Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

As the Deputy is aware, last March the Central Bank set specific performance targets for the six main banks, requiring them to propose sustainable solutions: to 20% of their mortgage customers who are in arrears of over 90 days by end June; to 30% by the end of September and; to 50% by the end of this year.

The Central Bank also recently announced that it has agreed further mortgage arrears resolution targets with the troika. In that regard, the main banks will now be required to propose solutions to 70% of their mortgage arrears customers by the end of the first quarter in 2014. Even more importantly, given that the primary objective is to put agreed and durable solutions in place, the first targets were also set for concluded agreements and these require these banks to have concluded arrangements with 15% of their arrears customers by the end of December 2013 and 25% by the end of March next year. This initiative should see more long-term restructured arrangements put in place.

The strong view of the Government is that, in respect of co-operating borrowers under the mortgage arrears resolution Process, MARP, repossession of a person's home should only be considered as a last resort. The policy measures adopted by Government make that quite clear. The code of conduct on mortgage arrears places an onus on the banks, in respect of a co-operating borrower, to explore all the options for an alternative repayment arrangement to address a mortgage difficulty before any legal action is considered and any proposal to a co-operating borrower by a bank under the mortgage arrears resolution targets, or MART process, will have to comply with the code of conduct.

The Central Bank's MART document sets out three modes of generating a sustainable solution. The preferred solution is an arrangement where payments are re-established on the original, or an agreed revised schedule. The second mode is where the borrower opts for a personal insolvency arrangement. The final option is where an arrangement could not be reached or is not appropriate, ultimately involving surrender or repossession of the property. As the Deputy is aware, in his appearance at the Joint Committee on Finance, Public Expenditure and Reform, the Governor of the Central Bank acknowledged that more than 60% of the end of June proposals by the relevant banks involved the final option. The Governor also informed the committee that the Central Bank has commenced the audit of the banks' returns on the end of June target and the Central Bank will have initial results of the audit in November. This will ensure that the mortgage modifications proposed by the lenders are in fact sustainable.

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Regretfully, it must be accepted that not all mortgages, due to the individual circumstances, can be made sustainable. There will sometimes be circumstances where the person will have to lose ownership of the home. Indeed, in such cases this may be in the best overall long term interests of all parties. The Central Bank does not expect that repossession will be the lender's preferred solution to mortgage difficulties and in most cases engagement by the borrower will make the legal course unnecessary. However, in circumstances where the borrower does not engage with a lender to address a mortgage difficulty and, subject to fully complying with the code of conduct on mortgage arrears, then there may be no other option for the lender but to commence legal proceedings.

The Keane report clearly stated that without an effective insolvency system the mortgage arrears problem will not be solved. The Insolvency Service of Ireland began accepting applications on 9 September 2013 and while work has commenced on the initial cases, it is too early to make any specific determination on the numbers of individuals that may avail of the different options. There is, of course, a range of options available for the first time such as a debt relief notice, a debt settlement arrangement, personal insolvency arrangement and ultimately the fundamentally reformed bankruptcy arrangements which are more in line with international norms. The detailed operation of the insolvency service and the Personal Insolvency Act is a matter, however, for my colleague the Minister for Justice and Equality.

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