Martin Mansergh (Tipperary South, Fianna Fail)

I believe the script will be circulated nonetheless.

Most of the proposals by parties in advance of the last election were measures to keep the housing boom going. As far as Government revenues from stamp and other duties were concerned, they were used for economic and social purposes, such as extra special needs assistants, roads, higher pensions, child benefit and benchmarking for the public service. It was not just used for the benefit of property developers.

It is a large and complex sector but I want to focus initially on the proposals for a moratorium scheme that would provide a minimum period of 24 months from the time the mortgages first go into arrears. It is a priority of the Government to ensure as far as possible that difficulties in relation to mortgage arrears do not result in legal proceedings for home repossession. Home repossession should be and generally has been the last resort for the lender.

The new code of conduct on mortgage arrears which was published by the Financial Regulator last February applies to all regulated lenders on a statutory basis and replaces an earlier voluntary code operated by the mainstream lenders. This code applies only to mortgage lending activities to consumers in respect of their principal private residence in Ireland. Lenders must distinguish between borrowers who are genuinely unable to pay and those who could pay some or all of the arrears but will not. All genuine cases must be handled sympathetically and positively by the lender, who must explore with the borrower a number of alternate repayment measures.

The requirements of the consumer protection code, including those on mortgage arrears, continue to apply. The Financial Regulator will monitor compliance with the codes through its programme of on and off-site inspections. In 2009 the Financial Regulator undertook an on-site themed inspection on arrears and repossessions handling in selected mortgage lenders. This work is ongoing.

The main features of the code include early recognition of problems, where as soon as even one payment is missed, lenders must communicate with the borrower to establish in the first instance why the repayment schedule has not been adhered to and, second, how the situation may be rectified. There is also provision for active management of arrears problems - a plan for clearing the mortgage arrears can be developed that is consistent with the interests of both the lender and the borrower and having regard to all viable options open to the borrower. Furthermore, there should be an examination of alternative solutions, where the lender must explore with the borrower alternative repayment measures including an arrangement changing the amount of monthly repayment to help address the arrears situation; deferring payment for a period where there is a temporary shortfall of income; extending the term of the mortgage; and changing the type of the mortgage. Even where legal action is being taken, if agreement can be reached, and agreed regular repayments are being maintained, the lender must put a hold on proceedings.

The lender must not seek repossession of the property until every reasonable effort has been made to agree an alternative repayment schedule with the borrower. The code requires a lender to wait at least six months from the time arrears first arise before applying to the courts to commence enforcement of any legal action on repossession. AIB and Bank of Ireland, which have been recapitalised by the State, have extended this moratorium period to 12 months for the duration of the subscription agreement.

Comprehensive statistics on mortgage repossessions have not been kept, but the Department of Finance has obtained reports from lenders covered by the State guarantee. The total of legal repossessions of owner-occupier homes in this year to the end of September by those lenders is 20. In all cases, mortgages were in arrears for over 24 months at time of repossession.

Media reports of repossession cases taken through the courts show that most involve "sub-prime" lenders, who made mortgages available to borrowers who would not have been customers of the mainstream lenders, often because of perceived higher risks. Cases where borrowers stopped payment after a few months, or failed to respond to repeated attempts to contact them, or even abandoned the house, feature regularly in media reports of repossession cases before the courts.

A comparison of repossession figures for IBF members who are the mainstream lenders, not including sub-prime, with figures from the UK Council of Mortgage Lenders indicates UK repossession rates per 100,000 mortgages at 30 times those in Ireland. The number of residential properties taken into possession by Irish Banking Federation members in 2008 was only 99 and, for the first half of 2009, the number was only 70. These figures include some voluntary repossessions and buy-to-let properties. There were very few legal repossessions of owner-occupiers.

Since activity in the property market has remained low, it is very difficult to assess realistic price levels. Many who bought at high loan-to-value rates close to the peak of the market are in negative equity now, but any estimate of how many there are, or how long the position is likely to last is largely speculative. In any event, being in negative equity does not change the level of mortgage payments, so the problems it may cause are more long-term. The Financial Regulator has estimated that only a small proportion of borrowers with the covered institutions who are in negative equity are in arrears on their payments. For the moment interest rates have fallen considerably.

Mortgage arrears continue to be closely watched. The percentage of homeowners in arrears is notably lower than for investors according to the Financial Regulator's retail credit report on the covered institutions. While the numbers in arrears are still rising, figures for the second quarter show a marked slowdown in the growth of arrears from the first quarter. The number of homeowners in arrears for 90 days or more with institutions covered by the State guarantee is currently of the order 15,000-16,000.

The proposal to extend moratoria has the potential to cause serious funding problems for Irish banks, and ultimately for the State itself. It must be emphasised that Irish banks continue to rely to a significant extent on international credit markets for funding. Those markets are aware that Irish banks are heavily exposed to the residential mortgage market. Given that mortgage default rates are much higher in some other countries than here, there is already a perception of risk in connection with the Irish banks mortgage loan books that is higher than is justified. When the 12 month moratorium by AIB Bank and Bank of Ireland was announced as part of the recapitalisation, Moody's rating agency was quite critical. Recently the Fitch rating agency published comment with some negative material about mortgage lending in Ireland. While the banks' funding position has improved in recent months, it is still quite difficult, even with the benefit of the guarantee. It is essential, therefore, that nothing is done to raise further fears about the quality of mortgage loan books. It is fine to have caring attitudes, and we all share them, but we must be careful not to do things that will make matters very much worse for everybody. That also applies to Deputy Ó Snodaigh's proposal for confiscation of properties which may sound good in a rhetorical sense but if it causes a collapse of confidence in the Irish economy, it is not a very bright idea.

