Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak in this debate. I join colleagues in thanking Deputy Michael McGrath, the Fianna Fáil spokesperson on finance, for tabling the motion. When all is said and done, this is the most important issue facing Irish families, especially those with young children and people who purchased houses over the past decade. They are in a severe situation and they are becoming more and more distressed, not just because of the financial distress but also because of social and family distress caused by difficult mortgages.

Deputy Michael McGrath has highlighted in his motion the latest mortgage arrears statistics published by the Central Bank. There were 142,118 family home mortgages in arrears at the end of March last. I am sure the figure has increased by 3,000 to 4,000 since then at a rate of 1,000 per month. I am not even including buy-to-let mortgages but refer only to family homes. Various initiatives of the Government and Central Bank have shifted power in favour of the banks and against the mortgage holders who are their customers. The recent publication by the Central Bank of the revised code of conduct on mortgage arrears is causing further problems and distress. The banks hold the veto on any proposed arrangements involving mortgages under the new insolvency service. Under the mortgage arrears resolution targets, banks are not yet required to achieve any targets for reaching agreement with borrowers. The targets relate only to the making of offers. An unsustainable offer can be made, allowing the bank to send a figure to the Central Bank to demonstrate that it is meeting the targets. Such targets are fictional as they do not deal with cases which are being concluded or arrangements being entered into. They may simply relate to an offer.

Fianna Fáil calls for the code of conduct on mortgage arrears to be revised as it must include a clear definition of what constitutes an unsustainable mortgage and require a process involving representatives of both the borrower and the lender. Currently, a bank may unilaterally decide what constitutes an unsustainable mortgage and will base such assessment on its own subjective criteria. The code should also include an entitlement to a guaranteed minimum level of income for a borrower and his or her family, taking into account the number of children living in a house. That is not adequately catered for at the moment. There are differing views on the guidelines and a level of inconsistency exists in the approaches of various financial institutions. The code must also include an obligation on a bank seeking an order of repossession to obtain written confirmation from the Central Bank that the bank itself has exhausted every other course of action available to keep a family in their home. I stress that this is perhaps the most important issue that needs to be dealt with. We cannot allow banks to decide unilaterally that they have made every reasonable effort. Somebody must be able to certify on behalf of the public and in the public interest that the banks have done so. There should be an obligation on any bank seeking to classify a mortgage holder as unco-operative and to move to immediate repossession to obtain, again, written confirmation from the Central Bank that such person can be properly so classified. There must be independent verification of the process.

Fianna Fáil also calls in its motion for regulation of debt collection agencies, in particular those engaged by banks as representatives who want to contact customers on their behalf. It is an issue which has been overlooked. There are a number of unsavoury people out there, some of whom have criminal convictions and records, calling to people's houses to collect debts. It is a practice which must be regulated. Fianna Fáil does not consider that adequate safeguards have been put in place to counteract the possibility of abuse and increased contact by the banks with distressed borrowers. The new code fails to enshrine an entitlement to the minimum level of income required for a household. FLAC, which advocates for a number of people in the firing line, has said that the revised code confirms that the lender is the sole arbitrator of whether a mortgage is unsustainable or not. The bank will decide whether a borrower is co-operative or not and what the sole solution will be. There is no proper appeals mechanism and there is no guarantee of advice to borrowers going through negotiations with the lender.

We published draft legislation some time ago in relation to the Personal Insolvency Act. We believe a number of options should be considered and included in the mortgage resolution order, including split mortgages, which has not adequately been addressed, and interest-only payments. When we talk about interest it might not be the full interest but two thirds or 60% depending on the particular case. We have looked at extending the period of mortgages and also we want to talk about the debt for equity swap. In the draft legislation we highlighted that in the event of a voluntary surrender, a financial institution should rent the family home back to the borrower at the current mortgage rent. That rental or lease agreement should provide that in the event that the person sees their financial situation improve through obtaining good employment, they should have the first option to re-purchase the house. That should not even have to be done at the voluntary surrender stage. That can be done informally between the financial institution and the borrower. It is important that people are given the option to remain in their houses. Why do we have such arrears? It is because of the level of unemployment. From whatever angle one considers the matter, it is clear that people are in arrears because they have lost their jobs. Many who still have jobs are on reduced incomes. Until the Government takes action to deal with unemployment, we will continue to have mortgage arrears.

I am concerned that the banks will pick the easy targets. They will target people with substantial equity rather than to go after those with negative equity as they do not want to face up to having to sell properties at a loss. They will go after people who have paid a substantial portion of their mortgages. In particular, they will go after people in areas where house prices are beginning to rise. They will not go after people in areas where property prices are not rising. The Government is giving the banks carte blanche. This is strengthening bankers' hands and reinforcing the old culture. Banks will not learn from this process. If they do not, they will come back and cause havoc in another decade or 15 years when the current draft of managers has moved on. This is happening now because the banks want it to happen. They did not want these extra powers three years ago when house prices were still dropping. They did not want it two years ago when prices were dropping. They see that, in some cases, the property market has stabilised and that property prices are beginning to rise. Now is the time they want to come in for the kill and repossess properties in a rising market. They are taking this power now because it suits them. Mortgage arrears are causing families stress, creating mental health difficulties and leading to family break-up. We must restore the balance between customers and the banks from which they obtained their mortgages.

See this speech in context