Thomas Pringle (Donegal South West, Independent) | Oireachtas source

I welcome the opportunity to contribute to the debate on the Mortgage Restructuring Arrangement Bill 2013. I commend Deputy Joan Collins and her team for putting together this Bill. The Bill is modelled on legislation introduced in Norway in the 1990s after the housing bubble to relieve the debts of embattled homeowners and to ease the burden on them. We need to repeat that approach.

The legislation guarantees the security of family homes, meaning that families in mortgage distress will not suffer the threat of being put out of their houses. Homes will be protected. The legislation removes the veto over insolvency arrangements from the banks. It ensures the banks do deals with families in distress and ensures the mortgage element of the debt is written down so that affordable solutions are put in place. The Bill deals with negative equity among people who are in arrears with mortgage debt. These are the key themes of this vitally important legislation. It should be a key theme of Government policy in dealing with mortgage distress in the State. The legislation was introduced in Norway in the 1990s and has been modified for the Irish situation to take into account the personal insolvency arrangements. This will assist people in dealing with debt. In Iceland, a similar procedure was put in place, whereby the mortgage was re-fixed at the market value plus 10%, making it manageable for people in arrears. That is what we need to do in Ireland.

The media coverage of personal insolvency arrangements shows they will not work for people. What is more disturbing is that they will not be accessible to people. Only one in seven will be able to put up the fee of up to €7,000 to engage a personal insolvency practitioner to deal with their debts. If people had €7,000 up-front, they would use the money for the mortgage rather than to engage a personal insolvency practitioner.

The Bill is necessary because, over the past five years, we have seen the banks calling the shots in the State. The previous Government introduced the bank guarantee in September 2008. The heads of AIB and Bank of Ireland came into Government buildings in their fancy suits and talked to Brian Cowen and Brian Lenihan. Lo and behold, they introduced the bank guarantee. In the lifetime of this Government, the banks call the shots and dictate the pace. We saw this in the case of the personal insolvency legislation, which was amended on Report Stage so that the banks could extend the time someone could be in an arrangement. If someone is lucky enough that his or her fortunes improve over the three years of an insolvency arrangement, the banks can go back for another bite of the cherry and extend the period for five years. We have been kowtowing to the banks for too long in this country and we need some form of legislative backup to force banks to do deals with people.

The voluntary system clearly is not working. The Governor of the Central Bank told the Oireachtas Joint Committee on Finance, Public Expenditure and Reform that the banks are supposed to have issued 35,000 proposals for sustainable solutions. We discovered that 60% of the so-called sustainable solutions consisted of the voluntary surrender of houses, to be sold at the will of the banks. These are the sustainable solutions that the Government wants the banks to put in place, whereby people either voluntarily surrender or are forced to surrender their houses. That is not a solution we should use. We should use legislation to force the banks into a situation in which they must do deals with people. The only way to get out of this crisis and the only way to bring vitality and life back to the economy is to remove the millstone of mortgage debt from people's necks. We need to ease the burden on people, and that is the only way we can do it. Members on the other side of the House will talk about moral hazard but the real moral hazard is in doing nothing and letting the banks continue as they are, offering solutions under which people must voluntarily surrender houses. A bigger moral hazard is for society not to take this measure and not to force banks into write-down situations.

Figures from the Central Bank in June of this year show that 79,000 mortgages have been restructured, yet only 42,000 were not in arrears at that time. Of the 79,000 restructured mortgages, 37,000 are back in arrears. These are not sustainable solutions. The Governor, Professor Patrick Honohan, said, "[D]espite all of our efforts, and despite real progress in policies, processes and staffing, far too many arrears cases have remained untreated." Why have they remained untreated? Because the banks do not have to do anything. They must only sit tight and force families deeper into debt and then they will take the houses and sell them off, leaving families on the social housing lists, as outlined by Deputy Clare Daly.

What we need is legislation to force banks into doing deals.

I also believe the Government should get rid of the sub-prime lenders from this market by going in and forcibly taking over their loans. We own AIB. Why not buy the mortgage debts off these sub-prime lenders and take them into AIB where they can be dealt with and we can force a proper restructuring on them? Unless we do that and unless we remove the burden from citizens, the economy will not recover and there will be years of stagnation. We need to give people the wherewithal to be able to manage the debt they can afford and to participate fully in society again.

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