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

The Labour Party will also be supporting the Fianna Fáil Bill tonight. The effect of the Bill is to regulate so-called vulture funds that purchase non-performing loans from Irish banks. The Bill, if passed, would ensure that the Central Bank has the power to directly regulate the owners of the loans, while currently only those who deal with the borrowers directly are regulated. However, it is true that it is the owner, in all likelihood the vulture fund, that will make the key decisions around the future of the loan.

The latest controversy arises from the decision of Permanent TSB to sell off thousands of loans, worth up to €4 billion. This sale is likely to be followed by others, including Ulster Bank and AIB. The sale arises from the failure of the bank to manage its loan book properly.

Many people will have read a very good article in today'sIrish Examinerby Ms Julie Sadlier, who has been advising people threatened with repossession and attending repossession courts since 2008. She has written a very detailed examination from her own experience on this issue. She outlines that since the Personal Insolvency Act 2012, around 2,000 personal insolvency arrangements and around 1,500 bankruptcies have been approved. The number of home loans that have been restructured is appallingly low. That failure has compounded the problem. The lack of consistency in how borrowers are treated is also deeply disturbing.

As has already been said, at the heart of this problem is the motives of the banks. All they seem to care about is restoring their balance sheets by selling off loans rather than writing down debt and working with their customers to find and agree on sustainable solutions. Some 75% of Permanent TSB is owned by the State. It is a bank that has received significant support from the people of Ireland in recent years. However, instead of doing the hard work itself, it now plans to outsource the difficult job of fixing its balance sheet by selling off "non-performing loans", as its representatives call them. Permanent TSB has also failed to provide any clear information on the make-up or type of loans it plans to sell.

The Government has handled this controversy badly. The Cabinet waves through the news from the Minister of the latest planned transaction by Permanent TSB. As Minister for Finance and principal shareholder, it is incumbent on him to seek protection for citizens whose mortgages may be sold on to vulture funds.

In his speech, the Minister talked about "normalising" and the need for the banks to "normalise". I question this term. Surely it cannot be normal to allow the sale of mortgages where people have entered voluntarily into agreements and split mortgages and are paying whatever they can, yet part of this normalisation involves including the loans of such people in the sale. I question that this is "normalising".

Compelling PTSB to provide more information on the loans it plans to sell would be a good first step. The proposal to hand over large numbers of troubled mortgages to unregulated vulture funds seems perverse. It will add further precariousness to the housing market and the homelessness situation because these people have to live somewhere. It is wrong that the sale would include those borrowers who have engaged with the banks and made the effort to pay their debts, and agreed to a restructuring or a split loan product. This legislation, as Deputy McGrath has acknowledged, will only go so far towards addressing the problem. The reality is that regulation is not the main issue, although it is a step in the right direction.

Based on ECB Single Supervisory Mechanism rules, 28% of the loan book of PTSB is classed as non-performing. However, of the approximately 20,000 loans that PTSB expects to sell, 6,500 appear to be active split mortgage loans. Those split loans are classed under these rules as non-performing. Splitting mortgages was one of the key responses to the arrears crisis and it was promoted by the Government and urged on the banks. It was one of the arrangements that was promoted, yet now the loans are being sold off to these vulture funds. These are homeowners who have engaged with the banks and who have been paying what they can afford. A portion of the loan was warehoused while repayments continue to pay down the capital sum on the rest. It is a betrayal of those homeowners who engaged to the best of their ability with the banks to allow these loans now to be sold off to a vulture fund.

It is hard to have sympathy for those with capacity who have stopped paying their loans completely, but the evidence would suggest that a very large number of people did engage and did pay what they could. However, the other solutions do not appear to be working. Mortgage-to-rent has not delivered enough, although it is a good concept. The main reason for this is that the banks have not actually engaged with it. I am dealing with one case of a person who agreed the very early stages of mortgage-to-rent. The Clúid Housing Association agreed to work with her and her lender apparently agreed, but four years later it still has not signed off on this and it still has not gone through. There is a reluctance on the part of the banks and they are not co-operating, certainly in my experience of this one case, with the mortgage-to-rent scheme.

For those mortgage holders have engaged with their lenders, their loans should not be sold off because of a quirk of the rules. This issue is being examined, but when Deputy Howlin raised this with the Taoiseach over a week ago, the Taoiseach implied that the Labour Party was seeking a loosening of regulations on the banks. However, the Department of Finance has also been seeking a change to the rules that treat those split mortgages as non-performing loans. I hope the change will be made and the Minister should continue to pursue that.

From the height of the arrears crisis, major progress has been made, as the Minister acknowledged, to help those mortgage holders who found themselves out of a job or unable to meet their repayments. From the code of conduct on mortgage arrears to the mortgage arrears resolution process, those policy initiatives have provided some protection to borrowers. The changes in the bankruptcy law pioneered by my colleague, Deputy Willie Penrose, have also made it easier for those with unrealistic debts to seek relief within a year. The additional resources provided to MABS by the then Minister, Deputy Burton, and the establishment of the Abhaile service have ensured support for those families who found themselves dealing with legal letters and the courts. The introduction of court mentors and a dedicated mortgage arrears service have been central to that. Much has been done. However, for those who have engaged and who have done their bit to meet their obligations, it is essential that their split performing loans are not sold on. It is incumbent on the Government to ensure that does not happen. It is about time Irish banks resolved their problems in-house rather than trying to outsource a solution to vulture funds. That means writing down debts and it also means compelling banks to use the mortgage-to-rent scheme as it was designed.

In the time I have left, I want to quote from Julie Sadlier's article in the Irish Examinertoday. She states:

So what next? We need to acknowledge that the income and repayment capacity for the vast majority of the tens of thousands still in arrears has never been, and is unlikely to ever be, replaced because of the damage caused to their sectors by the recession.

They are also the cohort being accused of strategic defaulting but from what I see default is not, and never has been, part of their strategy.

Bank claims of strategic default are false, just like their claims that for many years there was no tracker overcharging. This is simply propaganda to alter public perception and influence government policy.

These borrowers do not, however, fit into bank or personal insolvency resolution criteria and so they are facing certain repossession and homelessness unless Government intervenes.

This is from a very experienced practitioner who has been working directly with families in this situation.

We will be supporting Deputy McGrath's Bill but, as has been acknowledged on all sides, a lot more needs to be done to protect, in particular, those people who have engaged with their banks and who are now basically being thrown to the wolves.

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