Mick Wallace (Wexford, Independent) | Oireachtas source

The Bill is designed to make it easier for banks to repossess properties and seems to address a discrepancy in the July 2009 Act. It was amusing to hear Deputy Niall Collins of Fianna Fáil state yesterday that the prospect of a collapsing housing market and a mortgage arrears crisis on the scale that we are now witnessing was never considered by any party in this House. My building crisis began in September 2007. It is scary if Fianna Fáil did not know what was happening in July 2009.

Much of our discussion on the banks relates to questions of what is sustainable. It is difficult to decide what is sustainable for one person but not another. A bank may make an offer that it claims is sustainable but that the borrower views as impossible. Sadly, there is no neutral referee. Although there is an appeals board, it is staffed by bank employees who we cannot be certain will be impartial.

The Government has claimed that repossessions will be a last resort. It is difficult to know what "last resort" means. What will happen to legacy debts? Will they hang over people's heads forever, causing stress and fear? Will people become homeless because banks repossessed their properties? If the banks repossess properties, how much they receive for them will be interesting. In Iceland, a decision was taken to write down mortgages to the amounts that banks or other financial firms could expect in the best of circumstances to gain from taking over those assets. Realising their monetary value was viewed as sensible. If someone paid €400,000 for an apartment that is now worth €200,000 and the bank sells it in a fire sale, it will probably go for €150,000 or €160,000, meaning that the bank will lose €240,000. Why not find out a property's real value, as happened in Norway in the early 1990s? If a property's value decreased from €400,000 to €200,000, 10% was added and people were given new mortgages of €220,000. This made sense for everyone and Norway's economy recovered more quickly. As long as the Irish banks refuse to engage on a sustainable basis with their mortgage debtors, many people will not recover.

The Government would correctly claim that its debt is unsustainable, leading to it asking Europe for write-downs. We took on debts that we should not have. We also sought to extend our repayment periods so that we might deal with our debt more easily. If this approach is good enough for the Government when dealing with Europe, perhaps the same relationships should be developed between banks and citizens. The Irish citizen needs a break. It makes no sense for banks not to deal with citizens in a rational way. I do not know how repossessions in any form will solve problems, even those of the banks.

Regardless of whether we like it, there are different strokes for different folk. Independent News and Media, INM, received a bank bailout recently for which the taxpayer will pay. That company is still trading, and presumably well. It is keen to keep going. This case causes concern. Many people in Ireland would have loved to get support from the banks. Many companies would have liked the banks to be patient, to give them time to deal with their problems, to write down their debts to sustainable levels and to give them a chance to continue and keep their jobs. In the past two years, many companies have received letters from banks telling them that they had 24 hours to repay the banks what they owed, after which the banks would get court judgments against them. Obviously, the law is not the same for everyone.

On the bailout of INM, Mr. Colm Keena wrote in The Irish Times:

No-one is arguing that it is better that companies with unsustainable debts be allowed collapse rather than have their debts reduced to manageable levels. But giving write-downs to companies that are wholly or in part owned by non-resident billionaires who appear to be flush with cash, raises the kind of issues referred to in the OECD report. This is especially so when so many people on moderate incomes are being levied with extra taxes, while also struggling with debts which the banks, and the Government, say should not be written off if the debtor can pay, lest it create a moral hazard.

Moral hazard is an interesting topic and is used as an excuse by banks. When I discussed the idea with a bank with which I have a few issues, I was told that moral hazard was a concern. Where was the moral hazard excuse when the banks, with their reckless business practices and overpaid managements, were bailed out by taxpayers who are still paying for it day and night? It is a bit rich of any bank to mention the term "moral hazard".

If banks engage in repossessions, they will sell those properties for less than it would cost to build them today, even if the site was acquired for free. How logical is it to put people out of their home and to sell it for less than it is worth? We need a common-sense approach.

If we are not going to deal with the mortgage debt crisis in a sustainable way, we definitely cannot expect the domestic economy to recover in the near future. Neither can we expect to see any serious inroads in the unemployment figures. I do not think we will see a huge change in the emigration figures either. We are facing significant levels of rising inequality in this country and around the world. Repossessions and a failure to deal with mortgage debt in a sustainable way, rather than just kicking the can down the road, will increase inequality in society and that will have major repercussions for this country.

I wish to refer to a few issues raised by Noeline Blackwell to which many speakers have referred. She has called for more balance between the power of the bank and the borrower. We would all admit that it is a little unfair. The period of two months allowed for a person to work out his or her problems with a financial institution is a joke. Not a lot happens with financial institutions in two months. One would need much more time than that. Six months would be far more realistic. A period of two months does not allow sufficient time for real negotiations. Things do not happen like that. The financial institutions are in a different world.

The Companies Bill was discussed last week in the House. I noted that one proposed change would allow the Circuit Court to deal with problems that were previously in the jurisdiction of the High Court. That is a good idea. The same approach should be taken to the reform we are discussing. As Ms Blackwell pointed out, going to the High Court is a considerable extra expense for people, and having cases dealt with by the Circuit Court would make a lot more sense and ensure costs were more manageable. It goes without saying that Ms Blackwell’s point about the lack of legal and financial advice for distressed borrowers is a big factor. The financial institutions will not be short of legal advice or financial advice, but we can easily imagine the distressed borrower being short of the same. Perhaps we should try to balance matters in that regard as well.

See this speech in context