Billy Kelleher (Cork North Central, Fianna Fail) | Oireachtas source

We could go down that road again with the Minister but we will not bother. It would be far better if the Minister could address it in the legislation. There should be independent oversight. MABS could be brought in and people could adjudicate in a fair, impartial and rational manner and deal with the difficulties.

In his contribution at the Central Bank conference in February 2013 Professor Patrick Honohan referred to how to fix distressed property markets. He stated:

In particular negative equity is not in itself a rationale for debt relief.


On the other hand that, while repossession may be inevitable for many investment properties (BTLs), it should be avoidable for the majority of owner-occupier cases where the distressed over-indebted borrowers - often suffering from unemployment - are doing their best; a debt modification that enables them to stay in their home will often be the best solution all around. Repossessions of course have huge consequences for the affected family, and besides, there are typically financial costs that erode the amount than can be recovered by the lender. Still, at the end of the day, most would agree that there must be consequences for an unco-operative borrower refusing to make a reasonable effort.

No one could disagree with that. The difficulty is that those who will define what is a reasonable effort will be the banks, unless the Minister goes down to the court and stuffs more money into some barrister's pocket. That is the clear difficulty with this legislation. We are not discussing normal times. We are discussing more than 100,000 people whose mortgages are 90 days or more in arrears. It does not appear that it will be getting better any time soon. There is a slow-down and a stabilisation. The great difficulty for the banks is that during the past five year property prices have tumbled and there has been no uplift in the property market. The big holes in the balance sheets of the banks remain. My concern is that if they start this process they will begin cherry-picking the mortgages that have most collateral. The last thing the banks want is to flog properties of poor value on the market because that could further erode their balance sheets. That is of great concern.

Despite all the glibness that overcomes this place from time to time this is one substantial issue that could be addressed by having independent oversight. We can debate who should oversee it but MABS should have a clear and defined role in the legislation when it comes to dealing with impaired mortgages.

Let us consider the banking inquiry. As the Minister is well aware, last year the Government put a proposal before the people and they rejected it. They could not trust the Government with it and therefore the Minister, Deputy Shatter, should not blame me for everything. The point is they could not trust the Government. The Government was unable to competently convince the people that it was capable of setting up a banking inquiry that would be fair, rational and reasonable. The Government could not do that much and, therefore, the Minister should not talk to me about incompetence in this place. The key issue is to address the need for a banking inquiry and get to the truth of it.

The point I was trying to make before the Minister became partisan again was that we must address the issues prior to the bank guarantee. The bank guarantee was a consequence of reckless lending. It was not the result of reckless lending by the Government. It was because of lack of oversight and regulation. At the time the Minister's party supported it in the House and supported the position of having independent regulation that would allow the financial system to flourish and expand. I do not believe there was any opposition from the Minister's party when proposals on regulation and oversight of financial institutions in the country were put to the floor of the Dáil. At the time there was good, reasoned debate about why it was good to lighten the regulation, allow the banks to flourish, allow the International Financial Services Centre in Dublin to flourish and make Ireland a financial services hub. That was the theory behind it.

What happened as an outflow was that the banks became very competitive. There was a flow of cheap money from Europe and of other banks coming from outside the jurisdiction offering cut-deal mortgages and other personal credit lines. All of this opened up the whole market to competition, but it was competition without any oversight. Banks were beginning to lend six, seven and eight times the principal sum of an earner for a mortgage and included room rent and social welfare payments as part of the principal earner's salary to get a mortgage over the line. Clearly, that was fundamentally flawed. As house prices went up we were caught on the other side. House prices kept escalating. Developers would see that a house that had been worth €300,000 could be worth €400,000. They were willing to outbid each other for land banks throughout the country. They were funded by the same banks and the bust eventually happened. Then, the guarantee came as a consequence of that.