The mortgage interest subsidy scheme under the supplementary welfare allowance system provides money, subject to a means test, towards the interest payments on a home mortgage. The number of people being assisted by the scheme has risen sharply from a low base and stands at over 14,000 since the end of September. Applications to the scheme are regarded as lagging unemployment by some months and the increase in numbers is expected to continue for some time. Funding for the scheme has been substantially increased for 2009. A review of the scheme is under way and is expected to be completed later this year.

Those availing of part-time employment, that is, up to 30 hours a week, and-or training opportunities or who are in receipt of basic social welfare payments can receive mortgage interest supplement subject to satisfying the standard means assessment rules. A person is disqualified from mortgage interest supplement while she or he, or her or his spouse, is engaged in full-time employment in excess of 30 hours a week. The assessment for the existing mortgage interest supplement scheme, however, provides for a gradual withdrawal of payment as employment and earnings increase.

Mortgage interest supplement is normally only paid for the duration of the period to which entitlement exists. A community welfare officer may, however, award mortgage interest supplement for a period of not more than 12 months, where the amount of mortgage interest exceeds such amount as the community welfare officer considers reasonable to meet residential needs. This allows time for the person to make alternative housing arrangements.

In excess of 14,000 people are in receipt of mortgage interest supplement, an increase of over 200% over those receiving payment at the end of 2007. Over 71% of those are in payment for less than a year and almost 2,300 are in payment for 18 months or more. Expenditure on mortgage interest supplement was €12.2 million in 2007, some €27.6 million in 2008 and €40 million was included in the 2009 supplementary budget, although it is expected that final out-turn for 2009 may be €60 million. People are expected to make a contribution of €24 from 1 June 2009.

A review of the mortgage interest supplement scheme is ongoing and this involves representation from the Departments of Social and Family Affairs, Finance and the Environment, Heritage and Local Government with a representative from the Financial Regulator. The purpose of the review is to examine how the scheme can better meet its objective of catering effectively for those who need short-term assistance when they are unable to meet their mortgage interest payments in particular, given the increased number of those in receipt of mortgage interest supplement. All aspects of the existing scheme are being examined and the group hopes to issue recommendations by the end of 2009. The initial output from the review has been the issue of guidance notes on specific and operational issues for community welfare officers operating the scheme.

In addition, the Government funds the Money Advice Budgeting Service, MABS, which provides valuable help to those in difficulty. A new debt protocol agreement has been finalised with MABS and the Irish Bankers Federation, which provides added reassurance for borrowers with the most difficult issues. MABS is the main Government-funded service which provides assistance to people who are over-indebted and need help and advice in coping with debt problems. It is important that people coping with debt difficulties take early action and approach MABS for help and guidance. This can be the first positive step for people in addressing debt difficulties. The role of money advisers is to help clients to assess their financial situation, make a budget plan and deal with creditors.

MABS is now dealing with increasingly complex debt situations in respect of clients who present with multiple creditors and debts. There are 53 independent MABS companies with voluntary boards of management operating the local MABS services from 65 locations throughout the country. In 2008, over 16,600 new clients approached MABS for assistance with debt difficulties and the telephone helpline dealt with almost 11,000 callers. In the first nine months of 2009, MABS staff saw some 14,700 new clients. The MABS helpline received over 18,000 calls in the same period.

Funding of almost €18 million has again been provided to MABS to deliver its services in 2009. An additional 19 staff are being recruited for MABS and this will bring money advice staff to over 270 in 65 locations around the country.

The Government is committed under the renewed programme for Government to introducing new measures to protect families having difficulties with their home mortgage payments. The existing statutory code of conduct on mortgage arrears and the recently agreed protocol between the Irish Bankers Federation and MABS on debt default will be further reviewed with a view to expanding the options available for dealing with debt situations, including, for example, the use by banks and lenders of more flexible mechanisms to avoid foreclosure in appropriate circumstances. These could include reduced rates, longer maturity dates, rolling-up of outstanding interest, the bank taking equity in the house or the bank taking ownership and leasing back the property to the resident with rent payments coming off the loan. With reference to the measures adopted in other jurisdictions, the Government will examine ways of expanding its own mortgage-support measures.

In light of the facts I have outlined and having regard to the steps the Government has taken in respect of the code of conduct on mortgage arrears, the additional requirements we have insisted on with the recapitalised banks, the additional resources we have committed to the mortgage interest subsidy and to MABS and to the long tradition in mainstream Irish mortgage lending of repossession being a very rare event, it is disturbing that certain commentators seem to take delight in producing horror stories about what has been called in this House an orgy of repossessions that is always just over the horizon. We heard these stories almost a year ago and we are hearing them again in recent times, yet the number of actual repossessions remains very small.

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