Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"acknowledges that this Government inherited a severe mortgage arrears crisis from the previous Government; and notes the responsibility of the previous Government for the creation of that crisis and its abject failure to properly address it;

recognises that the Government has already taken a number of significant steps to address the mortgage arrears problem and also to stabilise the banking and wider economic situation;

acknowledges, in particular, that shortly after taking office the present Government established the Inter-Departmental Mortgage Arrears Working Group and that it is now implementing the key recommendations of that Group’s Report;

notes the speedy publication by the Government of comprehensive legislation to reform our insolvency laws and the enactment of the Personal Insolvency Act 2012 which provides for non-judicial debt resolution mechanisms, which include a Personal Insolvency Arrangement which will facilitate the retention of their family home by individuals who are insolvent and enable them to resolve debt issues by agreement with creditors with the assistance of a Personal Insolvency Practitioner;

recognises that Central Bank interaction with mortgage lenders is key to addressing mortgage arrears and that the Central Bank is now further intensifying its engagement with the main mortgage lenders to ensure that lenders offer sustainable solutions to their customers in arrears;

supports the Central Bank in this work, in particular, in setting specific targets for action and in monitoring and auditing the achievement of those targets;

further notes the Central Bank’s review of the Code of Conduct on Mortgage Arrears to strengthen protections for customers and also allow to provide for effective, timely and sustainable resolution of individual arrears situations;

accepts that, for a functioning mortgage market, it is necessary to protect and vindicate, in a fair manner, the legitimate rights of both debtors and creditors;

while accepting that the option of repossession has to be one of the options to deal with mortgage default and distress, also notes the view of Government that this should only be an option of last resort and that there are a range of other resolution options available that can be deployed to deal with mortgage distress in the best interests of both the borrower and lender;

encourages the Government and other authorities to continue with the work to bring the Insolvency Service of Ireland, and the debt resolution processes provided for in the Personal Insolvency Act 2012, into operation as soon as possible;

notes that the Insolvency Service of Ireland will shortly publish guidelines on reasonable living expenses for debtors who propose to enter into debt resolution mechanisms; and

condemns the failure of the previous Government to publish or enact any legislation to reform bankruptcy and insolvency law, and its failure to create any statutory debt resolution mechanisms or structures to facilitate individuals in financial difficulty to resolve such difficulties by agreement with creditors and to facilitate the restructuring of mortgage debt."

I listened to the Deputies opposite introducing their motion with a sense of disbelief and incredulity. I wondered if they were rendered amnesiac two years ago and have just woken up like Rip Van Winkle. For their information, we are still dealing with the mess in which their Government left this country, including huge increases in unemployment and consequent family indebtedness and inability to meet financial obligations. Fianna Fáil, which led the past three Administrations and to which the Deputies who moved this motion belong, is the main party responsible for the fiscal disaster that hit this country and the financial difficulties now being experienced by tens of thousands of our people.

This Government, in stark contrast to its predecessor, has made considerable progress across a number of sectors in addressing the very significant and severe mortgage arrears crisis which it inherited. This crisis is directly linked to the economic situation presided over by members of the previous Government, some of whom are signatories to tonight's motion. Let us be quite clear about the utter and total failure of the previous Government as this country slid towards the abyss of national bankruptcy to propose or introduce insolvency or bankruptcy reform legislation. Let us also reflect this evening upon the many consequences of this failure, not least the loss to emigration of so many thousands of our young people.

Unfortunately, the Fianna Fáil motion before the House shows the same mindset which it displayed down through the years while causing the economic collapse of this country. It pretended the good times would always roll, that the property bubble would never burst and that a bailout would never be necessary. It seeks to pretend to those whose financial lives it was responsible for ruining that there is some painless or simple way of resolving their problems. I have learnt from long experience not to be surprised by the calculating cynicism and hypocritical posturing in which Fianna Fáil specialises but it must be truly galling for those who find themselves in difficult financial circumstances to see the very party which caused them now trying to hijack their plight for its own political ends and engaging in this type of political opportunism.

Each motion on financial and economic matters which Fianna Fáil brings before this House is informed by the same wilful amnesia as if it has no recollection that what it did and failed to do over the years resulted in an economic, fiscal and banking collapse. Thousands of people lost their jobs, living standards were substantially reduced for families, and despite frenzied denials that it would ever happen, we lost our economic sovereignty. As the people of the country know to their cost, we are still living with the consequences of the failures of the previous Administration and its predecessors.

I can assure the party opposite, however, that any failure it has in recalling what it did to address the problem of mortgage arrears is quite easy to explain because it did absolutely nothing. In particular, it failed to reform the law on bankruptcy and insolvency. It did not provide any statutory debt resolution mechanisms or structures to facilitate individuals in financial difficulty. Having caused so many people to get into financial difficulty, it simply ignored the problem and its responsibility to deal with it. Against that background, if the motion is to serve any useful purpose, it provides an opportunity for the party opposite to apologise for all it did to contribute to the mortgage difficulties in which so many people regrettably find themselves. Of course, there is little prospect of Fianna Fáil apologising for its appalling failures.

