Paul Kehoe (Wexford, Fine Gael)
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I welcome the opportunity to speak on this important report the Government commissioned some time ago. As Members are aware, a large number of people are in serious trouble because of mortgage arrears. The Government cannot help everybody who is in trouble but something will have to be done to help the people who are hard pressed. I am sure Members opposite and throughout the House are very much aware of the many people who approach us asking for representations to be made to banks, building societies and other lending institutions to see if something can be done to help them with their mortgage arrears. When one looks at their personal circumstances and the size of mortgage they got in years gone by, it is clear that there was no way it could last. Some people received 100% mortgages and are now in serious financial trouble with repayments. The Government is very much aware of what has happened.

This was a cause of the property bubble, where properties were selling for huge amounts of money and people were put under severe pressure to get on the ladder to own their own homes. Last week in my constituency some unfinished houses in ghost estates were demolished. It is very difficult to comprehend some very fine houses being knocked down and people being unable to repay their mortgages. Many of these were properties that were marketed as dream places to live four or five years ago. It has left many scars for individuals throughout the country.

To prevent further nightmares the Taoiseach has outlined on numerous occasions that the most important thing is that people be allowed to remain in their homes. The Government is very committed to helping families keep their homes. I have witnessed some families' personal situations, including people who have lost their jobs. The most important thing for them is to keep their houses and pay their mortgages. It is important that they are dealt with on a case-by-case basis. I am very aware of people expecting that the Government will come to their aid. Some people who can afford to pay have stopped their mortgage repayments because they believe the Government will come to their aid and relieve them of their financial difficulties. However, not everybody can be helped - the country cannot afford to help everyone. It would cost millions of euros to bail everybody out. The Government is looking at the matter with a view to being in a position to help families to remain in their home and to doing it in a fair and equitable way.

The Keane report made many proposals and everyone in the House has been willing to debate them. There are proposals such as blanket debt forgiveness and mortgage-to-rent. Whatever the proposal, the Government will consider it. That is why we gave everybody in the House the opportunity to give their views on what can be done to help people. I assure Members opposite and hard-pressed mortgage holders, who are unable to meet their repayments, that the Government is willing to tackle this.

I have referred some of my constituents to different organisations. I compliment MABS on the trojan work it is carrying out in helping get people with mortgage arrears on the road to recovery. There is no easy solution to this problem. At the end of the day it is down to money and as everybody is aware money and financial aid is very scarce for the Government. It is only possible to spread so far what is available, and helping everybody will be very difficult. The Government is taking this report seriously and will try to help as many mortgage holders as possible. There cannot be and I would not be in favour of blanket debt forgiveness; it would be wrong for the Government to go down that road.

Charlie McConalogue (Donegal North East, Fianna Fail)
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I commend the Government on ensuring the Keane report will be debated in the Dáil and properly addressed. It is important to gather the views of people on all sides of the House on this key issue - in many ways it is the most important issue for the country now. We need to ensure that those who are unable to meet their mortgage repayments and may be in negative equity can move on and see light at the end of the tunnel.

We face a stark situation regarding mortgage arrears. The latest figures published by the Central Bank on 29 August indicated that at the end of June there were 777,000 private residential mortgages valued at €115 billion, which contextualises the total size of mortgages here. Of these, 55,000 representing 7.2% of the total were in arrears of more than 90 days. This compares with the 6.3% that were in arrears of more than 90 days at the end of March. Banks recently increasing their variable interest rates has piled the pressure on many people already struggling to meet their mortgage repayments. For people who have lost jobs, the increased pressure of repayments is leading to more accounts falling into such levels of arrears.

The Keane report tries to address the matter in some way, but it does not go far enough and a greater response is needed to address the issue. Unfortunately it relies too much on the banks to try to address the situation. It is unfair for customers to have to rely on banks, which unfortunately recklessly lent in many of these instances in the first place. The customers now have to deal with those and there is insufficient oversight in the proposals from the Keane report to ensure the customer gets a fair crack of the whip.

Last night my party introduced the Debt Settlement and Mortgage Resolution Office Bill 2011. I know the Government accepted it, but something like this will be required to offer a fair structure to address the situation. Under this Bill, it will be possible for people finding themselves in mortgage difficulty to approach the debt settlement and mortgage resolution office and to have their financial situation assessed. In such a scenario, it will be possible for that office to issue a debt relief order in the case of personal debt, and a mortgage resolution order in the case of mortgage relief. This is designed in a way that would offer an outcome to the homeowner that allow him or her to continue to live at home while paying the mortgage.

This office will deal with people on a case by case basis and that will not be a painless process. It is important the message goes out that a pain-free blanket debt write down is not something that can be considered. That said, we must understand people's needs and give relief to those who are in trouble. The debt settlement and mortgage resolution office could fulfil that task very well.

There are many people whose properties may have devalued by up to 50%, but who are in a position to pay and who are continuing to do so. The future for these people is still bleak. We also have to look at how we deal with them, because they did not buy houses or take on mortgages through greed or through a desire to make money. They really were unfortunate in their timing and they were just people who wanted to start a family and set down roots. Between 2003 and 2007, they made a decision to take out a mortgage and buy a property. They did so at a time when the banks were plugging money to them and at a time when economic commentators were saying that property was steady, would continue to rise in price and that we would see a slowdown rather than a fall. The political parties were complicit in this as well. The establishment across the board, from banks to economists to commentators and the political system did not foresee what would happen, although some did. The scenario in which people made the decision to purchase was one where they were assured that everything would be fine if they went ahead with it. Many of these people bought houses for around €400,000 and they now find themselves in a situation where these are worth €200,000. They may be still in jobs and paying the mortgage, but it is crippling them and they see no future in terms of how they can address that.

Our first priority is ensure we address distressed mortgages and try to give those who are currently unable to pay some assistance that can put them on a viable pathway. However, as the European and world wide economic crisis is evolving over time and we try to find new resolutions as we go along, we also have to keep an eye on how we deal with those people who are paying but for whom their mortgage is taking up an unacceptable level of their income. We have to find a mechanism that is not pain free, but releases those people from a future that looks like a financial jail. They see no light and see themselves continuing to pay a massive mortgage with no sign of relief. It cannot be pain free, but there has to be a solution that is fair to them. If our economy is to move on, it will need that segment of the population to be dealt with fairly and to be in a position where they can participate in the economy, build a life for themselves and have a financial future similar to those who did not suffer their bad timing.

I urge the Government to address this matter quickly. It has been in office for eight or nine months and it is now turning its attention to some of these reports. It is absolutely critical that all the parties work together, because people need the issue resolved.

Brian Hayes (Dublin South West, Fine Gael)
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Like every Deputy here, I am acutely aware of the enormous pressures that face our people. My constituency of Dublin South-West is no different to other constituencies in the profile and mix of housing type. Those who currently face the twin problems of negative equity and distressed mortgages demand that their Government and this Dáil respond with effective solutions to the nightmare they face. Our response to this problem will define how an entire generation views politics.

The Keane report is a good starting point, but it is only that. What is now needed, as the Minister for Finance has acknowledged, is a clear plan across the Government to implement those ideas that can work and provide relief for people in this appalling situation. That is what we will get; an implementation strategy which starts to deliver real solutions.

We are not bound by this report. I very much disagree with the report's conclusions on providing support through the tax code for those who bought at the peak of the boom. Helping people through enhanced mortgage interest tax relief, particularly those caught in negative equity and who are meeting their repayments in full, is both prudent and sensible use of the taxation code. This issue is under active consideration and is a matter for the Minister and the Government in their deliberations on framing of this year's budget. At this stage we should rule nothing in or out.

Let us be absolutely clear about what has happened. The banks cannot slither away from their responsibility for creating this mess. They were on steroids during the boom in property prices. It was the banks that pumped money into the market, introduced 100% and higher mortgages, and introduced 35 and 40-year mortgages. They cannot now behave like Pontius Pilate, wash their hands and walk away from the situation. The covered institutions have a particular responsibility in this regard. They have been provided with the public capital to allow debt write down for people who have unsustainable mortgages. Their failure to date in providing for this represents more of the same denial that was such a feature of the years leading up to the crash. The public has done the heavy lifting on behalf of banks. It is now time for banks to step up to the plate. They need to get on with the job.

This debate is crucial, both here in the Chamber and at the various committees that are working on this problem. The Government does not have all the answers. I appeal to all Members to work with us in coming to an agreement where that is possible and setting out a common approach to this problem. I have to stress, however, that these solutions must be both realistic and applicable.

