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

I am sharing my time with Deputy McGuinness and we will have ten minutes each.

I would like to express my personal condolences to Deputy Pearse Doherty, the Leas-Cheann Comhairle, the other Oireachtas Members from Donegal, their constituents and, above all else, the families of the four young men who tragically died in the road accident at the weekend. It was a devastating event and it puts everything else into perspective.

I welcome the opportunity to make some remarks on this Bill. The Minister of State, Deputy Canney, in his response on behalf of the Government, certainly did not hold back in the predictions he and the Department have made about the implications of the Bill. He cited increasing interest rates, an increase in the number of repossessions and significant economic and financial costs for the Irish economy and society as a whole. It is important the Government understands, certainly at least from our perspective within Fianna Fáil, why there is such frustration among consumers and mortgage holders with the current system and the difficulties they face on a day-to-day basis in dealing with so-called vulture funds.

Deputy McGuinness is the chairperson of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach and Deputy Doherty is a member of it. We have tried on many occasions to get the so-called vulture funds to come before the committee to engage with us, answer questions, debate their business model, the way in which they deal with individual mortgage accounts, the type of solutions they offer and how they make their decisions. On each and every occasion they have refused to engage and to come before a committee of this House. This House passed a motion on that very issue sometime ago. That in itself leads to much suspicion and worry.

One can say what one may about the banks, and we certainly do not hold back at that committee or in general in this House in criticising them where it is warranted, but they come before that Oireachtas committee, complete a very detailed questionnaire and answer questions. We are not always satisfied with the answers we get but we do get engagement and there is no hiding place for them. When we contrast that with the other loan owners, these funds which purchase loans from financial institutions, there is no accountability, no engagement and up until recently, those funds had no direct oversight by the Central Bank. I welcome the fact that the Government supported our Private Members’ legislation which, in essence, regulates those funds for the first time. I acknowledge the work of the Minister's Department and his support in bringing that about, and in recent days ensuring that it was signed into law.

It has long been our position as a party that the banks should be working through their loan books themselves. They should be making decisions on a case-by-case basis. They should know their customers. They certainly should have an intimate knowledge of the history of each individual mortgage account and they are best placed to do everything that possibly can be done to rescue that mortgage and to ensure that the family home is saved.

I acknowledge there are mixed messages from the Single Supervisory Mechanism. When we met its representatives in Frankfurt some months ago, they were at pains to say they set no targets. There is no pressure on the institutions to reduce their non-performing loan levels. I know that is not the case. They may not have told the banks how to do it but they certainly have told them they must do it and that they must reduce their non-performing loan levels to European norms of the order of 4% to 5% of their loan book. Therefore, they are speaking out of both sides of their mouth.

When it is said, as it often is, that the vulture funds are more likely to do deal with borrowers than banks, that may well be the case if one is willing to sacrifice one's home. As somebody who advocates for borrowers and deals with individual cases quite a lot, I have not come across an instance where somebody has been able to stay in his or her home and has negotiated a very good deal with these vulture funds.

Regarding this legislation, we will support it on Second Stage. It warrants very careful examination at the pre-legislative scrutiny phase. I note the Minister of State, Deputy Canney, said it does require a money message. I take it the Bill will not be in any way supported by the Government, in fact it will not allow it to proceed to Committee Stage, but perhaps the full pre-legislative scrutiny can still be conducted and that should be done.

An opportunity was missed when it came to the review of the code of conduct on mortgage arrears. This is an issue I raised directly with the Minister. Under section 39 of the code, any lender is only required to consider the forbearance options, the alternative repayment arrangements that it offers. It is only required to consider those; it is not required to consider the full suite of options that are available under the mortgage arrears resolution process. There is a gap, a deficit, there. It means that, in effect, these funds can say to borrowers that they do not provide split mortgages or arrears capitalisations and are not in breach of any code, notwithstanding the regulation that has now been extended to them. That is a change that should have been made and the Minister should still make that change.

In addition, when we brought forward legislation to provide powers to the Central Bank to restrict interest rates. That, too, was knocked back by the Department and by the Central Bank but the reality is that if one of these funds decided tomorrow morning that the interest rate on a loan is to double from 4% to 8%, there would be a hue and cry. It would be a scandal but there is nothing that anybody in this House, the Central Bank or in the Minister's Department could do to deal with that because the Minister refused to put on the Statute Book even limited powers to deal with the egregious interest rates which are currently being charged in some cases but which potentially could be charged in a scenario where interest rates are increased.

The fundamental problem with these funds is that their business model is very different from the banks. The banks hope to be here in 20, 30 or 40 years. They hope to build customer and brand loyalty. If they give out a mortgage there is a reasonable expectation that bank will still be the institution accepting the final payment on that mortgage in 20 or 30 years. There is no such expectation with any of these funds. They will not be here in ten, 15 or 20 years. They simply have a different business model. We are not only looking at one portfolio sale to one of these funds. We will see these sales go on again and again and the reality is that loans, over the course of the life of a loan, may well end up changing hands on multiple occasions, and that is not in anybody’s interest. It is not the road that we should be going down.

There is obviously an issue regarding the application of this code in respect of mortgages that have already been written.

Borrowers have signed a mortgage contract which explicitly allows the lender to sell on the mortgage. Perhaps it is a legal question. I would value independent advice from the Parliamentary Counsel or others on whether the Bill, if enacted, would have any impact on mortgage contracts already been entered into. Can the Oireachtas set aside that contractual provision to which both parties have already signed up? I have my doubts, but it is a matter of legal opinion.

On the consequences of the Bill for the financial system, the banks and so on, significant issues have been raised. Securitisation is a legitimate and bona fide financial transaction, especially in this context where it is passive, where there is regular management of loans and decisions on loans are made by the existing lender who continues to hold legal title. From my perspective, it is a bona fide transaction. The Minister of State, Deputy Canney, said on behalf of the Government that, if enacted, the Bill would lead to an increase in interest rates. Irish consumers and mortgage holders are already paying far more than they should be for loans. That is an issue we need to examine further and make progress on. It was also said it would stop non-performing loan sales. There is no doubt that the banks are under immense pressure from the European Union. They should work through their loan books and deal with them. If the Bill enters a pipeline that it will take many months to come through, it could accelerate non-performing loan sales because if someone in a bank is looking at a high level of non-performing loans, he or she might try to sell them before any such legislation came into place. That matter would need to be teased out.

There is a real issue, much of which derives from the lack of engagement and accountability of the so-called vulture funds. They are not easy to deal with, as I can tell the Minister personally. People have a reasonable expectation that their bank will continue to work with them and continue to administer their mortgage.

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