel when they are negotiating the affordable mortgage and debt payment arrangements. The lending institutions who, together with the Government are responsible for this crisis, should be compelled to suspend interest and other charges and penalties, as these only exacerbate a family's financial distress.

Furthermore, introducing a court protocol to require lenders seeking a repossession on secured debt to be forced to show they have explored all possible alternatives through the above debt settlement mechanism is another option that should be explored. Repossession should always be the last resort and mortgage lenders must be compelled to carry their responsibility for lending recklessly, which has caused the nightmare for many unfortunate families in the first place. To help people who are now unemployed, the Government should increase awareness of, and access to, mortgage interest supplement to assist those mortgage holders experiencing temporary financial difficulties. This would require a reversal of the cuts made in the Social Welfare (Miscellaneous Provisions) Bill which will limit the payment of mortgage interest supplement.

The Government must engage in a similar process with private sector landlords and their lenders, securing a protocol on repayments by developers to their banks; a moratorium on evictions; greater access to MABS for those in financial hardship; and a significant increase in the resources of the Private Residential Tenancies Board to deal with those threatened with illegal eviction.

Repossessions and illegal evictions are bad for families, bad for communities and even bad for the economy. The Government must intervene now and take the necessary steps to reduce the burden on those currently experiencing such housing need, and to halt the growth of families being placed in financial hardship and at risk of homelessness by lenders and by some landlords.

The proposed recapitalisation scheme may provide a golden opportunity to tackle the impending housing crisis that faces us. While speaking to an Oireachtas committee on 14 October last, Mr. Patrick Neary, CEO of the Irish Financial Service Regulatory Authority, told us that such speculative lending to the construction and property sectors in the State amounted to €39.1 billion and that he anticipated "losses on property-related loans". He also stated that "increased provisions and write-offs will be necessary".

Mr. Neary also revealed that a PwC audit of the six largest Irish banks had found that €15 billion of the lending was secured on those properties alone. Can we learn anything from the Swedish experience in the early 1990s, where a similar case of ill-advised commercial lending in a property boom led to a collapse in its banking system? As part of the Swedish bailout, its government forced banks to write down losses and sell off the distressed assets. In the Irish case, some of the assets in question are the land banks amassed by speculators, unfinished housing estates and commercial retail ventures that should be sold off as bad debts.

The Swedish Government formed a new agency to supervise institutions that needed recapitalisation and another that sold off the assets, mainly property, that the banks held as collateral. In Ireland, we have a unique opportunity to return control of the planning process and commercial development to local government by breaking up the property cartels that have been holding Dublin city and many other towns across this land to their own development strategy, wilfully thwarting local council development plans. As property prices fall and these assets are sold, local government could provide a unique route to dealing with the growing housing crisis and the taxpayer could be given a better return for the investment in the banks, rather than let cash-strapped developers sit on these assets now only to make a significant profit on them in the decades to come. I hope the Minister will heed some of these suggestions.

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