Like others in this debate, I am especially concerned about that group of young people who bought during the peak of the boom and now find themselves in substantial negative equity. Many of them were seduced into taking out a mortgage by the aggressive marketing and promotional tactics of the banks. In many cases the banks failed adequately to stress test the borrowers. There is now a social and moral imperative on banks to help people who are in difficulty with their mortgages. Mortgage holders are customers; they are not there to be squeezed for the last drop. The family, social and economic consequences of not taking action are too high.

The report under consideration today should be taken in conjunction with the strong remarks made by the Governor of the Central Bank and particularly the extensive speech given by the deputy governor, Mr. Matthew Elderfield, in Cork last Friday. The Governor of the Central Bank has made it clear to the covered institutions that they have been provided with sufficient capital to deal with future losses on their mortgage books. The Central Bank and the Government are at one. It is high time the banks got on with the job in hand. Where mortgages are manifestly unsustainable, it is time that they were written down.

In his speech in Cork, Mr. Elderfield set out in clear terms the vigorous approach the Central Bank will now be taking in forcing lending institutions to act more decisively and more fairly. He was especially severe in his criticism of the sharp practice of banks which are raising interest charges on standard variable mortgages in an attempt to compensate for their losses on tracker mortgages.

Of course, no single solution will work in all cases. The residential mortgage sector is multi-layered and complex. The stresses in the mortgage sector are a consequence of falling prices, falling incomes, rising unemployment and exceptionally low levels of activity in the housing market. According to the latest Central Bank report, the total number of mortgages is in the order of 777,000. The total value of these mortgages is just over €115 billion. We are talking about a large number of mortgages and a large amount of capital. Within that number there is a wide variety of mortgages in type, size and duration.

Analysts have estimated, for instance, that 25% of the residential mortgage market is buy-to-let mortgages. Third parties guarantee many mortgages. This has been particularly the case in mortgages taken out by younger people at the height of the property boom when parents were asked to act as guarantors for their children.

The Government's position is clear and we have three priorities: we want to keep people in their homes where that is the clear wish of the mortgage holder; we want to reduce the burden on home owners facing mortgage servicing difficulties; and we want to redress the power balance between lending agencies and mortgage holders.

Steps have been taken to date but much more needs to be done. I have been critical of the implementation strategy by the banks when it comes to the modest proposals of the Cooney group, which reported late last year. It is simply unacceptable that it has taken the banks more than eight months to implement a sensible idea that up to one third of mortgage interest could be set aside for two years for people who find themselves in this situation.

The Central Bank has published, and is strongly enforcing, a code of conduct on mortgage arrears. The Central Bank has recently updated that code and has published a useful guide for mortgage holders who are in difficulty or may be about to go into difficulty. Much more needs to be done in explaining the rights that people have in this situation.

Earlier this year, a mortgage arrears resolution process was put in place, which outlines the procedures that should be followed by lenders and borrowers. To date, more than 69,000 mortgages have been restructured. It is disturbing to note, however, that 30,000 of these restructured mortgages have already gone into arrears. Quite clearly the banks are not being realistic in their restructuring proposals. A restructuring proposal should have the capacity to last for a reasonable period of time. In any restructuring plan, the ability to pay and having a reasonable disposable income are essential ingredients.

The Keane report outlines a series of measures which will help some mortgage holders who are in difficulty. These include a mortgage-to-rent scheme, a mortgage leasing scheme, a split mortgage scheme and a trade-down scheme. The Government is moving rapidly to implement some of these suggestions on a pilot basis. Other measures, such as debt-for-equity and shared ownership options, may benefit some people and these will also be considered.

The report also proposes a new independent mortgage advisory agency, which will act as an advocate on behalf of mortgage holders during discussions and negotiations with lenders. Such an agency would help redress the power imbalance which currently exists between lender and borrower.

Early in the new year the Government will also be bringing forward major reform proposals in the area of personal bankruptcy and insolvency. This legislation will be of enormous benefit to those who have unsustainable debts, including unsustainable mortgage debt. In drafting this legislation, careful consideration will need to be given to the danger of providing perverse incentives either to borrowers or lenders. In the meantime, the prospect of such legislation may be an incentive to lenders to move with more urgency in resolving mortgage arrears.

The interdepartmental group rightly points out that there are three factors influencing mortgage arrears. These are affordability, negative equity and future prospects. Affordability is obviously the key matrix in any discussion of mortgage arrears. Changes in people's ability to pay their monthly mortgage obligations will be strongly influenced by changes in their employment status, salary and tax levels. There are people in difficulties now whose future prospects will change for the better.

As the Keane report states, determining how incomes, interest costs and house values will change in the future is by no means an exact science. As the economy stabilises and growth returns once again, job prospects and salary levels will get better. Improved mortgage affordability will be a consequence of a stronger economy.

The other factor which is key to changing the outlook is a fully functioning residential property market. In 2010, the number the number of new mortgages was equivalent to the same number given out in 1971. This is a clear sign that the market is now dysfunctional. No one wants a return to a boom and bust cycle in residential property. It is in the clear interest of mortgage holders and the wider economy, however, that we have a property market functioning at sensible levels of activity. Confidence is critical. I believe confidence will return when a clear resolution is found to the sovereign debt crisis and the associated banking crisis in Europe. Confidence will also be boosted when people see that the Government is showing the capacity and determination to deal with the difficult economic situation facing us.

The Government will also have to look carefully at lenders' capacity or willingness to provide new mortgage finance. Without adequate levels of mortgage finance, the residential property market will remain severely constrained.

The Keane report is not the last word on residential mortgages. The Government is open to new ideas from other parties and Deputies, and welcomes suggestions from interested groups outside this House. In discussions surrounding the budget we will be examining what further actions might be taken. I want to repeat what I said at the beginning: the Government is fully aware of the scale and depth of the problem with residential mortgages. Comprehensive data on arrears are now being provided quarterly. We will work through the issues presented in this debate in a sensible, determined and fair manner.

Brian Stanley (Laois-Offaly, Sinn Fein)
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I wish to address the statement by a previous speaker concerning the political system and establishment. The Deputy said that political parties en bloc went along with the reckless lending and said nothing about it. Any examination of the record, however, will show that on a number of occasions Sinn Féin did raise concerns about reckless lending by banks. Other parties may not have done so, but my party did raise concerns on many occasions. However, it did not get much of a hearing thereon, either in the House or the media.

The Keane report, as it stands, will do nothing to solve the problem. It is deeply disappointing to the almost 100,000 families experiencing mortgage arrears and mortgage distress. It does not provide anything close to a comprehensive solution to the issue of mortgage distress, but that is what we need to solve the crisis. The main proposal made in the document is that those in mortgage distress should be left at the mercy of the banks and saddled with decades of unsustainable debt which they will probably never be able to pay.

In recent weeks I met a couple who borrowed €180,000 three years ago from Start Mortgages. At the time the man was 59 years old and working on a community employment scheme, while the woman was 47 with a health problem. Their income was €23,000. The man is now 62 years old, while the woman is 50 with serious health problems. Their income is approximately €320 per week and they have a debt of €180,000. I am highlighting this problem to demonstrate the crazy circumstances that obtained. Somebody from Start Mortgages should be standing before the High Court for granting such a loan. One could say the couple was foolish to take out the loan, but agents for mortgage companies were showing up on doorsteps with glossy brochures and shiny briefcases enticing people to take out loans. These are the circumstances we face.

People waited to see whether the Government would provide them with the solutions it stated it would provide; however, they have been given nothing but a tokenistic, minimalist response that will not do anything to relieve their mortgage distress, as set out in the report. It is astonishing that although three reports have been produced in two years, their main conclusions recommend leaving the fixing of the problem to the banks, despite all that has occurred in the country. The Government parties, Fine Gael and the Labour Party, are clearly happy to pick up where Fianna Fáil left off. The report has explicitly ruled out a number of Fine Gael and Labour Party commitments in the programme for Government such as increasing the mortgage interest supplement, extending mortgage interest relief and transforming MABS into a personal debt management agency with strong legal powers. There are no proposals to insulate mortgage holders from ECB interest rate increases.

