Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank the Deputy for raising this important matter. He will be aware of the Government’s announcement on 13 March which coincided with the Central Bank’s announcement of additional measures to address mortgage arrears, including the publication of performance targets for the main mortgage banks. The objective is that 50% of distressed borrowers will have received potential solutions from the banks by the end of the year.

As the Deputy’s main point was about split mortgages, I will jump to that issue. I have been informed by the Central Bank of Ireland that the majority of lenders have introduced, or are in the process of introducing, a split mortgage arrangement. A split mortgage warehouses a part of what remains unamortised from the initial capital sum in what can be called part B of the loan. Part B is not serviced unless the borrower's financial position improves significantly in the future, in which case the split will be revised in line with the new circumstances with the provision that, to preserve incentives, only a fraction of the new resources will be applied to the loan. Also, the maximum amount that can be warehoused is dependent on each lender's own internal criteria. The split mortgage, like all other forbearance and modification arrangements, is based on affordability and sustainability of the arrangement from both the borrower's and the lender's perspective. All of the products offered by the banks have been prepared in the context of the Central Bank's mortgage arrears resolution strategy.

The banks, including those in which the State has a significant shareholding, are independent commercial entities. Decisions on the handling of their individual mortgages and other loans, including distressed loans, are solely a matter for the board and management of individual institutions in the exercise of their commercial and fiduciary responsibilities. In respect of the covered institutions, under the relationship framework agreements the Minister for Finance has with the covered banks, responsibility for commercial policy and day-to-day operations remains with the boards and management of the banks. The Minister for Finance does not have any involvement in such decisions. He has no role to play in the decisions the covered banks make on the treatment of individual loans.

We do, however, engage on the macro-policy response. The Minister for Finance recently met board representatives from the three covered institutions to receive an update on the progress each institution was making in dealing with their distressed mortgage holders. The Department of Finance is also meeting the main mortgage lenders regularly to assess their progress in addressing the banks' mortgage arrears strategies and meeting the targets set by the Central Bank in offering sustainable, long-term mortgage solutions to borrowers in difficulty. This is part of the regular ongoing engagement the Department has with the institutions as part of the overall policy response.

In summary, the Government is making significant progress to address the problem of mortgage arrears and believes the ingredients of a transparent resolution process for borrowers are now in place.

Deputy Michael McGrath has made a sensible point on how the banks deal with split mortgages. Now that we have targets in respect of these solutions, it is important there be uniformity in the way these products are rolled out. I will raise the matter with the Central Bank to see what engagement it can have with the covered institutions. It is in all our interests, particularly those with distressed mortgages, that we make progress in this area. Issues could arise if one were to create a dichotomy in the products available owing to which bank one was dealing with. It is a fair point.

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