Ciarán Lynch (Cork South Central, Labour)

In the context of amendment No. 79, the Labour Party understands that the National Asset Management Agency Bill is emergency legislation. The mantra the Minister has continually repeated is that this is an issue of systemic importance. Another issue of systemic importance is that of people being in a position to keep a roof over their heads. At present, residential mortgage debt in this country is approximately €300 billion. It is believed that stressed mortgage debt stands at €3.5 billion. Even in the context of the exaggerated figures relating to the legislation before us, €3.5 billion is a significant sum and it is one that is of systemic importance.

Amendment No. 79 proposes that:

It shall be an obligation of a participating institution not to commence or pursue proceedings for repossession of a principal private residence unless the arrears of any mortgage are in excess of 24 months, provided the mortgagor provides reasonable co-operation within his or her means and ability with the participating institution.

In essence, the amendment relates to the owner-occupiers of homes. It does not refer to those who made or tried to make massive incomes in recent years by investing in an overheated property market or to those who bought second homes in the west or in the western part of Cork, the county in which I live. The amendment is concerned with those who go to work each day in order to earn the money that will allow them to keep a roof over their heads. The amendment sets out a framework whereby the Minister may, either through primary or secondary legislation, provide an apparatus or structure that will allow people to negotiate the next 24 months with some degree of hope that there is light at the end of the tunnel.

It would not be unusual for most Members of the House - I include myself in this - to have been obliged to claim social welfare in the 1980s. I signed on so often during that decade that I know my PPS number off by heart. If one asks a member of my generation their PPS number, he or she would be able to recite it quicker than his or her telephone number. The fundamental and significant difference between the 1980s and now is that while people might not have had any money during that decade, they did not accrue the same level of personal debt with which their current counterparts are saddled. In the 1980s, people may have delved into the black economy in order to get money to pay for shoes for their children or to buy something for Christmas. However, they did not carry massive mortgage debt.

During the period to which I refer, the price of one's house would probably only have been three or four times that of one's car. If one's car was worth £9,000, then one's house was probably worth between £27,000 to £36,000. In recent years, if one owned quite a good car valued at €40,000 or €50,000, the value of one's house would have been several times these amounts. That is just one way to highlight how out of kilter the property market became during the past ten years. The latter occurred as a result of a number of factors.

In the first instance, developers had established a relationship with the banks that was a win-win scenario for both. The former were purchasing land at overinflated prices but they were also selling houses at overinflated prices. This meant that the banks were able to take advantage of extremely attractive arrangements when it came to offering loans. In addition, a range of incentives was put in place by the Government and, in particular, by the Minister's predecessor, Charlie McCreevy. In the early part of this decade, Mr. McCreevy facilitated a situation whereby it became extraordinarily attractive for people to invest in property as a source of obtaining income. This led to the price of houses rising significantly over period of a few months. In April 2006, the former Leader of Fianna Fáil famously stated that certain individuals should commit suicide. At the core of what he was stating was that if people did not buy their houses at that stage, it would cost them more to do so in the future. The Government of the day introduced a plethora of measures which drove house prices upwards.

The key point in respect of this matter is that with any lending practice comes a duty of care. Lending institutions have a duty of care, as does the Government in the context of how it facilitates certain practices. Amendment No. 79 provides for such a duty of care and under its provisions, the State would be obliged to step in and ensure that lending institutions adhere to particular standards in respect of their practices.

The Government has a number of reservations with regard to anyone assuming responsibility for a duty of care in this area. Those reservations were outlined during the debate on mortgage arrears which took place during Private Members' time this week. The Government appears to be of the view that some 20 repossession orders were pursued during the first nine months of this year. The fact is that orders are the final stage of the process and cannot be used as an indicator of what is really happening in the mortgage market. Repossession orders in respect of which a determination is made by the High Court represent only the tip of the iceberg. There is a major crisis on the horizon in this regard and a Government response to it is required.

There are some 16,000 loans in arrears or in distress on the books of the institutions to which amendment No. 79 relates. It is predicted that this number will increase as a result of what will happen in respect of the 14,000 people who are currently in receipt of mortgage interest supplement. Community welfare officers are obliged, after a period of 12 months, to inform those in receipt of the supplement that it will no longer be paid and that they must make alternative arrangements. In such circumstances, the only option usually open to those who have been in receipt of it for 12 months is to engage with their banks in respect of losing their homes.

The Minister will state that the programme for Government envisages a series of measures that will be put in place in the future. The time for envisaging is long gone. Amendment No. 79 does not envision, it suggests how direct action might be taken in respect of this issue. I look forward to the Minister's reply. However, it is critical that he take on board the fact that he has a duty of care in this area.

The ESRI compiled a report on negative equity, as did my colleague, Deputy Wall. The ESRI report indicates that by the end of the year almost 200,000 homes will be in negative equity. This shows that over a period of 12 to 18 months there has been a complete reversal in people's fortunes.

See this speech in context