We must have a solution. We believe there is a better way. Sinn Féin has long argued for a strengthened distressed mortgage resolution process with a stronger code of conduct for mortgage lenders. This process must be backed up by an independent distressed mortgage resolution board to ensure decisions taken by lenders represent an appropriate response to the problem of mortgage distress. Where such a response is found to be wanting, the board should have legal powers to ensure the right solutions and penalise the lenders for failing to act and engage with clients in an appropriate manner. Mortgage lenders must absorb a significant proportion of the losses to the value of the mortgages, particularly those outlined. We do not believe the taxpayer should foot the bill for the mortgage crisis, nor do we believe it is necessary for the taxpayer to further compensate the banks for the loss in value of their residential mortgage loan books. There is sufficient capital in the banks to absorb a significant proportion of these losses. The taxpayer has dug deep in his or her pocket to ensure this.

The priority of the Government should be to keep people in their family homes. I heard the Minister of State say this. Other priorities should be to provide appropriate alternatives, ensuring debt sustainability and a sharing of the burden fairly, because these would provide the basis for a solution to remove the causes of the mortgage crisis that was both fair and sustainable for borrowers, lenders and the taxpayer.

I asked the Minister of State to address the issue of loans taken out from local authorities. I highlighted this issue in the Chamber a number of weeks ago. I hope the Government will take this issue on board because there is a considerable problem backing up. This is not just because of repossessions of local authority homes but also because local authority balance sheets will be seriously impaired. The money is borrowed from the Housing Finance Agency and if the lenders are unable to repay the money to the local authorities, the latter carry the loss on their balance sheets. As we all know, local authorities are seriously stressed owing to the difficulty associated with the collection of rates. The current state of the public finances presents another problem. I cannot overstate the extent of the problem for those caught in the trap I describe. It is not just a financial problem; it is also affecting people's physical and mental health and relationships. I am sure all Deputies are hearing this in their clinics. The problem is having serious repercussions and manifesting itself in a cost to the health service; there is both a human cost and a financial cost. I appeal to the Government to take this on board.

Some 25% of the clients of one local authority are in serious arrears. Some 33% of those who took out shared ownership loans have serious problems. Their debt is mounting on a monthly basis and there is no way out. The local authorities are trying to work with householders to keep them in their houses, but this is proving very difficult. While we all can complain about what is happening, I appeal to the Government to address it. Shared ownership loans are loans over which the Government and the Department of the Environment, Community and Local Government have direct control. The rent element of these loans is increasing by 4% year on year, which is compounding the problem. The Government should first stop these increases and determine whether it can adjust the ratios such that the rental fraction could be increased from 50% to 75%, 80%, or 100%, if necessary.

When a house is repossessed, it is boarded up for months or years on end, with a consequent effect on neighbours. Oireachtas Members, the Garda and local authority members receive calls about this issue. A repossessed house loses value and by the time it is sold the local authority has taken a big hit owing to the loss of equity. This affects it financially. The family removed from the repossessed house must be given a rent allowance, placed in local authority housing or on the ever growing waiting list therefor. This is in nobody's interests. The taxpayer is picking up the bill for rent allowance, which is absolutely ludicrous. I appeal to the Minister of State to take this massive problem on board.

The Minister of State made some strong statements, but I appeal to him and the Government to move beyond the Keane report. He says it is just a start, but it is totally inadequate. The Government should try to get on top of the overall problem.

Ciarán Lynch (Cork South Central, Labour)
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I very much welcome the opportunity to speak on this issue. Members might recall that in November 2009 the Labour Party tabled a Private Members' motion on increasing mortgage arrears. We did so because the crisis was developing and every examination of the problem was showing it would get worse. We warned of an impending crisis and argued for the creation of a mediation service based on a legislative framework. Having read the debate on the motion in recent days, I note a wait and see approach was adopted which has featured ever since. The recommendations from the Cooney report, many of which are commendable, were not debated here. The preliminary findings of the Cooney report were published in July last year on the same day the Dáil went into recess. It was targeted deliberately so that the report could not be published and debated here. The finalised reports were published in November last year. Once again the Fianna Fáil Government refused to let the report be debated in the House. It is ironic, if not disingenuous, to listen to Fianna Fáil Members who, in recent weeks, have spoken to the urgency of this issue and the need for it to be debated in the Dáil when, on two specific occasions, that party refused to facilitate the House upon the publication of the two stages of the Cooney report. Since then mortgage arrears have doubled. The number of people who are 180 days in arrears has doubled since the Labour Party brought this motion before the House.

I have listened to the debates and discussions on the Keane report in recent days. While there may be some fair criticisms of the Keane report, the main driver of criticism is the issue of blanket debt forgiveness and those who argue in favour of it. Without a doubt this group is in conflict with the Keane report because the Keane report is clear where it stands on the matter of blanket debt forgiveness: it will not happen and difficulties faced by people in arrears will be dealt with on a case-by-case basis. Clearly, there is an agenda which proposes and promotes blanket debt forgiveness. It is in the interest of those promoting it to undermine the key recommendations and the robustness of the Keane report.

The Keane report is not a finalised response, nor is it an overly prescriptive document and this is as it should be. The Keane report lays out the structures by which solutions can be arrived at. In terms of the way the processes are laid out, it allows other parties into the debate to add to and compliment what the Keane report has recommended. People who have argued that MABS, New Beginning or others were not included in the process have the cart before the horse. The position is now clearer. Yesterday, several groups appeared before the Joint Committee on Finance, Public Expenditure and Reform. Perhaps it is simply the old-style of binary politics but there seems to be acceptance that people are prepared to take as untested or unchallenged reports or documents presented before the committee without question.

Those in New Beginning have some interesting things to say. However, when asked to lay out specifically and in tabled detail the content of their report yesterday, they said they had no wish to get bogged down in detail, despite that they were before the finance committee. Some estimates of the New Beginning proposal suggest it could cost the Exchequer €75,000 per mortgage because it involves off-loading the debt to the bank and, since the State ultimately owns the banks, the €75,000 will be picked up by the Exchequer if the New Beginning proposal, as some have interpreted it, were to be implemented. I understand they will bring the tables before the committee and we can test it later on.

The Keane report should be considered in the context of the key principles which underpin it. The first principle of the Keane report is that people who are making an honest endeavour to meet their financial obligations in stretched situations will not be put out of their home; they will continue to remain in their home. That was a key principle of the Labour Party leading up to the general election, it is a key principle of the programme for Government and it is a key recommendation and outcome of the publication of the Keane report.

The Keane report makes it clear that the problem is affordability, not negative equity. This means it is not the size of the debt which matters put one's ability to pay it back. The Keane report sets this out clearly. Criticisms of the Keane report from Members and others outside the House must be challenged. Sometimes these criticisms are rather disingenuous because they relate to a blanket debt forgiveness agenda or it is simply a case of old-style binary politics, that is to say, no matter what the Government proposes, Opposition Members will oppose it.

We have been criticised for certain issues and I am keen to know where of the Opposition stands on these issues. The Keane report has ruled out the concept of enhanced mortgage interest relief, which would cost at least €120 million per year to implement. It is not targeted in any strategic way. The relief would go in a blanket fashion towards those who have taken out mortgages between 2006 and 2008. Those who can afford to pay their mortgages would receive this relief and those in distressed situations would also get it. The Opposition may criticise us for not including it as part of the Keane report. However, where does the Opposition stand on this? Is the Opposition for enhanced relief or against it? Those in the Opposition should not criticise the Keane report for not containing such proposals unless they have a position on the matter themselves.

Another issue relates to the creation of an independent mortgage service. The report clearly describes why such a service is required. It is in the report because the examination of MABS revealed the lack of continuity and uniformity of approach throughout the country and that skill levels vary from area to area. The Keane report proposes to enhance the work MABS is doing and it is proposed that specialised people would work hand-in-hand with MABS agencies throughout the country. In some situations these people would be located in MABS offices. This would yield an enhanced MABS service where the relationship between borrower and lender is re-balanced. It is a clear and honest proposal.

I wish to explore another aspect of mortgage interest relief and I believe the Keane report should examine mortgage interest relief in greater detail. The relief was set up at the outset to deal with short-term problems. It was established in an economy in which house prices were increasing and in which people were unemployed on a temporary basis. This has changed completely. House prices will continue to drop for at least another 18 months or two years and long-term unemployment is with us. We must redefine mortgage interest supplement in this context.

