Ciarán Lynch (Cork South Central, Labour)

An examination of the census figures demonstrates how unsustainable the property market had become. Between 2002 and 2006, the number of households in Ireland grew by 181,563 with an additional 260,718 housing units being built. Up to 80,000 houses were built as holiday homes or empty investment properties. It was unsustainable that 30% of new housing should be empty. Despite this surplus, house and land prices continued to rise suggesting demand was even greater than the unsustainable supply. It was, however, a false demand buoyed up by falling credit standards, light-touch regulation, low interest rates, speculation and tax incentives on property.

This led to the establishment of an unholy trinity, a collusion between bankers, large developers and Fianna Fáil. While the property bubble may have burst, who believes this relationship has also ended? During this time we witnessed the reckless game of passing on liability to home owners that was acted out by developers and bankers. A developer would borrow money from a bank to buy land for a housing project at an overinflated price. The developer would then sell the housing units to purchasers at overinflated prices. In turn, the banks facilitated the purchasers with loans, thereby transferring the developer's liability to the bank on to the purchaser.

What did the bank do with these mortgages, many of them for 35-year terms, which could have been tangible assets in the NAMA process? They sold those mortgages on the international market and with that money gave the cycle a kickstart again by lending money to developers at even more inflated prices. This went around in circles while every September the developer went to the Galway tent, paid his dues and ensured that the game continued.

Another aspect of this game was that the rules for traditional loans went out the window, 100% mortgages were introduced, the ratio of wage to value of home was abandoned to the extent that a first-time buyer was offered a loan of three to four times his wage and the scheduled payment over 20 years went up to 35 years. The basic rules for buying property were abandoned in the past decade and a half, with Fianna Fáil in Government observing this, while bankers used light touch regulation and developers laughed all the way to the bank, knowing that there was a killing to be made from the punters.

Even affordable housing went out the window. The notion that a house bought from a local authority for €250,000 was an affordable house was a nonsense. There are now almost 4,000 unsold affordable units across the country because they are overvalued and the punters know it. Those houses are probably worth €100,000 in the market. The banks threw any duty of care out the window. Their bottom line was to look after the shareholder, while the lender would be looked after by other means. The fundamental rule of banking is that banks exist to serve shareholders and that will remain as we go into the NAMA process.

There was no consideration given to the idea that lenders might become over-stressed because the group-think of the unholy trinity of Fianna Fáil, bankers and developers was that the property values would increase for ever. They did not care if the home purchaser defaulted on his or her loan, or if they had to repossess the house because they believed they could make a profit on the asset so they lent like hell.

We are engaged in the subordination of democracy with what may be described as "the namafication" of every policy that goes through the Dáil. We witnessed that this afternoon as the Minister of State at the Department of the Environment, Heritage and Local Government, Deputy Michael Finneran, indicated that social housing policy in future will be determined by long-term leasing and letting. The priority is not for local authorities to purchase homes to make a long-term investment for sustainable community development but for them to get out and lease vacant units. That is "namafication" of social housing policy. It is also present in the retail sector where the downward rent reviews are held up although the Bill was passed on 1 July last to create an inflated market value on properties for the NAMA evaluation. That is causing serious difficulties for businesses that operate in the retail sector where the cost of rent far exceeds the costs of employment, energy and other factors, which is outside the European norm.

Everybody expected that NAMA would offer some redress to the ordinary person who bought a home in recent years and now finds that not only is the bank doing him over for his mortgage repayment, but that while the banks are being bailed out the Government is not stepping in to protect him. It is estimated that there could be 35,000 families in mortgage arrears, an increase of 150% in the past 16 months. From 1 December 2009 legal proceedings dealing with mortgage difficulties will shift from the High Court to the Circuit Court. In 2008, the High Court issued 120% more repossession orders than in 2007. When the Circuit Court deals with these cases the legal costs of repossession orders will be significantly reduced, making it inevitable that these figures will increase substantially. The Irish residential market is worth €150 billion and the value of arrears is estimated at almost €3.5 billion, or 2.3% which is up from 1% in the same period last year.

As this crisis continues to grow we are witnessing the most expensive Bill ever moved in this House in order to bail out banks and developers that colluded, with the Government's assistance, to create the problem. There has been no legislative action. The only action to date has been to deal with a voluntary code that the Government states it is observing.

I propose the establishment of a national home mortgage agency to deal with stressed mortgages and help individuals and families remain in their homes. The consequences of families losing their homes are well known. The agency would require a legislative framework to set out the criteria by which mortgage difficulties would be managed. It would set out the obligations of Government, lending institutions and borrowers.

In essence, the process would be an independent assessment which would establish the sustainable amount for distressed borrowers and what they could pay each month. The agency would bring together borrowers, lenders and Government so that all stakeholders would share in the cost of ensuring that homeowners could afford their monthly mortgage repayments and stay in their homes. Furthermore, it would set the parameters for mortgage assistance for those who are suffering because of the economic downturn and would set out the eligibility factors ensuring that borrowers make reasonable repayments and that this is not just a cop-out for them. It will also involve the rescheduling of mortgages along with eligibility factors and a requirement that the borrower would be in regular contact with his or her lending institution. The independent agency would review the eligibility of each applicant and assess whether the borrower should increase his or her payment or be entitled to an extension of the reduced payment.

I propose a first-stage approach that will lead to the beginning of badly-needed normalisation of the residential property market whereby working people can afford to buy their homes at just prices, and expect to repay their mortgages within a predetermined and reasonable period with the assurance that they are protected in so doing.

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