Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move:

That Dáil Éireann:notes:

— the worsening crisis in respect of mortgage arrears, with over 94,000 residential mortgages in arrears for greater than 90 days and over 28,000 buy-to-let mortgages in arrears for the same period;

— that almost one in four family home mortgages and more than one in three buy-to-let mortgages are now either in arrears or have been restructured;

— the slow progress made to date by banks in identifying and implementing solutions for distressed borrowers;

— the additional burden being placed on families struggling with their mortgage arising from cuts to child benefit, PRSI increases, local property tax and other measures in budget 2013;

— the adverse impact on mental health, the well-being of society and the domestic economy arising from the failure to adequately address mortgage distress;

— the widespread concern about the threat of a significant increase in family home repossessions arising from the mortgage arrears resolution targets programme, the proposed changes to the code of conduct on mortgage arrears and the Government’s plan to reverse the Dunne judgment; and

— that, in effect, the bank will retain a veto, in the vast majority of cases, over any proposal to restructure the mortgage under the planned new personal insolvency service;

recognises:

— the importance of tackling the mortgage arrears crisis to support economic recovery; and

— the best interests of society are served by ensuring that families can remain in their homes so long as reasonable efforts are made to meet their mortgage commitments;

calls for:

— the establishment of clear, consistently applied guidelines in respect of reasonable living expenses for distressed borrowers;

— the family home to be protected from repossession unless every other possible alternative has been exhausted, including giving the borrower the option of entering a mortgage-to-rent arrangement;

— the Government to refrain from introducing legislation that will remove obstacles to the repossession of family homes until such time as the Central Bank is satisfied that the banks are properly addressing the mortgage arrears crisis by entering into meaningful long-term sustainable solutions to mortgage distress with individual borrowers;

— the setting up of a mortgage resolution office, under the new Insolvency Service of Ireland, to arbitrate between borrowers and lenders and, where necessary, to make a binding mortgage resolution order; and

— greater emphasis on the implementation of long-term sustainable mortgage solutions such as split mortgages, shared equity and permanent interest rate reductions.

I wish to share time with Deputies Éamon Ó Cuív, Michael Moynihan and John Browne.

I welcome the opportunity to introduce this motion on behalf of the Fianna Fáil Party on what is one of the most serious issues facing the country. At the core of the issue is one simple question: who should make the final decision in identifying a fair solution for a family in mortgage distress? That is what this entire debate will be about.

The Government believes the banks should have the final say. Its announcement two weeks ago greatly strengthens the hand of the banks in their dealings with people who are in mortgage distress. All that the banks are being asked to do now is to propose what they believe is a sustainable solution. In other words, they decide on what is a sustainable solution. This is provided for in the definition of what the Government announced two weeks ago. The banks are not being asked to reach agreement with borrowers; they are merely being asked to propose certain solutions to borrowers, solutions which are to their satisfaction. In return, they are being given extensive new powers that they can use against borrowers. These include measures to allow a bank to contact a distressed mortgage holder as many times as it wishes in the course of one month, whether by e-mail, text message, letter, telephone call or voicemail. Until now the limit was three successful contacts per month, but that limit will be lifted if the Government gets its way. It is proposing that there will be an option for the tracker mortgage rate to be taken from a borrower as part of an overall solution to indebtedness. This tool will be on the table for the first time. The banks will now have the power to deem a borrower to be not co-operating in certain circumstances; therefore, they will have the power to move to repossess a family home within one month or 30 days. This comes on top of the Government's stated intention to reverse the Dunne judgment, a move that will inevitably result in a significant increase in the level of repossession of family homes at a time when the Governor of the Central Bank is saying he is pulling his hair out at the slow pace of progress on the issue of mortgage arrears and the failure of the banks to adequately address the problem. If we can believe media reports, the Department of the Taoiseach is frustrated with the Department of Finance. Apparently, the Department of Finance is frustrated with the Central Bank and the Central Bank is frustrated with the banks at the lack of action on this problem. However, those who are most frustrated are those suffering from mortgage distress because they are not being offered fair, long-term sustainable solutions to their mortgage problems.

On top of all of this is the new Personal Insolvency Act, many of the provisions of which we welcome because we published a similar Bill in July 2011. I have heard the Taoiseach, the Minister for Finance and other Ministers say time and again that there is no veto in the personal insolvency arrangements and that the banks do not have a veto. The Citizens Information Board's website makes it clear that a personal insolvency arrangement will be a voluntary one that must receive the support of creditors, secured and unsecured, representing at least 65% of a person's total debt.

Therefore, in practice, in the majority of cases the banks will have a veto. If we take, for example, a family with a mortgage of €200,000, even if the remainder of that family's debt - credit card loans, car loans, credit union loans - adds up to another €100,000, the bank that holds that mortgage will still have a veto on any personal insolvency arrangement put forward under the new insolvency service. That is the context for this debate.

The Government's view, clearly, is that the final say on determining a fair solution to a person's mortgage problems rests with the bank. In our view, that is a formula which has failed abjectly over the past number of years. It is time for a new approach. We base our view of the need for a new approach on practice to date. We should have learned from experience by now that the banks are not putting long-term forbearance solutions in place. What they are doing is putting sticking plasters on people's mortgage arrears problems and entering into short-term forbearance arrangements, such as interest-only arrangements, which will work for some people. However, for many people these arrangements are not a long-term solution.

If we consider the 80,000 or so mortgages which have been restructured, approximately 99% are subject to short-term arrangements that cannot, in anybody's language, be regarded as a proper restructuring of a mortgage. This is what we seek to change. We propose a different way. Everybody in this House deals with people on a weekly basis who must live with the daily reality of a mortgage hanging over them that they simply cannot afford to repay. This is happening at a huge cost to those families, their communities and the economy. This is the reason it is essential we put new solutions in place, solutions that are deliverable and have oversight.

We propose that a mortgage resolution office be set up within the ambit of the new insolvency service and that this office have the power to examine in detail the financial affairs of a person who is suffering due to mortgage distress. This office will be prepared to engage with the bank to see what it proposes with regard to restructuring the mortgage. We fully recognise that the ideal outcome is that the bank and the borrower enter into a voluntary agreement, but that is not happening in anywhere near the numbers we would like to see, nor is the quality of these agreements sufficient. Therefore, in the absence of agreement between the lender and the borrower, we wish to give the mortgage resolution office, under the new insolvency service, the power to impose binding mortgage resolution orders. These orders would be binding not just on the bank but on the borrower. This is critical.

This proposal greatly improves the Personal Insolvency Act in that it removes the power of veto the Government has built into the legislation, effectively putting the banks in the driving seat. The Minister may come back on this and say we are dealing with issues of property rights and that there are constitutional questions with regard to removing that power of veto and giving an independent office the power to intervene in a commercial contract between a borrower and a lender. The Minister is far more knowledgeable than I am on legal and constitutional questions, but I have investigated this and taken advice. The advice is that property rights are not an absolute, as was decided yesterday in regard to the upward-only rent review issue in the case of Bewley's on Grafton Street, suggesting that measures that are proportionate and controlled-----

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