Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

That is the overriding message. Bankruptcy is in place for people with more complicated debt arrangements, including business and related debts.

Those who have been able to persuade their secured creditors to approve their PIA proposal have been forced to accept surprisingly small write-offs of secured debts to ensure their proposal is approved by their creditors, with the average write-off of secured debt being only 16%. In some cases, there has been no write¬off of secured debt, with the PIA used to reduce unsecured debt only. The extent of the failure of the PIA route to deal with family home mortgage arrears is evidenced by the fact that less than 40% of the debt in cases currently with the ISI relates to family mortgages.

Banks should not be able to act as judge and jury when dealing with homeowners who seek to restructure their mortgages to avoid repossession of their family homes. Where a sustainable solution cannot be agreed between a lender and borrower in respect of a family home, the matter should be dealt with by an independent judge, who can hear from both sides equally and mandate a fair solution that is beneficial to both parties, not just the bank. That is the essence of what we propose. The Bill provides that homeowners who satisfy the eligibility criteria set out in the legislation may propose a family home mortgage settlement arrangement to their lenders in respect of their mortgages. To be eligible to make such a proposal, they must have engaged in the Mortgage Arrears Resolution Process, MARP, under the Central Bank's Code of Conduct on Mortgage Arrears and exhausted the appeals process set out in the code of conduct.

A proposal could be made only by a licensed Personal Insolvency Practitioner, PIP, who would assist the homeowner in completing a prescribed standard financial statement and ensure it is accurate. A proposal for a family home mortgage settlement arrangement would be possible only where the PIP believes there is a reasonable prospect that an arrangement would facilitate the homeowner to pay off the arrears on the mortgage and there would be no prospect of him or her being solvent within five years without such an arrangement. After a thorough review of the homeowner's financial circumstances, the ISI would issue the necessary certificate to the Circuit Court, which could, in turn, issue a protective certificate. The borrower would be protected by the certificate from the lender commencing or progressing legal proceedings or taking any step to repossess his or her home for a period of 180 days.

During that time, the personal insolvency practitioner would prepare a proposal for a family home mortgage settlement arrangement which could include any of a range of 14 options set out in the Bill, including paying interest only for a period, permanently or temporarily reducing the interest rate, extending the term of the mortgage, changing the type of the mortgage, having a split mortgage and reducing the principal sum, etc. They are all laid out in the Bill. The Circuit Court would consider the proposal and all associated documentation at a private hearing at which both sides could be heard.

The Bill contains a number of important safeguards to ensure this legislation is not misused. It provides that a homeowner may enter a family home mortgage settlement arrangement just once. It also provides that when an arrangement is under way, the lender can apply to the court to terminate the arrangement in limited circumstances, for example if the borrower has failed to comply with his or her obligations under the arrangement or has fallen into arrears of 12 months in respect of payments under the arrangement. The court would have the option of terminating or varying the arrangement in those circumstances.

Tens of thousands of families are currently in a position in which they must comply with the demands of their banks or face eviction from their family homes. They potentially face having to take on crippling debt if there is a significant shortfall when their homes are sold for less than the amount of their mortgages. The solutions that are available at present are totally focused on the banks. They give lenders a complete veto over any proposals made by home owners. If this legislation is enacted, it will rebalance the relationship between banks and home owners by allowing the Circuit Court, on the recommendation of the insolvency service, to put in place a fair, equitable and sustainable solution that would allow a family to remain in the family home while paying a sustainable monthly mortgage payment.

If our proposal were adopted, I do not doubt there would be a considerable improvement in the current situation, with a much higher proportion of successful restructuring arrangements being implemented. It would put the interests of the mortgage holder at the centre of the process. It would act to dilute the control that the banks currently have over the process. I honestly believe that if the Government were genuine in its efforts to deal with this ever-growing crisis, it would accept this Bill, imperfect and all as it might be. It should accept the broad principle of this Bill, which is that the bank veto that current operates in the insolvency service when it comes to family home mortgages should be removed.

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