If the Minister wishes to get partisan he can blame me about the bank guarantee but he should not blame me for every particular aspect of what happened previously, because that was the philosophy of the day espoused by almost everyone except, as Deputy McGrath stated, those on the left who were opposed to it. Some of those on the left were opposed to it but many were happy with it. Social partnership bought into it and everyone else bought into it because it seemed to deliver good times. Obviously, those good times fell foul in recent years. All the indications were that there would be a soft landing, that the economy would level off and that we would be back to sustainable growth of 2.5% or 3%. None of that happened but that does not make it any easier for the people who are facing nightmares night after night and worrying about whether the bank will knock on their door and ask for a serious discussion on their situation.

I have no difficulty with banks bringing people in to have a genuine debate, sitting down to highlight the difficulties they are in and saying that they need action on given scenarios. However, since the banks hold the whip hand they will use it excessively because they are desperate to fight for their survival. The only guiding principle in the banks at present is to try to repair their impaired balance sheets. The big hole that remains is the mortgage area. I believe the Government should act on the proposal put forward by my party and many on this side of the House. We can have a debate on history some other time but we are discussing people's lives, homes, families and the societal carnage that exists at present and we are trying to come up with constructive proposals.

The Bill was to deal with the loophole as highlighted by the Dunne judgment. The consequences of the loophole and the Dunne judgment has led to a delay in addressing mortgage arrears. I believe that was the reason the banks did not deal in a meaningful way and engage with people for a protracted period. They were concerned that if they delved too deeply into their mortgage books they would expose a big hole. The Minister, Deputy Shatter, knows it exists, I know it and they know it. The difficulty is how to fill it if it is exposed in one fell swoop.

There was a naive hope that some way down the road, house prices would stabilise, the hole would not be as big and we could start to fill it over a period with property inflation. That has not happened and it does not look as though it will happen for some time to come, regardless of the Government's promises to create 100,000 jobs and all the other nonsense we heard before the election. There is still unemployment of over 14%, a mass exodus of people from the country, an international recession and financial difficulties in Europe. The growth that was presumed has not happened. Regardless of who is right and who is wrong, these are the facts. The Department of Finance and the Central Bank have again revised their forecasts for growth downwards. No matter what we do in this country, we are dependent on growth in Europe and the broader international economy; we are a trading, open nation.

I do not blame the Minister for every aspect of the present difficulties, but his difficulties are minuscule compared to the 100,000 who have huge difficulties. That is why this debate should be treated with more courtesy and respect.

My concern is that banks will cherry-pick those houses where there is some equity or value, even though people are in massive mortgage arrears. There are properties whose values have halved and whose owners are in very difficult circumstances and are incapable of making any meaningful repayment. The banks could cherry-pick initially by targeting repossessions and that is another reason there should be independent oversight. It should not just deal with individuals; there should be independent oversight in dealing with trends the banks will follow with regard to repossessions. The Minister knows as well as I do that in every banking institution in the State, there are those who were previously flogging mortgages and selling credit cards, personal loans, holiday loans and car loans. They are all members of the nutting squad now, bringing people in to talk to the banks. The bottom line is that they want to get their pound of flesh now and there should be oversight in this area.

Fianna Fáil can be blamed for this, and I will accept that responsibility, but whether we like it or not, the banks were absolutely culpable in the reckless lending that went on for years. The Central Bank was culpable for years and the regulator was culpable for years. Some people highlighted the things banks were up to, such as multiplying the principal earner's salary by seven when calculating the size of a mortgage and adding a few bob for furniture. That was clearly unsustainable, regardless of how good times might be.

With the best will in the world, this is flawed legislation from start to finish. Whatever happens between now and the passing of the Bill, the Minister will have to at least listen to our suggestions. The Minister visited Meath East during the by-election and no doubt met some of the staggering number of people who are shattered and who do not see any light at the end of the tunnel. People in those circumstances have almost written off their own hopes and aspirations, but their main concern is no longer their own hope; it is hope for their children. That is a devastating way for people to live. That is why this Bill is fundamentally flawed. Those hopes and aspirations are now dependent on banks deciding what is a reasonable offer for a borrower.

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