Terence Flanagan (Dublin North East, Fine Gael) | Oireachtas source

The mortgage arrears situation is another mess inherited by this Government and one which the Government intends to deal with this year. There clearly is an epidemic of mortgage arrears, as previous speakers have stated. The property bust and the collapse of the Celtic tiger have led to a huge number of people losing their jobs and having difficulties in repaying their mortgages. Houses which once sold for €400,000 and more are now worth half that amount in some parts of the country. It is really disheartening for those home owners who have to continue making mortgage repayments on a property that is now worth half what they paid for it.

A few years ago people were being freely offered 100% mortgages by a large number of banks such as Bank of Scotland. The houses on which these mortgages were taken out are now worth less. People are repaying huge mortgages on a monthly basis and trapped in locations where they have lost jobs and, when they find a new job, they have a long commute to the new place of employment. Due to the downturn in the economy, the loss of jobs has contributed greatly to the stress and difficulty in paying a mortgage.

This Government recognises that the current loophole in the law is a further hindrance in the mortgage arrears crisis. This loophole came to light in the Start Mortgages v. Gunn case in 2011 where it was found that in certain cases mortgagees were being restricted from exercising their repossession rights. The Government is determined to address this matter and committed in the memorandum of understanding, agreed with the troika, to remove any unintended constraints on banks to realise the value of loan collateral under certain circumstances. In conjunction with the Personal Insolvency Act, which, for the first time, aims to provide options for those in debt, this change will make a big difference.

The Land and Conveyancing Law Reform Act 2009 was major legislation that reformed areas of land law, including ownership, trusts, co-ownership, conveyances and mortgages. The Bill simplified the land law and facilitated the introduction of e-conveyancing. Section 1 of this Bill will ensure the continued application of certain repealed and amended statutory provisions to mortgages created prior to 1 December 2009. Section 2 makes provision for the adjournment of court proceedings for repossession of a principal private residence to consider other options available under the Personal Insolvency Act. As Members, we all agree that house repossession must and should be the last course of action undertaken by banks when dealing with the debt situation. It is crucial that a clearly defined system is in place for future generations.

It has been noted that investment properties will be repossessed and that all efforts will be made to ensure family homes are not repossessed, where possible. Certainly there are many people who purchased second and third properties and who find themselves in extreme hardship and would be only too glad to see the back of some of the investment properties, but clearly not their principal private residence. That is why it is crucial that family homes are not repossessed. It is important that all avenues are exhausted to enable people to stay in their family homes and to agree a debt plan that enables them to do that.

The most recent statistics from the Central Bank on mortgage arrears show that there were 94,488 cases of mortgage arrears over 90 days on 31 March 2012. Although the number of mortgages in arrears have increased, the number of repossessions in this country are much lower compared with other countries. In the Republic, the rate of repossessions was 0.3% of total arrears cases in 2012, while in the US and the UK, the rate is between 3% and 5%. The banks have a hugely important role to play if the issue of mortgage arrears is to be dealt with and repossessions are to be avoided. The Central Bank has stipulated that banks should propose sustainable mortgage solutions for a sizeable number of distressed borrowers, and banks have been given targets of 20% of the loan book by June 2013, increasing to 50% by the end of this year. I am aware from discussions with some of the CEOs of the banks that they are determined to address this long-standing issue and ensure home owners are put on a more sustainable path in repaying their mortgages.

The Central Bank has set a target that the majority of distressed borrowers will have been given proposed solutions by their bank by the end of 2014. The Central Bank will monitor the rate at which each bank is addressing the issue and all information will be publicly disclosed. That is important, particularly in light of the serious problem the Government has inherited.

The measures outlined in the Bill will ensure that any further delay in economic recovery will be avoided as the revised system to be introduced will support Ireland's exit prospects and growth outlook. We need to ensure a balance is struck and every step is taken to ensure repossession of a family home is the last resort in addressing an individual's debt problems. The repossession of a family home has a significant negative impact on any family and should only be undertaken in very extreme circumstances.

See this speech in context