Brian Cowen (Laois-Offaly, Fianna Fail)

I will make a general point before taking up the Deputy's specific question. The Central Bank and the Financial Regulator have set capital levels for the banks to ensure they can absorb losses across all parts of their loan books, including mortgages, and the loss assumptions used by the Central Bank followed an extensive examination of the banks. The assumptions applied were tougher than those used in the EU tests.

The level of default in mortgage books is closely related to the rate of unemployment. Recent data shows a fall in the number of the unemployed in each of the past two months. Reference was made to the experience of American states such as Florida and Arizona in predicting mortgage losses. The Irish and US mortgage markets are different in many respects, including the fact that mainstream Irish banks rightly do not see merit in forcing repossessions in a depressed housing market.

The net cost of resolving the financial crisis is estimated by the Central Bank and its new Governor, Professor Patrick Honohan, at €35 billion. This is a once-off cost, as compared to the €19 billion budget deficit which we also have to address. Anglo Irish Bank's loan book, before provisions, will be almost halved in size after its loans have transferred to NAMA. Very substantial impairments of its remaining loan book have been factored into the bank's capital forecasts. The suggestion that AIB and Bank of Ireland combined will incur the same level of loss as Anglo Irish Bank, because they might have had the same exposure to developers, is not a true reading of the situation as far as the Department is concerned. The steps taken by the Government have been based on the advice of the NTMA, the Governor of the Central Bank and the Attorney General.

There was some suggestion that at least 100,000 mortgages have seen negotiated repayment reductions or defaults. This significantly overstates the situation. The figure is closer to 70,000, which includes restructured payments and the arrears figure of 36,000. The Government is very conscious of the high value placed on home ownership in Ireland and, in particular, the efforts of Irish people to secure and retain their own homes. The Government's social and economic policy objective is that home owners who lose their jobs should be assisted to retain their homes during periods of unemployment. Members will be familiar with the work of the Credit Review Office, which is headed by Mr. John Trethowan.

The repossession rate remains low. Some 86 homes were repossessed in the second quarter of 2010, of which 66 were abandonments or voluntary surrenders. The Government has done much to support those who are in difficulty with their mortgages. We have provided financial help to over 17,700 families through the mortgage interest subsidy scheme. We have increased the advisory services provided through the Money Advice and Budgeting Service. We have introduced a statutory code of conduct on mortgage arrears, which applies to all lenders. We have extended the six-month moratorium on legal proceedings to 12 months. We have refocused mortgage interest relief on those who bought their homes at the peak of the market, with extensions up to the end of 2017. We have established a mortgage arrears and personal debt expert group, which made recommendations in its first report.

The Government has been able to ensure that a uniform process has been established across all banks to deal with people who have mortgage arrears problems. A mortgage arrears resolution process has been set up. It will be incorporated into the code of conduct. Therefore, the uniform process will be binding. Banks will have to negotiate on forbearance with lenders, in terms of interest-only periods or interest holidays being provided where appropriate. An appeals process is in place. Bankers cannot force mortgagees off their tracker mortgages when they are rescheduling. They cannot charge penalty interest if people are co-operating with the mortgage resolution process. Changes have been made to the mortgage interest supplement scheme to help borrowers. There was a time when one could not get the supplement unless one was unemployed, but now one can get it on a means-tested basis if one is working less than 30 hours a week.

Those recommendations, among others - there were over 40 recommendations in the first report - are being implemented. The group we established is due to report again within the next couple of weeks. It is clear that we will consider any further recommendations it makes in that regard. It is important to set out those issues in response to the Deputy's question about the practical steps that are being taken on an operational basis to assist people with mortgage arrears. We are making sure there is a uniform process across the banking sector. We are trying to ensure the banks deal sympathetically with those who find themselves in difficulty, perhaps through no fault of their own, as a result of a change of circumstance. Such issues will be examined further in the context of the second report.

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