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

A mortgage resolution order as envisaged under the Mortgage Resolution Bill, which we published yesterday, effectively acts as a binding arrangement between a borrower and a financial institution. A mortgage resolution order can be granted only if a financially restricted borrower - defined in the Bill - is the owner of the mortgaged property, has resided in that property for the two years prior to making the application, has provided written confirmation that he will not sell or lease the property and has not previously been granted such an order.

The Bill proposes that the mortgage resolution office will have a wide range of options open to it which it will be able to employ to restructure the mortgage concerned. Many of these solutions have already been identified, but the problem is they are not being rolled out. One of these solutions is the split mortgage proposal, which has the potential to make a dent in the mortgage arrears problem in this country. A split mortgage provides that a portion of the mortgage, the unsustainable portion, can be parked. The difficulty is that the banks are all treating this issue differently. In the case of AIB, for example, the parked mortgage does not accrue interest, while Permanent TSB charges 1% interest on the parked portion and Bank of Ireland charges the full current market interest rate on the parked portion of the mortgage. This is evidence that there is no consistency currently with regard to how borrowers are being treated. This is the reason we want to give the mortgage resolution office the power to impose solutions such as split mortgages on terms it decides are appropriate, participation in the deferred interest scheme, interest-only payments for a period of up to four years, extension of the mortgage period by up to 20 years, repayment holidays of up to 12 months and permanent reductions in interest rates. For the many people who are locked into unsustainable interest rates, this reduction would play a role in resolving their problems. In the event of voluntary surrender of a property, the financial institution concerned can be required to lease the family home to the borrower at a market rent. This is a solution with potential for many people , but so far only two mortgage-to-rent transactions have been completed.

At the heart of this issue is what I said at the beginning. Will we, as a country, allow the banks, which have been adequately recapitalised - to the tune of approximately €9 billion in the context of mortgages alone - to have the final say on their dealings with individual mortgage customers and families as to what represents a fair solution? That is the Government's position, announced two weeks ago - that the banks will define what is a sustainable solution. The banks will have a veto under the Personal Insolvency Act, but that could, if required, be changed through a constitutional referendum if the Minister is convinced that there are property rights which act as a barrier to bringing in this change. Why not change the Constitution so as to provide him with absolute certainty that this issue can be addressed?

What we propose is a radically different way, a way that provides an opportunity for borrowers who are genuinely engaged and want to restructure their mortgages to have a fresh start. A mortgage is the single biggest liability most people face in their lives. We all know the scale of the crisis. One in four family home mortgages either are in arrears or have been restructured. Our focus is on the family home and its protection where possible. Where it is not possible to protect it, a borrower must be given the option of entering into a mortgage-to-rent transaction.

I look forward to the debate on this and hope it is constructive, because that is the purpose of what we have introduced.

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