James Bannon (Longford-Westmeath, Fine Gael)
Link to this: Individually | In context

I thank the Ceann Comhairle for affording me the opportunity to raise this important matter, namely, the need for the Minister for Finance to establish a mortgage rescue scheme to minimise the number of mortgage repossessions, which is a potentially major cause of homelessness.

The current economic climate and the persistent increases in mortgage possession action have made this an area that needs to be urgently addressed. Financial deregulation and increased sub-prime lending has drawn in more economically vulnerable households, leading to a situation in which, according to Mr. Justice McGovern, mortgage lenders are leaving it to the courts to deal with the social wreckage caused by giving loans to people who cannot afford to repay them.

Many sub-prime lenders have encouraged people to borrow beyond their means and are quick to take action to repossess properties when payment default becomes an issue. Insurance provisions cannot always save people from repossession and such repossession leads to homelessness.

Mortgage rescue schemes — the introduction of such a scheme is what I am seeking — are already in operation in other parts of Europe. These can be in the form of shared ownership, which reduces the amount of mortgage repayments or a complete purchase of a property in which the former owner becomes the assured tenant and is able to remain in his or her home for as long as he or she likes. There is also a number of private companies offering sale lease-back possibilities, but these may involve home owners selling a property for considerably less than its value and offer little in the way of tenure.

I want the Government to introduce proposals to reduce the number of households becoming homeless as a result of mortgage repossessions, which are currently running at a high level. Education must be provided to ensure that people have the necessary financial capabilities to manage their affairs and information must be provided on what services are currently in place to support people with mortgage difficulties. The Government must ensure that comprehensive information and advice is available to all consumers pre-purchase, taking into account affordability and, in particular, the implications of changes in circumstances and also encouraging improved communication between lenders and borrowers where difficulties arise.

Rural homelessness is not an issue that is commonly discussed and is often hidden as people may face stigma in their community if they lose their home. Dwellings are often in remote areas which are removed from services and such households have a greater difficulty in accessing these than those in urban areas. Housing options may be fewer and affordability for home ownership is particularly difficult, as house prices can be disproportionate to incomes.

The threat of homelessness is very real and is rapidly increasing, with a 70% increase in the number of people seeking help to pay their mortgages from the start of this year and some 7,000 people now applying for assistance, a major increase compared to the 4,000 who were applying for it last December.

The urgent development of a mortgage rescue scheme, allied with improvements in regulation and enforcement, to ensure that courts only approve possession action when lenders have explored all other options to prevent possession being taken, must be undertaken by the Government. As Mr. Justice McGovern said recently: "I wonder what is realistically being done by banks and mortgage companies...?" We could certainly add the Government to that question. I welcome a favourable response from the Minister on the issue raised because it is one that is becoming increasingly widespread. We need a scheme to be put in place urgently to protect people from homelessness.

Trevor Sargent (Dublin North, Green Party)
Link to this: Individually | In context

Ar dtús báire, ba mhaith liom a rá gur oth liom nach bhfuil an tAire Airgeadais, an Teachta Brian Lenihan, i láthair. D'iarr sé orm an freagra seo a thabhairt don Teachta Bannon.

I wish to start by addressing the Deputy's concerns on the need for supports for those who may fall into arrears on their mortgages and I will later address the issue of how mortgage providers deal with such situations when they arise and the role played by the Government and the Financial Regulator in responding to those difficulties.

It is obviously most desirable that as few people as possible fall into arrears with their mortgages and one of the ways of achieving that is to ensure mortgages are affordable in the first instance. In terms of the housing market, affordability in Ireland is currently supported by such factors as interest rates that remain low in historic terms — with today's ECB announcement providing further relief — and increases in mortgage interest relief available in particular to first-time buyers. Successive budgets since 2006 have increased the level of mortgage interest relief available to first-time buyers in order to refocus mortgage interest relief towards home owners who are in most need of assistance.

