Joan Burton (Dublin West, Labour)

A number of Deputies asked about the mortgage interest supplement on which I will give some background. The purpose of mortgage interest supplement is to provide short-term support to eligible people who are unable to meet their mortgage interest repayments in respect of their sole place of residence usually because they have lost their job. The supplement assists with the interest portion of the mortgage repayments only and the capital repayment is not taken into account in calculating the amount of the supplement. Approximately 18,000 people are in receipt of mortgage interest supplement, an increase of 340% since 2007. This year we will spend more than €50 million on the mortgage interest supplement.

The Department reviewed the administrative, policy and legal aspects of the mortgage interest supplement scheme and this review was published in July 2010 in conjunction with the interim report of the mortgage arrears and personal debt review group - the Cooney report. The final report of that group was published in November 2010 and its recommendations were considered by the interdepartmental mortgage arrears working group under the chairmanship of Mr. Declan Keane whose report was published in October 2011. The Department supports the key finding of that group, which recommended these changes in the mortgage interest supplement.

When budget 2012 was introduced I announced this change and gave considerable detail. The amendment provides that a person shall not be entitled to the supplement unless, at the time of making an application, a designated person - usually somebody from MABS - is satisfied that the person making the application has engaged with his or her mortgage lender in order to meet his or her mortgage repayment obligations. In any debt settlement process the debtor and lender need to engage with each other. It is not possible to reach resolution or help the person who has fallen into debt and fallen behind in mortgage repayments unless the lender - the bank or mortgage agency - will engage. That is why both reports strongly recommended this approach which provides a mechanism for getting the financial institutions to engage with people who because they have lost their job or for some other reason are unable to meet their mortgage commitments. The purpose of the Department's scheme is to help them with the payment of interest.

The person is required to have engaged with the bank and entered into and to be complying with an alternative repayment arrangement in respect of his or her mortgage repayment obligations. The applicant must have completed repayments for a cumulative period of not less than 12 months. The underlying principle is to ensure the mortgage arrears resolution process, MARPS, functions alongside State supports. Many Deputies will have had dealings with the Money Advice and Budgeting Service, MABS. MABS is empowered to work towards the resolution of banking debts for individual families, which is what Deputies are concerned about. It is authorised to ask the borrower and the lender to engage in the mortgage arrears resolution process, which is something this Government, and indeed my predecessor, was trying to work towards. The arrangements are now there, in this legislation, to achieve this. I have had opportunities to visit quite a number of MABS offices around the State, including in Dublin, Sligo and Tralee, and I have talked to those who are at the coalface, helping people who are in arrears to negotiate restructuring plans with the bank. As Deputies know, the Government is currently preparing detailed, technical insolvency legislation to help people to keep their family homes and structure their way out of arrears.

Deputy Ó Snodaigh referred to the Free Legal Advice Centres, FLAC. I attended the conference it ran last week - I do not know if the Deputy was there - and I have had detailed discussions with FLAC and, I am happy to say, with the Northside Community Law Centre and other public interest law centres as well as with MABS, because their insight into dealing with debt is important. I have also spoken to people involved in the chartered accountants' voluntary assistance scheme and barristers who are involved in voluntary assistance schemes, because I share the concern of the Deputies that this must be dealt with. Unless we can ensure that lenders, that is, banks and financial institutions, seriously enter into negotiations and dealings with their customers, we will not be in a position to help those customers. Mortgage and debt resolution is a complicated issue, but at the basic level one must have two parties who are willing to engage so they can come to an arrangement that protects the family home while helping the individual who is suffering the weight of indebtedness. In most cases this indebtedness arises from the fact that people took out mortgages to buy properties at very high prices at the height of the boom, because they thought they were doing the right thing, and then found they had lost their jobs or another source of income and were no longer able to service their mortgages.

We have to work at persuading the lending institutions, in particular, to engage. This is what both groups dealing with mortgage arrears suggested, and the Department examined it in detail. The previous Government accepted the recommendation, as has this Government. It is critical to helping people who are in mortgage difficulties. This is what the amendment is about. I hope it will be of significant assistance because, in order to obtain the mortgage interest supplement, the lender will have to engage in the mortgage arrears process. Most Deputies will be aware that when people go to MABS with difficulties, the MABS officials help them work through the source of the difficulties, their income and what they have the capacity to pay. Simply to have an automatic commitment to giving mortgage interest supplement to the lender, even if the lender does not engage with the borrower, is not necessarily best practice. This provision is supposed to help people by ensuring they go into the mortgage resolution process. If Deputies have had opportunities for contact with MABS they will know that a feature of the recession is that people have complex debt. They do not have only mortgage debt but also car loan debt, credit card debt, credit union debt and, in some cases in which people were self-employed in the construction industry, business debt. In the latter case, they may have complicated arrangements about using their family homes as collateral for this debt.

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