Other matters must be considered in the context of the Keane report. This is not the only action the Government is taking. There is a series of actions under way around the Keane report. They include the decision tree which provides five options for people who are being assessed by the personal debt management agency. There are other issues such as the three-tiered approach whereby there will be a review of the judicial processes, non-judicial debt settlements will be taken into account and debt relief orders will also be required. Why is this? It is because existing legislation in this area is antiquated and it was never designed for the dilemmas we face at present.

We must create normalisation measures, not only crisis measures. One of two measures rolled out this week which will lead to normalisation in the sector is the creation of a house price database, which is on Committee Stage in the Dáil at the moment. This is critical to putting in place clear information with regard to the housing market. Second, the new lending practices published by the Central Bank this week will change borrowing levels to an appropriate ratio of people's incomes rather than the madness which was facilitated by the previous Administration. This must be done because Irish society will continue to be a home purchasing society. We must ensure the measures which were absent for many years are now put in place.

The key principle of managing the resolution of debt is the issue of long-term affordability to service that debt. In addition, it is critical that people are assessed on an ongoing basis with regard to their debt difficulties. This is why the agency is required. Otherwise, we could create a situation whereby people under stress at the moment may arrive at an unsustainable situation and, because we cannot extract them from these situations, their situation will become worse.

It is critical that a number of comprehensive measures are rolled out, which is what the Government is doing. I ask Deputies, especially those on the Opposition benches, to add their ideas to the template set out in the Keane report and, in so doing, assist the Government in implementing what is a very robust and long overdue proposal. The report should have come before the House a long time ago but the Government deserves credit for reaching this point within six months of coming to power.

John Browne (Wexford, Fianna Fail)
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I welcome the opportunity to say a few words on the subject under discussion. I will not be excessively critical of the Keane report because any report before the House which makes recommendations on mortgage resolution is to be welcomed. My only fear is that we may end up with many reports and little action. It is important, therefore, that action is taken urgently to address the problems.

Deputies are aware that tens of thousands of families are experiencing serious difficulties making their mortgage repayments. In August last, the Central Bank published the latest data on mortgage arrears and repossession. The figures were stark and showed that 7.2% of private residential mortgage accounts had been in arrears for more than 90 days at the end of June. Of more than 750,000 private residential mortgage accounts held in the Republic of Ireland and valued at €115 billion, approximately 60,000 had been in arrears for more than 90 days. The comparative figure in March 2011 was 49,000, which indicates a dramatic increase in the number of people falling into mortgage arrears in a three month period.

Deputies are being contacted weekly in their clinics by people experiencing serious debt and mortgage problems. Many of the individuals in question have lost their jobs. Five or six years ago, when they took out a mortgage, they were in employment and believed they would be able to continue to meet the requirements of their mortgage. As a result of the downturn, especially in the construction sector, a large number of individuals with young families have lost their jobs and are no longer in a position to meet their mortgage repayments. This issue must be addressed as it is causing major social problems, including marriage break-up and suicides. People are tearing out their hair wondering how they will meet their mortgage repayments. If a couple with two children are in receipt of social welfare payments, they will clearly not be in a position to meet monthly repayments of €1,000, €1,200 or €1,400. We must make decisions on what measures we will take to assist people in such circumstances.

Rent supplement and mortgage interest relief payments are provided by community welfare officers. The problem is that people are finding it difficult to obtain these supports because they must jump through hoops to prove their inability to pay or demonstrate that they did not increase their mortgage when they should not have done so. If it is shown that they increased their mortgage when they could not afford to do so, they will not qualify for rent supplement or mortgage interest supplement payments. This is causing severe problems.

The Money Advice and Budgeting Service is doing tremendous work assisting people in difficulty. However, it can only provide a certain amount of support and assistance. It can, for instance, make representations on behalf of its clients to banks and building societies to try to reach some form of repayment arrangement, for instance, interest-only facilities or payment holidays for a period of perhaps six months to allow the person time to find a job or alternative sources of funding. These arrangements merely postpone the day of reckoning. In the past month, I have noticed that banks are taking a tougher line with people in mortgage arrears. While they generally show a reasonable degree of understanding for the first year or 18 months of arrears, they adopt a much tougher approach thereafter. In some cases, they are demanding the return of properties. I am aware of families in County Wexford who have returned their home to the lending institution and moved into rented accommodation. This does not make sense, particularly if the families in question are now in receipt of rent supplement. Many families who have accumulated significant arrears prefer to return the property to the lender and enter rented accommodation for which they may only pay €400 or €500 per months.

Local authorities could assist people by playing an advisory role. Every local authority has a housing and loan section, all of which are under-utilised at present because councils are not in a position to built or allocate houses. Local authorities have expertise in housing and loans and should work in conjunction with the Money Advice and Budgeting Service to assist, advise and support families in mortgage arrears.

While the Keane report makes some good recommendations, it is, to some extent, a holding exercise in the sense that it will not be possible to implement some of the recommendations owing to the inaction of the Government and its slowness in introducing some of the legislation required. The potential six month delay in introducing bankruptcy legislation, which will not come before the House until the first quarter of 2012, will cause serious problems for the implementation of the report. The report states, for example, that the reform of the bankruptcy and personal insolvency law is fundamental and notes that the advisory group did not envisage the mortgage problem being resolved without such laws. It is important, therefore, that the Minister enact the relevant legislation as quickly as possible. I understand he indicated yesterday that this will not be done until the first or second quarter of 2012. This will create problems for the implementation of the report.

This week, the Fianna Fáil Party published a Bill to establish a debt settlement and mortgage resolution office and provide an independent, non-judicial debt settlement system for persons struggling with personal debt and those experiencing difficulties with their mortgages. The legislation, which was debated in the House on Tuesday and Wednesday nights, is based on the recommendation of the Law Reform Commission report on personal debt and debt enforcement published in December 2010 and the associated draft personal insolvency Bill. We decided to extend the scope of the insolvency Bill to include the growing problem of mortgage debt. Under the Fianna Fáil Party Bill, a person struggling to cope with personal debt could apply to the proposed new office for a debt settlement arrangement. Following a comprehensive assessment of the person's financial affairs, a personal insolvency trustee would make a proposal to the person's creditors. This is good legislation and while it may not provide all the answers, taken alongside the Keane report and other reports published recently, it could form the basis for a proper resolution to debt problems caused by mortgage arrears.

We must all recognise that families are experiencing serious problems in this regard and in many case there is not a hope in hell that they will be able to meet the repayments demanded of them by their bank or building society. It is incumbent on all parties in the House to offer solutions to the difficulties facing people in order that they are able to rest easy at night in the knowledge that they have made some form of arrangement with their bank or lending institution in an effort to solve their problems. I ask the Minister to take on board some of the suggestions that came from this side of the House as well as the recommendations in the Fianna Fáil Bill. It is important that we work together to resolve this difficulty. It is not one to play politics with but is for working together across the political divide to ensure we solve the problems of people with enormous mortgage debts who are looking to us to come up with solutions.

Joan Burton (Dublin West, Labour)
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There has been a dramatic rise in the level of mortgage arrears in the past two years and the trend continues. Some 45,000 households are more than 90 days behind with their mortgage payments and another 56,000 households have already been forced to restructure their loans due to difficulties in making repayments.

This is the legacy of the previous Fianna Fáil-led Government, which failed to rein in the reckless lending of our banks. I have visited several Money Advice and Budgeting Service, MABS, offices and have met also with representatives from the Free Legal Aid Centre, FLAC, and have listened to many other debt advisors. I pay tribute to all those people, in particular those working in the Citizens Information Board, MABS and in organisations such as FLAC, the Society of St. Vincent de Paul, community law centres such as those in Ballymun and Coolock and organisations like Threshold and Focus Point which have been dealing with this issue. I include people involved in New Beginning and others in the legal professions who have been closely involved in trying to help and advise people. I very much welcome the statement published yesterday by a group of those organisations. This concerned debt settlement rather than debt forgiveness and was very positive. I hope to meet collectively with organisations interested in this area during the coming weeks to hear their views in greater detail. I have met many on an individual basis, both formally and informally. They understand the problem on the ground.

There are many people in difficulty with their mortgages who could never have foreseen the scale of the economic downturn that has left them unemployed or living on reduced income and consequently unable to meet their mortgage repayments. This is the core of the problem. Many of these people tell me they were sold financial products that were totally unsuitable for their needs. There are pensioners, for example, who redeemed debt for their children and are now themselves left with debt. There are ramifications of this in every facet of society. All families in the country are affected.