As the counter motion in amendment No. 1 makes clear, since coming into office, this Government has taken a number of significant steps to address the personal insolvency situation, including the mortgage arrears problem, and to stabilise the banking and wider economic situation. Such steps can be contrasted with the inactivity of the previous Government with regard to updating our ancient and ineffective personal insolvency law. Shortly after assuming office in 2011, we established the interdepartmental mortgage arrears working group, the report of which is also known as the Keane report, and we are implementing the key recommendations of the report published in October 2011. Based on its recommendations, the Government established the mortgage arrears steering group to co-ordinate the responses of the Departments and agencies centrally involved. Since March 2012, the steering group has reported to the Cabinet committee on mortgage arrears.

In contrast to the inactivity of our predecessors, let us consider some of the important initiatives taken by this Government. For example, the mortgage-to-rent scheme, available since last June, is a mainstream social housing solution for the most acute cases of mortgage arrears. Lenders are now engaging with the process and substantial progress has been made. More than 800 cases have been put forward for the scheme. Development of a mortgage-to-lease scheme is also progressing. Under this scheme, the lender would become the long-term owner of the property after voluntary repossession had taken place. The household would become a social housing tenant of the relevant local authority and the local authority would, in turn, lease the property from the financial institution for the period of the lease.

An information and advice service has been established to help people in mortgage arrears through the website, www.keepingyourhome.ie, an information helpline and the availability of independent financial advice for people being offered long-term restructuring proposals by the banks.

The most significant development in addressing the issue of personal over-indebtedness, including mortgage arrears, has been the development and enactment of the new personal insolvency legislation. The Personal Insolvency Bill was published in June 2012, passed by both Houses in December 2012 and signed into law. The Act introduces new concepts to Irish law. The new personal insolvency arrangement, PIA, introduces a concept which I understand is unique in international insolvency law, providing for the negotiated resolution of secured debt in a court sanctioned process that provides certainty for creditors and - if I may say so - hope and relief for debtors. If I can describe it as such, the personal examinership approach in the PIA is sufficiently flexible and robust to be able to address complex personal insolvency cases which may include combinations of trade, consumer and mortgage debt. It offers a second-chance mechanism for talented and capable individuals and entrepreneurs to return not only to solvency but also to contribute to the economic development of our society.

The development of modern insolvency law is a key commitment in the programme for Government. The Personal Insolvency Act provides for three new debt resolution processes which, though requiring approval by the court, are essentially non-judicial in nature. The debt relief notice will allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period; the debt settlement arrangement provides for the agreed settlement of unsecured debt, with no limit involved, normally over five years; the personal insolvency arrangement will enable the agreed settlement of secured debt up to €3 million, although this cap may be increased with the consent of all secured creditors and unsecured debt without limit normally over a six year period. The Act also provides for the automatic discharge from bankruptcy after three years subject to certain conditions.

The Insolvency Service of Ireland was formally established by ministerial order on 1 March. Its director, Mr. Lorcan O'Connor, is working with all speed to complete the administrative and technical preparations to ensure the full operation of the provisions of the Personal Insolvency Act can begin as soon as possible. I expect full operation to commence in the second quarter of 2013. The service will launch an information campaign early next month which will include launching its website, the issuing of publications, the opening of a public information line and the announcement of the regulatory framework for personal insolvency practitioners.

The Personal Insolvency Act makes provision for the Insolvency Service of Ireland to draw up guidelines in regard to reasonable living expenses that would be applicable to a debtor in one of the new insolvency processes. In developing these guidelines the Act requires the insolvency service to have regard to a number of specified criteria and this has been done. The service has engaged in extensive consultation with relevant Departments, agencies and organisations and I am informed that the guidelines should be ready for publication in the very near future. When completed, they will be published on the insolvency service's website. While the guidelines are primarily a matter for the service, I wish to counter some ill-informed recent media comment. A reasonable standard of living does not mean a person should live at a luxury level, but neither does it mean a person should only live at subsistence level. A debtor should be able to participate in the life of the community like other citizens.

The numbers likely to avail of the new or reformed insolvency processes will be significant. For broad planning purposes for the first full year of operation, our tentative estimate remains at 15,000 applications for the debt settlement arrangement and personal insolvency arrangement; 3,000 to 4,000 applications for debt relief notices; while 3,000 bankruptcy petitions may be made. The critical message to all those experiencing debt problems is that it is essential for customers to engage with their lenders so as to negotiate an appropriate settlement. It is also a requirement that lenders engage properly with customers.

Now that the architecture of the new insolvency legislation is settled, I have made it clear that I expect financial institutions to better engage with debtors. If financial institutions refuse to engage constructively and realistically, I have made it very clear on a number of occasions in this House and in the Seanad that the Government will in the future take any necessary measure to refine its approach to ensure the debt resolution processes work. I realise that banks must have regard to commercial considerations, but they must also behave with greater flexibility and insight and apply a broader range of common-sense options based on financial reality. The new debt settlement arrangement and personal insolvency arrangement are designed to facilitate a workable, sustainable voluntary resolution between a debtor and his or her creditors. A common-sense rather than a coercive approach is taken, as expressed in the creditor voting process provided for in the Act. It is also an approach designed to avoid, in so far as is possible within constitutional constraints, the necessity for contentious court hearings and adjudications, together with the substantial delay and inevitable legal costs inherent in such process.

