Paul Connaughton (Galway East, Fine Gael) | Oireachtas source

I very much welcome the extension of the Central Bank's code of conduct to lenders that are currently unregulated as it provides additional and much-needed security for home owners and owners of small and medium businesses whose loans are currently in arrears.

At the time of the sale of the Ulster Bank loan book by the IBRC, I was approached by many home owners who were concerned that their loans would end up with unregulated financial institutions and they would not enjoy the protection of the mortgage arrears resolution process, which is mandated by the Central Bank's code of conduct on mortgage arrears. These people, as holders of residential mortgages which were in arrears, had very real fears that they would be treated differently by an outside agency and I believe that this Bill will ensure that individuals, families and small to medium enterprises will continue to enjoy the protection of the Central Bank's code of conduct.

Deputies on all sides of the House have heard many harrowing stories of financial difficulties in the confidential setting of clinics in recent months and years. We regularly come face to face with the real people whose everyday financial struggles are only too evident and can see the long-term damage being done to families who find themselves in arrears with their mortgage. Their mounting debt appears to be insurmountable. In this regard the Government is committed to ensuring that people who find themselves in mortgage arrears enjoy the protection of the Central Bank's code of conduct.

In the past week, at clinics in east Galway, I have heard tales about the intransigence of the main banks in dealing with mortgage arrears, despite customers' willingness to tackle debt burdens. I have arranged meetings with various banks in an attempt to find a way to break the impasse, but too often bank customers are unaware of the protection they enjoy and in the dark in terms of their rights and entitlements.

Over 117,000 mortgages are in arrears, but for some families, their situation has improved in recent months. Jobs have been secured; additional income is starting to flow and, in some cases, the level of the arrears is beginning to reduce. Nevertheless, arrears continue to be a worry in over 117,000 homes. Of these, between 5,000 and 10,000 do not enjoy the protection of the code of conduct on mortgage arrears and the Bill seeks to extend the code to their loans. Some 5,000 or 10,000 families is a significant number and while the firms involved in these loans have stated their intention to comply with the code of conduct, that is not sufficient and needs to be underpinned by legislation. That is what necessitated today's decision.

The code of conduct is particularly important in communications between banks and borrowers in arrears. It regulates communications between the bank and the borrower to ensure there will not be excessive contact between the bank and the already stressed borrower. I acknowledge that the passage of the Bill may make it more difficult for banks to sell loan books in the future because of the increased regulatory burden, but with rights come duties and the increased burden of care towards the borrower - individuals, families and small or medium-sized businesses - is fair.

When one considers that unemployment rose from 5% in the first quarter of 2008 to over 15% in the first quarter of 2012, it is clear that huge numbers of workers who never envisaged themselves being out of work found themselves suddenly without jobs as a result of the economic downturn. Without a job, it is impossible to service a mortgage and, while half of the people concerned have since found work and it is hoped to get unemployment below 10% by the end of the year, two issues remain. The first is the overhang of debt from those years, while the second is the accrual of mounting interest. Added to this is the fact that mortgages were given out in the good times on the basis of high incomes that were forecast to rise and house prices are now just over half what they were at the height of the boom and we have the perfect storm for mortgage holders.

While the Bill provides welcome additional security in legislative terms for the 5,000 or 10,000 loan holders not covered by the Central Bank's code of conduct, our focus must remain firmly on the 117,000 individuals or families whose mortgages or business loans are in arrears. The ongoing creation of new and better paid jobs within the economy will provide the financial lever that many need to address their mortgage arrears; therefore, our focus must remain on fixing the flaws in the wider economy, reducing unemployment, reducing taxation for the low paid and creating a better environment in which to do business. However, while repairs are ongoing to the economic infrastructure, we must continue to care for those who were caught up in the perfect economic storm that hit Ireland in recent years. It is not enough to repair the banking structure or institute codes of conduct, we must focus on the casualties of the property boom and bust and help those families back to a sound economic footing through a variety of resolution options. They are not statistics, this is the everyday reality for over 85,000 families with mortgages in arrears for more than 90 days and 30,000 owners of buy-to-let properties. This legislation is one necessary step that has to be taken for this cohort of home owners, but, as the economy recovers, we must ensure they are not left behind and that their cases are resolved in a way that will allow their lives and those of their families to progress.

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