In order to alleviate the difficulty for prospective first-time buyers who previously may have had access to a mortgage from mainstream financial institutions, but who are now unable to secure sufficient loan finance, the Government has decided to provide assistance through the new home choice loan. Those loans are to be provided by local authorities to first-time buyers of new properties subject to a maximum loan of €285,000, and a maximum loan to value ratio of 92%.

Furthermore, it is envisaged that a new single streamlined Government equity product will be introduced in mid-2009 to change the way in which affordable housing is provided, to introduce greater equality into the system and to provide a basis for achieving greater consistency across the schemes and across different areas of the country. The Government will take an equity stake in the affordable units sold, which the purchaser can either buy out in steps or at the end of a fixed period. That means the State's investment will be better protected and should enable more funds to be recycled into affordable housing in the future.

The Minister for Finance has consistently highlighted the need for responsible behaviour by both borrowers and lenders and, in particular, the need to factor in to their financial decision-making the effects of potential future changes in economic and financial conditions.

Unfortunately, a number of borrowers develop debt problems. Anyone experiencing difficulty in repaying a mortgage or other loan should discuss the matter with the loan provider and seek appropriate financial advice without delay. The money advice and budgeting service, MABS, which falls under the remit of my colleague, the Minister for Social and Family Affairs, is a national, free, confidential and independent service for people in debt or in danger of getting into debt. Funding for MABS in 2008 is almost €18 million and is to continue at that level for 2009.

The Department of Social and Family Affairs also funds the demand-led mortgage interest supplement scheme, which provides short-term income support to those eligible who are unable to meet their mortgage interest repayments in respect of a house which is their sole place of residence. Support for the scheme was re-affirmed in the recent budget and payments from it have reached more than €20 million so far this year. As it is a demand-led scheme, the Government is committed to meeting all payments arising under it, thereby affording protection to those who need it when they need it most.

The Deputy will appreciate that recent media attention on court proceedings for home repossessions needs to be interpreted with caution, given the variety of circumstances that give rise to such cases. Although the number of cases involving applications for repossession orders is up in each of the past two years, it should be noted that orders are not always granted and do not always represent residential mortgages. Even when orders are granted, they are not always followed through and levels remain low compared to historical averages and in comparison to similar jurisdictions such as the United Kingdom.

Non-financial supports in place include the Financial Regulator's consumer protection code, CPC, which applies to home loan providers operating in the State, including so-called sub-prime lenders. The CPC requires mortgage lenders to undertake suitability assessments before offering a product or service to consumers as well as requiring the regulated provider to contact the consumer as soon as it becomes aware that a mortgage account is in arrears, irrespective of the amount of the arrears. The CPC also specifies that the regulated provider must have in place a procedure for handling accounts in arrears and the Financial Regulator's CEO has pointed out that the Financial Regulator considers this to include a requirement that lenders agree a remedial action plan with a borrower as soon as they detect arrears starting to emerge and to try to assist the borrower to manage his or her financial commitments and not allow the situation to worsen.

The Deputy may wish to note that the provisions of the scheme made under the Credit Institutions (Financial Support) Act 2008, requires institutions covered by the guarantee in Ireland to confirm their compliance not only with the consumer protection code, but also with the Irish Banking Federation's, IBF, code of practice on mortgage arrears, IBF code. The other IBF and Irish Mortgage Council members comply with the IBF code on a voluntary basis. In accordance with the IBF code, borrowers are advised to contact their lender about any problems they may experience in meeting their repayments schedule. It recommends that the borrower contact the lender after one missed scheduled payment, again irrespective of the amount, in order to prevent a situation of mounting arrears arising with negative consequences for both the borrower and lender. Once the borrower has contacted the lender, the latter will consider all viable options and develop a plan for clearing the mortgage arrears. Home repossession should be, and generally is, the last resort for the lender and the preferred method of dealing with arrears cases should be early intervention.

In the light of the above, I am satisfied that adequate safeguards are currently in place to minimise home repossessions in Ireland. The Government will continue to monitor the situation carefully and will consider the requirement for any further responses in order that the legitimate interests of mortgage holders are safeguarded.