There were various measures that kicked the can down the road but muddling along in the hope that things will get better is no longer acceptable. The socials costs are potentially enormous as families and communities risk disintegrating under the weight of financial pressure and the uncertainty of what the future will bring. That is why the Government set up the interdepartmental mortgage arrears working group, which is chaired by the accountant, Mr. Declan Keane. I thank Mr. Keane, and the people who worked with him in committee, for producing a report which marks a further stepping stone on the long path to resolving the Irish mortgage and debt crisis. Mr. Keane has recognised that the mortgage arrears problem is complex and requires a complex set of solutions. The groups that came together yesterday produced a very good nine-point summary and acknowledged the complexity of the solutions required. This is not a one size fits all solution - that would not be possible.

Mr. Keane's report came up with a range of possible solutions including mortgage to rent schemes, trade-down mortgages, split mortgages and sale by agreement, all of which have received considerable attention. The key recommendation in the report, in my view, is the early introduction of new judicial and non-judicial bankruptcy options. I agree with Mr. Keane that without effective bankruptcy legislation the mortgage arrears problem will not be solved. I say that as one who worked as an accountant a long time ago and has some experience in this area.

The International Monetary Fund has insisted that personal insolvency legislation be introduced in this country by the end of the first quarter of 2012. My colleague, the Minister for Justice and Equality, Deputy Alan Shatter, is currently preparing the outline of legislation on personal insolvency as a matter of priority and I thank him for that. My Department welcomes the proposed introduction of the Minister's personal insolvency Bill. We see the early reform of personal insolvency legislation as key to resolving the mortgage arrears and personal debt problem. It is important to understand that the proposed personal insolvency provisions would represent a fundamental departure from existing law, essentially permitting debtors to rid themselves of all liability, including mortgage debt, in a relatively short period, namely, three years. This would not be painless for the mortgage debtor who may lose his or her home and credit rating but it would be a less harsh option than the traditional position in which the debtor remains bankrupt for 12 years. Crucially, the existence of the new personal insolvency options would force banks to the negotiating table, allowing both sides to reach a settlement.

Let me be very clear. The Government plans to drag the banks to the negotiating table by giving the borrower the power, with appropriate advice, to threaten the banks that he or she will declare bankruptcy and walk away from the debt unless the banks play ball. That is what it comes to. Once the banks know the borrower can walk away they will be forced to engage with him or her in a meaningful manner. The Minister, Deputy Shatter, also proposes debt resolution arrangements. I understand there may be some resistance from banks to the idea of including mortgage debt in the negotiation of debt settlement arrangements but I have news for the banks. They caused what is probably the worst banking crisis on record and have been more than adequately capitalised at enormous expense to Irish taxpayers and citizens, to every man, woman and child in this country. We intend to force the banks to the table to negotiate with the people to whom they lent so recklessly and without any due regard other than for profit and for bonuses.

The Government is putting these very important tools in the hands of people in mortgage arrears as there is sufficient and significant anecdotal evidence that financial institutions are often slow to respond to contact from debtors, are inflexible and, for the most part, are refusing to contemplate reasonable proposals. There are also complications with secondary debt. Many people with mortgage debts have credit union loans, car loans and debt on credit cards and store cards. I have heard the most amazing stories of people with multiple store cards. That is what the Celtic tiger period did - it sold debt to people who were vulnerable, not only in terms of houses but in a range of other areas.

I welcome the proposal in the Keane report to establish a new mortgage support and advice function and the suggestion to appoint approximately 100 advisors with financial, accounting and legal expertise to help borrowers in mortgage arrears in discussions and negotiations with their banks. The idea is that the service will operate on similar lines to MABS, which is funded by my Department. However, the new service will be funded - properly - by the banks. The new MABS+ service would advise customers in their dealings with mortgage lenders and help to bring trust in the debt resolution process, as MABS already does with thousands of individuals. My Department already funds the Citizens Information Board, the parent body to which MABS reports. I recently appointed Mr. Eugene McErlean, the former group internal auditor of Allied Irish Bank to the Citizens Information Board. As Deputies may know, Mr. McErlean was scapegoated by AIB when he brought the bank's overcharging to the attention of the AIB board several years ago. I will look to honest bankers like Mr. McErlean to advise the Citizens Information Board on setting up a system that will enable our citizens to work out deals with the banks that caused so much damage to our society. He and others like him will be in a strong position to advise the Government on how best to operate a service that will help our citizens and the banks resolve the mortgage debt problem in a fair and reasonable manner.

I remind the House that a large portion of the social protection budget is currently being used to deal with the fall-out from the banking crisis. My Department is spending €77 million on mortgage interest supplement, which in effect is a support that goes to the banks. It is also spending approximately €18 million on the money advice and budgeting service, MABS, and a considerable additional sum on the Citizens Information Board. The Department spends more than €500 million on rent supplement and, on behalf of some 95,000 people and families, is the largest purchaser of the services of private landlords in the country.

I would much prefer a situation where the banks used some of the billions of euro in capital with which they have already been provided to write off the bad debts borrowers cannot afford to repay rather than having the Government continue to support them through the provision of even more taxpayers' money out of the social protection budget. I thank all the NGOs - especially the Citizens Information Board and MABS - for offering a helping hand and a lifeline to many distressed individuals and families. Members may be aware that there are 52 separate MABS companies in operation in areas from west Cork to west Dublin and further afield and they offer a lifeline to people in these very troubled times.

We can overcome our difficulties if we work together. Yesterday's submission from the organisations to which I alluded earlier refers to settlement rather than forgiveness. That is the nub of the issue. There is no possibility - despite what many of us would wish - that this problem is going to evaporate. We must work it through, get our families and citizens to the other side, get people back to work and get businesses back on track. As former US President, Mr. Bill Clinton, stated at the global economic forum a couple of weeks ago, this is critical in the context of getting Ireland back on the road to economic recovery and also of recovering our economic sovereignty.

Thomas Pringle (Donegal South West, Independent)
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I wish to share time with Deputy Joan Collins.

Michael McCarthy (Cork South West, Labour)
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Agreed.

Thomas Pringle (Donegal South West, Independent)
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When the report of the interdepartmental working group on mortgage arrears was published, people across the board greeted it with a sense of huge disappointment. The report clearly finds in favour of the banks and puts forwards solutions which benefit the lending authorities. This is hardly surprising, particularly when one considers the membership of the working group, namely, 16 civil servants, five bankers and one accountant. These individuals came together and supposedly studied the problem. The solutions at which they arrived only favour the banks and are designed to ensure the latter will recover the vast bulk of the debts they accrued as a result of reckless lending.

I was amazed to hear the Minister refer to dragging the banks to the table, kicking and screaming, and obliging them to negotiate with people who are in debt. We own the banks and we can tell them that they must deal with people. It is not a question of dragging them anywhere. We have invested €74 billion in them in the past couple of years but the Minister stated that we are going to try to drag them to the table and oblige them to talk to people. We should not drag them; we should inform them what they have to do.

Various Members on the Government benches stated that they are seeking proposals in respect of this matter. The Technical Group tabled a Private Members' motion on this issue in March and signalled that the problem of mortgage arrears would be the single biggest crisis the country would be obliged to face. I put proposals to the Minister for Finance following the debate on that motion but I still do not know whether he gave them his full consideration. The proposals to which I refer would not have cost the taxpayer any money but they would have dealt with the level of negative equity that exists. Following a number of months, I received a letter from the Department of Finance which did not address any of the proposals I had put to the Minister.

Groups such as New Beginning and others also put forward proposals. These groups were not even consulted when the interdepartmental working group was drafting its report. How could it be possible to produce a proper report which seeks to deal with the issues and provide solutions that can of benefit to everyone when those responsible for its compilation did not even consult widely with the groups which are already working on behalf of people who are in distress and who have mortgage arrears? It would have been quite easy for the working group to have considered and evaluated the many proposals that have been put forward by various interested individuals and groups and to have accommodated them within the report. If what I am suggesting had been done, the report would have been much more satisfying in nature and would have been a great deal more relevant to people whose mortgages are in arrears and who were conned during the Celtic tiger years into taking on massive mortgages they could ill afford. The banks certainly knew that the people to whom I refer could not have afforded to have repaid the mortgages they took out. As everyone is aware, the banks facilitated people by boosting the figures relating to their incomes and showing various transactions passing through their accounts in order that they might qualify for larger mortgages. They then provided them with mortgages which they could not afford to repay.

