Jan O'Sullivan (Limerick City, Labour) | Oireachtas source

I acknowledge the fact that everyone who has spoken in this debate feels very passionately about the crucial importance of addressing this very serious problem for many of our fellow citizens. The Government has taken action across a number of areas, including engagement with the banks, requiring them to develop and apply sustainable measures to assist customers in mortgage arrears, personal insolvency law reform and implementation, and the introduction of mortgage-to-rent schemes and a mortgage advisory function. Personal insolvency reform and Central Bank involvement are fundamental to resolving the mortgage crisis. These processes are under way and should be supported. I wish to stress, in response to several Deputies, that these processes are for all classes of debtor, not for a select few.

I thank Deputy Joan Collins for the work she has put into her Bill. However, I must reiterate what the Minister stated in the House yesterday - that the mortgage restructuring arrangement proposed by the Deputy, to be additional to the three new debt resolution arrangements introduced in the Personal Insolvency Act of 2012, would turn what is a negotiated approach to debt resolution into an adjudicative approach, with the details of such arrangements determined solely by a personal insolvency practitioner, with acceptance by the creditor to be mandatory. Such an approach would be unconstitutional and would have serious economic and financial implications for the sustainability and solvency of financial institutions, with the risk of a resulting additional burden being placed on taxpayers.

The Central Bank has the power, from both the prudential and consumer protection perspectives, to require banks to address mortgage arrears cases on their books. It will no longer be acceptable for banks to apply short-term solutions where the position of the borrower has fundamentally changed for the long term. Durable restructures such as split mortgages or other solutions will have to be applied, having regard to the circumstances of each case. The Central Bank has put in place the mortgage arrears resolution targets, known as MART, and set out a rolling plan requiring the main banks to propose sustainable solutions to their mortgage arrears customers, with a target of 20% by the end of last June, 50% by the end of the year and 70% by the end of March next year. There are also first targets for concluded solutions of 15% by the end of this year and 25% by the end of March next year. The banks have indicated that they exceeded the end of June 20% target for proposed solutions, with a heavy emphasis on potential legal proceedings. However, as Deputy Shatter has already stated, so-called legal letters cannot be regarded as a sustainable solution to a mortgage problem.

The code of conduct on mortgage arrears, with which banks must comply, clarifies that repossession of a primary home is a last resort and that legal proceedings may be commenced only where lenders have made every reasonable effort to agree an alternative repayment arrangement. Crucially, the Central Bank has commenced an audit of the end of June returns, with a report expected in November. The audit will entail an examination and evaluation of the policies, procedures, systems and controls that the banks have implemented to ensure that reported performance is complete, accurate and valid. It will also include file reviews on a sample of loans reported by the banks as modified sustainable loans. For this process to work and for banks to be able to provide sustainable solutions to mortgage arrears cases, the borrower will have to co-operate and provide the information necessary to enable the lender to provide such solutions. Where the borrower does not constructively engage with a lender, and despite full compliance by the lender with the code of conduct on mortgage arrears, then there may be no other option for the lender but to commence legal proceedings. Indeed, the lender may otherwise incur even more losses, with further costs for wider society. Where efforts to find a mortgage solution have failed or are not viable, unfortunately, in some instances - and I hope very few instances - the ultimate resolution will involve the sale of the property.

I wish to stress that the mortgage-to-rent solution is available to people who qualify for social housing and who fulfil a number of other criteria. It is becoming a realistic solution for a certain percentage of people.

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