Catherine Murphy (Kildare North, Independent) | Oireachtas source

I wish to share my time with Deputies Donnelly and Boyd Barrett, with the agreement of the House.

This Bill has been described as a technical one but there is nothing technical about it for the people to whom it will apply, especially those on the borrower rather than lender end of the spectrum. It would be remiss of us not to draw attention to the nightmare scenario before us. The measures that are coming before us now might not have seemed draconian had they been put in place ten years ago, before the crash happened, but because they are being introduced at a time of crisis for so many people, they add to the problem. The Personal Insolvency Act was heralded as a great solution for people, but for many, the harsh process will not seem to be a solution at all. It is amazing how people at the end of the spectrum, who seem to be carrying everything, have the spotlight on them while the big institutions that could not predict what would happen are still respected. We continue to rely on institutions such as Fitch, Standard and Poor's and Moody's, one of which made predictions on the Irish property market today. I would not believe anything those people say because they have been so discredited in recent times. Despite that fact, their international reputations are, somehow, still intact.

We all know that there was very little effort by the banks to tackle the mortgage arrears problem in a sustainable manner. They have been dragged, kicking and screaming, into action. The Taoiseach has been in the House on numerous occasions saying that he and the Minister for Finance were frustrated with the delays, but they did not seem to be able to force the banks, into which we put so much money, to do anything about this enormous problem.

The proposed code of conduct on mortgage arrears will not be admissible in legal proceedings, which is a major omission. The Government may say that the Personal Insolvency Act will prevent a flood of repossessions but, in truth, there is no onerous legal requirement on the banks to engage with debtors on any realistic footing. We know that the balance is in their favour. There is a very lopsided power imbalance sewn into the Personal Insolvency Act, which is also sewn into this Bill. Banks can and will repossess homes and we will most assuredly see that, once this Bill is passed, which it will be, given the enormous Government majority.

There is no doubt that the banks behaved recklessly during the property boom, facilitated by a lack of regulation, the political culture and the Government of the day. However, all of the difficulties emanating from the crash are being picked up by those on the other end of the spectrum. We never hear of moral hazard except in the context of ordinary people and their lives. An issue of natural justice is not being properly considered here. Most distressed mortgages are with the covered institutions which received €32 billion in taxpayers' money. Those same banks are not meeting their lending targets, have failed to pass on interest rate reductions and have actually increased their variable interest rates, despite reductions in the ECB rates. In many cases, they have pushed more people over the edge and into mortgage distress. We have seen massive write-downs for big borrowers, the most recent example being Independent News and Media, to the tune of €138 million. The arrangement involves the lenders taking a stake in that business, including AIB and Bank of Ireland. There was much talk of swapping debt for equity in people's homes at the onset of this crisis. It seems that equity swaps can be done for big institutions but not for ordinary individuals and their homes. The large NAMA developers are getting, in some cases, lotto-type payments to resolve their debts. That process is completely beyond public scrutiny, while at the same time the personal insolvency process is entirely public, about which many people feel aggrieved. Indeed, the public nature of that process is one reason people will not engage in it.

If the Government was seen to put the public interest ahead of the interests of the banks, trust in politics would be restored. The Government should be approaching this in a much more balanced way. Some of the suggestions made by the Free Legal Advice Centres, FLAC vis-à-vis this Bill would considerably improve the situation. People who are currently in arrears must be provided with certainty that their mortgages will have the code of conduct applied to them and not just those who obtain mortgages in the future. The overriding imperative must be to prevent large-scale repossessions by the banks, but that imperative is not guaranteed through the Personal Insolvency Act. There has been no acknowledgement by the Central Bank or the Government that the banks are not engaging honestly or fairly with borrowers. There is no acknowledgement that in some cases banks have acted in an extremely harsh manner towards borrowers. I have come across many such situations, including attempts by some banks to take people off tracker rate mortgages, although I know there have been some improvements in that regard lately.

The Government frequently refers to the low level of repossessions, many of which occur by consent. However, in reality it was the Dunne judgment and the defects in the 2009 legislation that restricted wholesale repossessions. The case in question was Start Mortgages Limited v. Gunn, and according to the court documentation, the sums in question had not been demanded before 1 December 2009 and, therefore, the right to apply for a summary order no longer existed following the repeal of section 62(7) of the Registration of Title Act 1964. Of course, there were other methods of securing payment but the one that was favoured was the one that put people under most pressure.

FLAC has made a number of very reasonable suggestions regarding this Bill.

I tend to listen to organisations that have been involved for a long time in the resolution of these kinds of issues with people in debt and distress. The Bill will effectively make it easier for lenders to process repossessions through the courts, according to FLAC, and the organisation is anxious that there should be a balance in the powers. It seeks an amendment to the legislation so that the court examining an application to repossess a family home could also examine whether a lender had fully complied with all the steps of the Central Bank's code of conduct on mortgage arrears. It is not an unreasonable request. If it is not satisfied by the compliance, it could refuse the application until such time as the lender could demonstrate full compliance. As the Minister stated earlier, the Bill proposes a two month adjournment to allow a person explore a personal insolvency arrangement. As mentioned by a previous speaker, and as argued by FLAC, the two month period appears very limited. A period of four months - or six months, as advocated by FLAC - would give people time if they enter the process in good faith.

Currently, many lenders bring proceedings to the High Court, which is easier administratively for lenders but it makes the process much more expensive. In FLAC's view, section 101(5) of the 2009 Act envisages that all repossession proceedings on foot of a housing loan mortgage would take place in the Circuit Court, and this should be the preferred position, rather than requiring borrowers countrywide to go to the High Court in Dublin. However, section 96 of the 2009 Act raises some doubt about whether the exclusive jurisdiction of the Circuit Court applies only to mortgages entered into after 2009. FLAC is seeking that this Bill would clarify the position, and such clarification would be an improvement.

Section 94 of the 2009 Act permits a borrower to apply and a court to grant an order for sale, with the terms envisaged being practical and technical matters. They do not cover a position where a borrower might seek an order that the lender was responsible for all or part of any shortfall in the debt on sale. It has been indicated that this has arisen in circumstances where lenders refuse to permit a sale with a reasonable offer having been made and later agreed to a sale at a lower price. It would be helpful to clarify that one of the terms of an order for sale would be to allow the court to determine the responsibility for the shortfall.

Section 97 of the 2009 Act provides for borrowers to sign a consent for repossession. Some of the forms seen by FLAC are complex and impose considerable financial responsibility on the borrower. It would be helpful if this section included a requirement that the borrower would have access to adequate legal and financial advice and assistance where a lender proposes a form of consent. This is likely to be a growing problem, as one can imagine, and FLAC has a general concern about the lack of adequate legal and financial arrangements. I see Mr. David Hall in the Visitors Gallery and some organisations are providing pro bonoassistance to some mortgage holders in distress. We can by no means rely on that arrangement, and we must properly resource the likes of the money advice and budgeting service, MABS, and FLAC in facilitating their work in this regard.

My major concern is with the balance and timing of the Bill. The balance gives the lender far too much additional power, although it is addressing a defect in the 2009 law. If change is to be made, it should be done in a balanced fashion that considers the borrower in a more comprehensive manner than the current Bill does. I hope the Minister will make changes to help that balance. The word "floodgate" has been used and misused in recent weeks, but it is appropriate to say at this point that the floodgates could very easily open, and we could see large-scale repossessions. None of us wants that.

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