Tony McLoughlin (Sligo-North Leitrim, Fine Gael)

The decision by the Government's economic management council to establish a working group to consider the great difficulties faced by many mortgage holders in this country was very welcome and is a first step in establishing and framing policy that will try to tackle this widespread difficulty in our communities.

The threat of losing one's home or the roof over one's family must be the most devastating feeling for a mother, father, husband, wife or partner to experience. When the majority of these people entered into mortgage agreements with their banks and building institutions between 2001 and 2007, they were comfortable with their payment terms and the purchase price of their homes. They entered into these agreements in good faith. Today, in late 2011, these same people have gone from having two jobs to having one or none. If they have a job, the income related to it probably has dropped by up to 20%, and in many cases the market price of their house has dropped by up to 55%. It is those people in our society who fall into this category that the Government must target for assistance with the publication of this report. Unfortunately, as in every society, there are people who will never honour their financial obligations, who will use this impasse to refuse to pay and may try to ride on the backs of mortgage holders in genuine difficulty who are simply unable to meet their obligations.

There will be many contributions on this report from all sides of the House. I commend the Minister for Finance, Deputy Michael Noonan, and the Minister of State, Deputy Brian Hayes, who will take into consideration all statements and ideas made in the House this week before formally setting out Government policy. The Minister, Deputy Noonan, stated, "It is incumbent on the State authorities and the banks to fully consider [the problem of mortgage difficulties] and for the financial institutions to bring forward other innovative solutions which will help this difficult and complex problem."

Many commentators expressed their disappointment in this report, identifying the lack of debt reduction or write-off as their main points, although it is estimated these would cost the State €14 billion. While I agree that a total write-off cannot realistically happen, I agree with the proposal that each case must be treated on its own merits having regard to the individual circumstances. This is the key to moving forward.

How do we propose to advance this proposal and how would it work? The current industry approach for dealing with arrears and pre-arrears is the mortgage arrears resolution process, MARP. This process is an important foundation to the individual case assessment approach in which the mortgage holder completes up-to-date information on his or her current income and commitments and the bank considers alternative repayment arrangements. Eventually the mortgage holder can appeal to the Financial Ombudsman or accept these recommendations.

The Minister, the banks and the mortgage arrears and personal debt group should revisit MARP to beef up the resolution process and should consider setting up an independent agency which would mediate between the mortgage holder and the lending institution. Recommendations from this process would be binding on all sides. Debt reduction must be considered as part of this process. Let us consider a mortgage holder whose income has dropped by 50%, the value of whose property has dropped by 45% and who is now in negative equity. If the borrower has been paying according to the terms agreed up to the time of job loss and has a history of honouring his or her financial commitments, it is important that this borrower is given the opportunity to get back to a position in which he or she can continue to pay for the home as he or she was prepared to do during the good times.

On the other hand, if the bank pursues the borrower to the end, evicts the householder and tries to sell the property, can it realise the principal it invested? It cannot and the lengthy and costly legal issues only exacerbate the bank's position. If the bank were to sign up with an agency along with the borrower, it could allow a percentage of the principal to be written off or parked for ten years in line with property prices and allow an interest-only option for one or two years. Then, if at any time the personal income of the borrower were to improve, the case could be reviewed. It is in the best interest that this approach is embraced or considered by our banks because a plethora of repossessed property on the market would further devalue the properties of the banks' other customers. An agency such as I suggest could be similar to the money advice and budgeting service, MABS. This approach would only be successful if the banks agreed to sign up to a process that is binding on all parties and administered and regulated by the Financial Regulator and the Central Bank.

The idea of split mortgages, as contained in the report, is worthy of consideration and should be so considered by any such agency. It needs to be considered alongside the fact that it may take up to 25 years for property prices to reach the heights they did in 2006. For that reason partial write-off of debt needs to be part of any arbitration process.

I welcome the recommendation on the establishment of a mortgage advice and support function which will act as an adviser to troubled mortgage holders. I argue strongly for the Minister to consider going further and developing an agency that would work case by case and would be financially supported by the banks and the Government to ensure it does not get bogged down and has a realistic chance of working.

There are many other recommendations worth considering in this report. There are many honourable people in my constituency and those of all Members who find themselves in an impossible position. They want to pay but cannot and want to find a solution which involves paying for a house that has a realistic value and a realistic mortgage premium. I call for a mechanism for those people in order that they can meet their obligations in a realistic way through mediation and an input from both this Government and, most importantly, from banks who have been afforded the same opportunity from this State.

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