The report refers to the reform of the bankruptcy laws. Since the first day on which I entered the Dáil those on the Government side have been referring to the reform of those laws. We are now informed that it will be spring of next year before legislation in this regard will be forthcoming. This probably means it will be this time next year before the legislation is enacted and put into operation. That will be way too late for most of the people who are being pursued by the banks in respect of massive arrears they have run up and who are seeking a way out.

The report also refers to mortgage-to-rent or mortgage leasing arrangements. Again, these favour the banks and give rise to State involvement. In addition, they will only be available to those who qualify for the housing list. A number of months ago, the Government changed the rules in respect of qualification for social housing and stipulated that the incomes of those who qualify cannot exceed €28,000 per year. How many people who are earning decent wages but who are struggling to meet their mortgage repayments and building up arrears as a result will qualify for placement on the social housing list and avail of the leasing arrangements to which I refer? I imagine it will probably be very few. Although it will probably not be fully acceptable to most members of the Technical Group, the report does offer a potential solution. This involves people applying to their local councils in order for placement on the social housing list. What will happen when they are informed that they do not qualify and that there are no other options open to them? They will be left to wait for the bankruptcy legislation to be enacted.

There is a need to consider the possibility of writing down debt. We know there is a cost involved. That cost is estimated in the Keane report as being less than one sixth of what the banks have cost us to date. There is no moral hazard involved. The greater moral hazard lies in doing nothing. This matter requires urgent attention and the sense of urgency attaching to it is only going to become greater. Unfortunately, the solutions offered in the report will not bring about relief quickly enough.

Joan Collins (Dublin South Central, People Before Profit Alliance)
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I am a member of the Defend Our Homes League which was established in July in response to the crisis people are facing in respect of repossessions and evictions. The membership of the league comprises, among others, New Beginning, Irish Homeowners Unite and many of the Independent Members. The league was formed as a result of the fact that everyone was aware a crisis was developing in respect of mortgage arrears and because people are under massive financial pressure. That pressure includes the cost of trying to get one's children to school, put food on the table, and so on. These issues were the subject of much discussion on the doorsteps during, and even prior to, the recent general election campaign.

The steering group of the Defend Our Homes League met on Tuesday night last and its members were absolutely appalled by the report. I use the term "report" but it has actually become a discussion document. This is similar to what happened when the jobs budget became the jobs initiative. The Government has not dealt with this matter in a proper way. The discussion document before the House should never have been published without the people who are affected by the problem of mortgage arrears first being consulted. MABS and FLAC, which have come out strongly against this discussion document, should also have been consulted.

The discussion document before the House has been warmly welcomed by the banks. Indeed, it could have been drafted by them. It does not call on them to do anything more than they are doing at present. In many instances, they are not even doing what is required of them. The so-called recommendations contained in this document are mere guidelines. The two main issues relating to the matter of mortgage arrears are keeping people in their homes and negative equity. Neither of these is properly dealt with in the discussion document, which is completely dismissive in the context of negative equity and states that the write-down would be too expensive. I challenge that opinion and ask in whose interest it is too expensive.

The first point I made was related to keeping people in their homes. The report disgracefully accepts that repossessions will happen and that after a bank has taken possession of a person's home, it may be possible for that person to rent the property from it, with the debt remaining as a heavy weight on his or her shoulders. That is an outrageous idea. The Government should ensure that if a debtor engages with a lender and is prepared to pay a reasonable amount of net income - this should be decided not by the banks but by an independent agency - there should be no question of a person losing his or her home. People could make interest-only payments or park the mortgage in order that interest does not accrue while there is a chance to pay down some of the principal. A person in the Defend Our Homes group has paid up to €100,000 in interest alone on his home because he cannot pay his mortgage.

We have all heard the proposal from New Beginning, which is very sensible. It proposes that 35% of net income could be used to pay down debt and that in the early years the principal would be paid down, with the interest being parked. This is a practical proposal. If a family cannot sustain a mortgage, there should be an option for it to be housed by the local authority, although the debt would have to be written off and the bank would have to buy the property.

There is a figure from the Department of Finance of €14 billion to reduce mortgages in line with actual value, but this is nothing compared to the cost of NAMA and the bank bailout. Independent economists question this figure. If the write-down was restricted to the average family home or apartments and buy to let examples and trophy homes were excluded, the figure could be reduced to €7 billion or €8 billion. Some of this has already been built into the recapitalisation of the banks against potential mortgage default.

I will make a point about bankruptcy and personal insolvency laws which should be introduced before Christmas. There should be a Government grouping urgently considering this with a view to introducing legislation before Christmas. There is nothing in the report dealing with sub-prime lenders which do not even need a licence to operate in this country. They work under no regulation and are here to make a quick buck before they pull out. Many are facing eviction because these companies just want to sell a house and get money whatever way they can. They show no concern for families with mortgages.

The debt write-down must form part of the mortgage process. Society must move on. However, we cannot kick the can down the road all the time while playing games with people. This is the biggest issue on doorsteps in the by-election campaign in Dublin West and it is being raised every time. People find themselves in a position where they want the monkey off their bank and although they want to pay off their mortgages, they cannot do so currently. I, therefore, urge the Government to reconsider its position.

Joe McHugh (Donegal North East, Fine Gael)
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I am glad to have the opportunity to contribute on this issue. I thank all those within the constituency who contacted me in the past week with their own proposals and suggestions. I thank them for what were often heart-felt contributions via e-mail, letter or the telephone to outline their predicament and the problems they face on a daily basis. Rather than it being a daily or weekly problem, this is a daily nightmare for many who are in negative equity and, as the previous speaker mentioned, have a monkey on their back. They feel that there is no light at the end of the tunnel. Therefore, we have an enormous task in that regard. The Minister for Finance is under no illusions about the enormity of that task, but the objective of the Government must continue to be keeping people in their homes, reducing the burden and redressing the power balance between banks and mortgage holders. Ultimately, we are representatives of the people and our constituents; although there are rules and guidelines, we must take cognisance of the fact that this is not a question of moral hazard alone but also of morale hazard. People's long-term expectations only focus on negativity and they are not planning for the future in the way they should be because they do not know what will happen in six months, 12 months or five years time. We must take this on board.

I have received different suggestions and submissions in the past week. There is an underlying theme of responsibility in that people want to face up to the problem. They want a solution and are not willing to walk away. There is an argument that some cannot pay, while others are not willing to pay, but that is a red herring. All the people with whom I have been in contact offered a solution and nobody is proposing a blanket write-off or arguing that he or she is willing to walk away. They want a solution, which could be as simple as handing back the keys to the bank and moving to rental accommodation. That suggestion is made because people feel trapped and the banks have been using a form of entrapment, of which we must be conscious.

I have heard various suggestions regarding next generation mortgages, while certain groups have proposed a 35% of income threshold. It has also been said people should pay what they can and park certain segments of the mortgage repayments for ten years or longer. We could consider what happened in Japan and Germany where there are mortgages of up to 100 years. People are looking for solutions because they face a serious predicament and are in negative equity. They are aware that at current market values they will never recover the initial purchase price. We are talking about people who bought their houses for the purpose of making them their homes. We are not talking about people who speculated and took a risk in buying second and third properties, rather we are talking about people who are living in their primary residence and we owe it to them to find some pathway to help them to get out of their predicament.

There are aspects of the Keane report that are positive. However, I would be the first to admit that there are also aspects that are not so positive. It identifies the causes of the problem - the lack of affordability, negative equity and future prospects. With prices down 43% since 2007, the lack of affordability is the key problem as people's incomes are also down. They are not in a position to pay back what they owe and are trying to negotiate with credit card companies. It is not just a question of mortgage repayments; it seems as if people are trapped by a burden of debt on a day-to-day basis. They are sacrificing the purchase of proper food in order to meet their mortgage repayments. These are the decisions and choices they are faced with on a daily basis and on which we need to engage with them. The banks must do this on a one-to-one basis. In some instances, they are trying to meet people but come up with a short, medium or long-term plan.

One must ask whether in reality we are kicking the problem down the road. It is possible we are doing this if we do not get to the core of the problem of negative equity. We must be honest and admit that some people with mortgages know in their heart and soul that they will never be able to pay them back. That is the reality and what is being said to me. Many people find themselves in this predicament.