I will now deal with the emotive issue of repossession of the principal private residence of a borrower. The House will be familiar with the well known 2011 case, Start Mortgagesv. Gunn, in which the High Court found that the repeal of section 62(7) of the Registration of Title Act 1964 in the Land and Conveyancing Law Reform Act 2009 had the unintended consequence in certain cases of restricting lenders from exercising their repossession rights. The judgment in this case is under appeal to the Supreme Court. High Court judgments in later similar cases appear to have limited the potential impact of that judgment. As a result, there is now uncertainty in the law relating to the exercise by lending institutions of their repossession rights in certain cases of default. Arising from this case law, the Government, in the context of the revised index of conditions and actions following the third quarter 2012 review of the EU-IMF programme of financial support for Ireland, made a commitment to introduce legislation to remedy the issues identified by case law in the 2009 Act. That legislation is being drafted and I hope to be in a position to publish the Bill shortly. Essentially, it will seek to eliminate any doubt as a result of the case law regarding the continued application of repealed provisions of the Conveyancing Acts 1881 to 1911 and the Registration of Title Act 1964 to all mortgages created prior to 1 December 2009. It will also contain a provision that will allow a court in proceedings for the repossession of a principal private residence to consider whether a personal insolvency arrangement under the Personal Insolvency Act 2012 would be a more appropriate course of action. Where the court is of such an opinion, it may adjourn the hearing for no more than two months. What I am seeking to provide by way of this provision is a transparent, final and time-limited safety net for a homeowner where repossession is being pursued without the PIA possibility having been fully explored by the parties. However, it may also be the case that as a last resort, it may be in the best interests of the borrower for repossession to take place. This could arise, for example, in cases in which there are substantial arrears and there is no prospect that the borrower will be in aposition to address these arrears or restore some stability to the mortgage situation or make any reasonable or realistic level of mortgage repayments. This is recognised in some cases and currently the majority of repossessions arise on a voluntary basis or by means of some other voluntary arrangement to address the unsustainable mortgage.

In circumstances in which individuals borrow money to acquire a home and that home is the security for borrowing, it has been the law of the State for many centuries that ultimately the financial institution that provides the loan can apply to the courts for possession of the property where the borrower fails to discharge the mortgage repayment. In the absence of such a law, no financial institution would lend money for house purchases as its security would be meaningless. Modern insolvency legislation is a required feature of a properly functioning market economy. It will assist not only debtors and financial institutions but also businesses of all types and sizes, tradespersons, local co-operatives, etc. All debtors and creditors are concerned about this reform and all must be treated fairly. Many persons or companies may be both debtors and creditors. While I can understand and share some of the very negative and jaundiced feelings towards financial institutions and their contribution to our current economic difficulties, we must not lose sight of our objective, which is to introduce reformed, workable and balanced insolvency legislation. This approach which seeks balance and fairness has been criticised as suggesting creditors, particularly mortgage creditors, will exercise a veto. That criticism is reflected in the ill thought-out Opposition motion. Such a contention is based on an incorrect view of how normal commercial contractual issues may be resolved. Where one borrows, one must repay where one can. If one receives a good or service, say, for example, essential plumbing repairs, the provider is entitled to be paid. If the debtor is genuinely unable to pay, negotiation with creditors may resolve the difficulty. The Act provides the new framework for sensible negotiation.

The approach in the proposed debt settlement arrangement and personal insolvency arrangement is that the insolvent debtor will, with the assistance of a personal insolvency practitioner, put forward what the debtor considers to be a realistic offer to his or her creditors, one that will restore the debtor to solvency within a reasonable period, while at the same time giving creditors a better financial outcome than the alternatives of debt enforcement or bankruptcy.

The creditors will need to consider carefully the debtor's offer conscious that if they refuse, the debtor has another option - the standard debt discharge procedure - under the reformed bankruptcy laws.

The motion from Opposition Deputies tonight makes reference to developing some form of non-judicial independent agency or process to arbitrate and impose solutions on creditors and debtors. The new processes, which the Government has introduced, are designed to operate on a voluntary basis with common sense and enlightened self-interest in mind rather than coercion. I know of no example of the type of body that appears to be demanded by Fianna Fáil Members existing in any jurisdiction and none could be provided by them during the debate on the Personal Insolvency Act. The State cannot impose a settlement on parties to a private contract involving the provision of goods or capital. I very much oppose this cynical, badly-informed and misguided motion. It does not seek to inform, educate or improve matters by offering constructive and objective proposals. It has no particular purpose, but serves to highlight again the inaction of the previous Government and to propose a suggested solution that cannot work and which is designed to establish some sort of alternative court to our current court structure.

See this speech in context