In its most recent report the Central Bank notes 777,000 mortgages to a value of €115 billion on the books at present. With all the realignments, readjustments and deleveraging that is going on in terms of the Minister's direct and conscientious role he has undertaken so soon after the recent election, one must ask whether banks have prepared for the rainy day in terms of commercial loans and NAMA properties on their balance sheets. Where does the private citizen come into the equation? That is something of which we must be conscious as well.

We must look at all the options in terms of writing down debt. We must consider parking up part of the mortgage for a period and other solutions. We must give people hope. At the moment they do not have hope. Not all people want to throw back the keys and leave this country. People still want to participate in this country's activities. They are confident that we are trying to get our house in order from a fiscal and budgetary point of view. They can see that. It might seem a contradiction given that we find ourselves in this predicament that there is a lot of positivity as well as negativity. There is a lot of positivity around what the Government is attempting to do in acknowledging that we have a mess on our hands. We have a complete and utter disaster in terms of over-expenditure. Historically, the tradition and mindset has been to throw money at problems. As well as learning the hard lessons we must look at other countries. The Canadian Minister for Finance was in this country during the week. He talked about the Canadian experience and the fact that they always had tight budgetary mechanisms and fiscal control and that is why they did not end up in the same mess in which we and other countries found ourselves.

I reiterate my point about morale hazard. I accept there is a moral hazard. That argument is made by people who do not find themselves in this difficulty. That is a legitimate argument. However, there is a morale hazard also. According to John Maynard Keynes's theory of expectations, people base their current expenditure on their long-term expectations. Currently, long-term expectations are blinkered. Many people do not believe they are going to get out of the current monkey-on-their-back scenario. We must be conscious of that. I welcome the fact that the Minister is open to suggestions from the other side of the House. He engaged with Opposition Members on the Central Bank and Credit Institutions (Resolution) Bill and he is willing to engage on this matter. I am confident we will work towards a solution to this mammoth problem.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I welcome the opportunity to speak in the debate on the report of the interdepartmental working group on mortgage arrears. I welcome the report as an input to the general debate. It is in no way a definitive report. It is not intended to be such and it was not set up with that purpose. It was set up with narrow terms of reference to deal with specific issues. I never saw such specific terms of reference. They prescribe the report. The person who wrote the terms of reference could have saved the 22 public servants from meeting during the summer because he or she knew the outcome that was required and could easily have written the report. Nevertheless, the report has been published, regardless of who its authors are and it will make a useful input into dealing with mortgage debt.

The report ignores personal debt and from that perspective it does not deal with the gamut of the problem that exists. I cannot envisage anyone who has a major mortgage debt that does not also have a car loan debt, for example, or other loans such as for education or credit cards. I have yet to meet a person who has all bills up to date including the ESB and telephone and where he or she only has one debt, namely, a mortgage. From that point of view the report is focused on an imaginary situation that does not exist. That said, the report contains useful information and the research carried out provides a useful input into the overall position.

I compliment Mr. Declan Keane, the chairperson of the group, for his work. The only good thing about the report is that it accurately titles itself an interdepartmental group. That is one of the problems. There is nobody outside the public service involved in this particular report and from that point of view it was written from the perspective of people who are in employment. Public servants have suffered pay cuts and are affected by the universal social charge and pension levies but I suspect that everyone involved in the report is in good, permanent State employment. The group was composed of 22 members. They were from the Department of Finance, the Department of Justice and Equality, the Department of Public Expenditure and Reform, the Department of the Environment, Community and Local Government, and the Department of Social Protection. There were three public servants from the Central Bank of Ireland, and also staff from Allied Irish Banks, which is a 99% State-owned company. In my view everyone who works for AIB is a public servant. One member was from the former EBS Building Society which is part of AIB which also makes that person a public servant. It is a public service report written by people, none of whom has lost his or her job or understands the difficulties people face. From that point of view I consider that like any project on the ground this is a desktop report from people at their desks rather than going out and finding out the particular issues on the ground. That said, the report contains useful information.

The scale of the problem is well known and it was well predicted. In January and February 2009 when the worst stages of the recession hit, 30,000 people lost their jobs in each of those months. They were probably the worst two months in the history of the State in terms of job losses. I spoke to people in the banking sector around St. Patrick's Day of that year when 60,000 people had lost their jobs and the live register had increased by that amount who predicted we would have a mortgage crisis by 2011. Thankfully, we have not had that level of increase before or since. It has never happened anywhere in the world that a significant increase in unemployment was not followed, with a two-year time lag, by a mortgage crisis. It was predictable and therefore it is possible that some of this work could have been done earlier to have systems in place to deal with the problem. The timescale was predictable given that it has happened in every other country.

When people lose their job they have a reserve built up and redundancy money which will help them to keep their mortgage on track for a year. Then they may start to fall behind with other bills while trying to keep the mortgage paid but after a few more months things inevitably start to go wrong. That is why we have the scale of numbers currently. Approximately 50,000 households are in arrears for more than 90 days. That is an issue we have to deal with.

I give credit to the group for the important notice on the first or second page of the report which outlines that the group was established to consider 15 specific matters, as approved by the Government's economic management council. However, as is the case with such a review the group has extended beyond the specific approved areas to a certain extent. The 15 matters are set out in appendix 1. The group draws the reader's attention to the significant limitations on its procedures as a result of the specific nature of the terms of reference. The Government drew up a list of 15 questions to which it wanted answers and indicated that it did not wish anything else to be considered. That was disappointing because those people could have produced a better report had it been sought. I compliment the chairman and those who worked on the report because they had restricted terms of reference. The chairman goes out of his way to say that. I compliment him on having the courage to put the important notice to that effect on the first page of the report. Perhaps if he had said that to the Minister he would have been invited to do more detailed work.

The first of the 15 terms of reference is to determine the extent to which the deferred interest scheme is being implemented. That has nothing to do with the future. It relates to the existing deferred interest scheme under the voluntary code. The second of the terms of reference relates to an assessment of the deferred interest scheme criteria. Again, that relates to something that is already in place. The fifth of the terms of reference refers to developing further the concept of trade-down mortgages with the Central Bank and the banks. It was already putting it into people's heads that they want people to consider trading down and getting out of the house in which they live. The group was asked to review what progress has been made on the introduction of insolvency legislation. Reference is also made to dealing with those who have a problem without dealing with those who do not. It was somewhat insensitive of the Minister when he announced this report last week to claim it was intended to help people who have difficulties rather than those who will not pay their mortgages. Everybody has difficulty paying their mortgages but he was almost implying that a large number of people are feigning problems. I recognise that the qualification to which he referred was part of the working group's terms of reference and is embedded in its work. However, the terms of reference also provided for research to be conducted into intergenerational mortgages, such as the Japanese experience of 70 year mortgages. If we are thinking about that route, we have lost the plot. It is bad enough that people have lost their jobs and cannot repay their debts without demanding that their children and grandchildren inherit the debt. The idea used to be that one inherited money, not debt. If the Government introduces intergenerational mortgages, everybody will flee after the funeral in case the will gives them a 35 year mortgage. It was wrong to prescribe that as a specific term of reference.

The working group came back with the idea of a split mortgage, which is like the shared ownership scheme which local authorities have rightly abandoned. The shared ownership scheme allowed people to take a mortgage for 60% of a house and pay rent on the balance. In 30 years time, when the mortgage is cleared, the remaining 40% would be dealt with. That was in effect an intergenerational mortgage unless somebody found a pot of gold at the end of the rainbow and managed to clear the balance of the debt. I have yet to see that happening.

The report discusses increases in mortgage interest relief but, unfortunately, it does not refer to expenditure on rent supplement. We cannot estimate the level of Government support for people in housing or accommodation without considering the wider question of how much is being spent on the mortgage interest supplement and rent supplement. I understand that the Department of Social Protection is providing money for housing and, given that 70,000 are on rent supplement compared to 18,000 on mortgage interest supplement, it is wrong to speak about one while ignoring the other.

The terms of reference were very narrow but, despite the constraints under which the committee operated, it made a useful contribution to the debate. I understand that the Minister for Finance will take questions and answers on the issue. I commend the Government on accepting our Private Members' Bill, the Debt Settlement and Mortgage Resolution Office Bill 2011. As we agreed last night, mortgages cannot be isolated from personal debt. I look forward to debating these issues further during the course of the afternoon.

Fergus O'Dowd (Louth, Fine Gael)
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Nobody has a monopoly on wisdom and this debate is a constructive engagement by a democratic Parliament to bring the best ideas to the fore and resolve this issue without excluding any views. Tens of thousands of young people who bought their homes during the boom have since lost their jobs and are saddled with mortgages they cannot repay. The interdepartmental working group was established in an effort to address that issue. I acknowledge Deputy Fleming's point about private debt and mortgage debt but mortgages represent a heavier burden than other forms of debt. If we can deal with the mortgage issue, people will then be able to start dealing with personal debts. At the end of the process it is hoped that the economy will start to recover and when the money is coming in through increased employment people will be in a better position to repay their mortgages. The Government's economic strategy aims to bring growth back to our economy. Thankfully, it is predicted that we will experience growth this year, leading to increased wealth and job creation. At the end of the day, that is the only solution.

Several Deputies have spoken about people with distressed mortgages who have gone to bed hungry in order to service their debts. I have met others who are relying on their parents for assistance in meeting their daily needs. The problem affects not only young couples but their parents, grandparents and extended families, who are being asked for financial support.

Having regard for increasing problem of mortgage arrears, the economic management council requested the working group to consider further necessary actions to address mortgage difficulties. The two objectives it set were to assist those who face real difficulties in remaining in their homes, where appropriate, and distinguish between those who cannot afford to pay their mortgages and those who chose not to do so. The working group, which comprised representatives from a number of Departments and bodies, finalised its report at the end of September. The report concluded that those who can pay their mortgages should do so and that blanket negative equity debt forgiveness is not appropriate.

The dominant response to the problem to date has been extended forbearance measures. This is a helpful response in many cases but the adoption of long-term forbearance will not be sufficient in all cases and it must be recognised that some mortgages are currently unsustainable. I have dealt with several cases in which people have left their homes because they knew they could not repay their debts. The surrender of a house can cause significant trauma for people. Where a person's future prospects are such that he or she is unlikely to be in a position to build up reasonable equity in a property, more sustainable solutions will have to be advanced by banks and the State. The report sets out a range of possible solutions, as well as a decision tree approach to aid assessment of individual cases. However, these solutions are not intended to be exhaustive or prescriptive and they will need to be developed over time.

One of the possible solutions set out in the report is a trade down mortgage. This could be suitable where owners of high value or large properties trade down to a more affordable mortgage. Split mortgages might be suitable where a household is not in a position to meet the commitments of a full mortgage but could pay a reduced amount and perhaps repay the remainder over time from income or capital increases. Where an alternative solution cannot be reached, the borrower and lender could agree to sell the property and resolve the shortfall in the mortgage in an appropriate and reasonable manner, considering the borrower's circumstances. The State also has a significant role to play in circumstances where a person with a distressed mortgage qualifies for social housing support. The group proposes two new mortgage-to-rent schemes which would be administered by the Department of the Environment, Community and Local Government. These schemes would utilise approved housing bodies or leases to local authorities.

In each case, the key criterion to qualify is that the person with the distressed mortgage and the person's house must qualify for social housing. In line with previous reports, the group was of the view that the unlimited duration of the Department of Social Protection's mortgage interest supplement scheme is inappropriate. The scheme is an important support for people in short-term or medium-term difficulties, but it is not sustainable for the State to support private home ownership indefinitely. In long-term situations, mortgage-to-rent type solutions represent a more appropriate and sustainable social housing solution. Accordingly, the group reiterated the recommendation in previous reports that the mortgage interest supplement scheme should be time limited. The group also considered that a more specialised mortgage advice service will be needed to advise and assist mortgage holders to make decisions in their best interests and to act as a consumer advocate in this area. This service could be linked to the money advice and budgeting service, MABS, which does a fantastic job. All of my colleagues in this House are familiar with scores of people who go to MABS to get professional, good and helpful advice.

The need to reform and update our bankruptcy and personal insolvency law underlies all the approaches to problem mortgages that are set out in the report. The report points out that the mortgage arrears problem will not be resolved in the absence of effective bankruptcy legislation. A number of key elements of the report have already been implemented. The Minister of State, Deputy Penrose, will shortly launch two mortgage-to-rent schemes in line with a recommendation in the report. The schemes will operate on a pilot basis initially. They will be subject to prompt review before they are more widely rolled out. Under each scheme, people in extreme mortgage distress who are eligible for social housing will be able to remain in the homes as social housing tenants. Either the lending institution or a housing association will take ownership of the property.

The Minister, Deputy Shatter, has done extensive work on the heads of a personal insolvency Bill, as set out in the report. This will be published shortly. The Minister, Deputy Noonan, has instructed the banking division of the Department of Finance to begin discussions with the banks to ensure the measures set out in the report are implemented speedily. The Government obviously arranged for this debate to take place in the House. The Joint Committee on Finance, Public Expenditure and Reform will also consider the report. The key point is that the Government wants to hear the views of all parties on this important issue. The strong views we all have comprise the collective wisdom of this Parliament. No effort should not be made and no stone should be left unturned as we try to help those who are facing these serious difficulties. At the end of the day, the key point is that we need to restore our economy to growth so that people can get jobs and return to repaying their mortgages. Notwithstanding the terrible recession we are experiencing, people need to be able to continue with their lives.

Sandra McLellan (Cork East, Sinn Fein)
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While I welcome the opportunity to speak on this crucial issue, I would have preferred if we had a little more to talk about. I welcome the Minister of State's comment that we must work on this collectively and leave no stone unturned. Anyone who has paid attention to the pressures facing ordinary people across the State as a result of the devastating impact of the mismanagement of our economy and the gross excess, speculation, gambling and crookedness knows that the problems caused by negative equity and distressed mortgages are rife. Hundreds of thousands of individuals and tens of thousands of couples and families are under immense pressure to pay their bills as the cost of living increases. Utility bills are on the rise and professional fees show no sign of abating. It is incredible to think that many families in this day and age have to choose between food and heat or between rent and school lunches. This House has a lot to answer for.

Our thoughts are with the Aviva workers who received the terrible news of massive job losses yesterday. Many of them will join the 450,000 people on the dole queues, with no real option for future gainful employment in the current climate. The chief executive officer of Aviva has said there is a culture of entitlement in this State. In this Chamber yesterday, the Taoiseach as much as agreed with him. According to the Taoiseach, the issue is one of competitiveness and the cost base. For me, for Sinn Féin and, I am sure, for the most of the Aviva workers, it is a clear case of a big multinational jumping ship to increase already handsome profits, with a shameful lack of consideration and respect for its dedicated workforce to boot. It is impossible to ignore the real possibility that many of the workers are facing into the harsh reality of bill prioritisation and corner cutting. Many of their counterparts are already experiencing this reality. The stories we hear in this regard are numerous and varied, but similar in many ways.

We should recognise that the issue of mortgage distress is in many respects a generation game, as David McWilliams might say. The people who are worst affected by mortgage distress are those who were most vulnerable in the first place. When many people in their late 20s and early 30s reached the stage in life where they were in gainful employment, getting married, starting a family and looking for and purchasing a home, it happened to be around the peak of the market. We remember the push to get on the property ladder and the famous suggestion that there would never be a better time to buy. It was suggested that those who thought this was some sort of crazy bubble should consider taking their own lives. That is what the leaders of this State and its industry and business champions led people to believe. The same demands were made by the Government of the day and most of the Opposition. Where are they now when lives are being devastated, families are being torn apart, hundreds of thousands of people are on the dole and almost as many are emigrating? I am sure every Deputy in this House has experience through representing constituents, if not personal experience, of the real human cost of this crisis. This Government promised solutions for the worst affected people. Unfortunately, we have yet to see them.

The report of the interdepartmental working group on mortgage arrears is simply that - a report. It has no real bearing on the lives of ordinary people. More importantly, it does not provide any real solutions. Incredibly, it suggests that much of the management of the mortgage crisis should be decided on by the banks. This should not be surprising, given that the analysis was drawn up by 17 civil servants and five bankers. Elements of the report could be part of a meaningful solution to this increasing problem. My colleague, Deputy Pearse Doherty, has outlined our position in this regard. We will continue to play a constructive role in the process of dealing with this crisis. Sinn Féin's position is grounded in fairness and sustainability for the lender, the borrower and the taxpayer. It is focused on maintaining the family home, providing appropriate alternatives, ensuring debt sustainability and sharing the burden.

Like many Deputies, I feel that if my constituents gave me a mandate for anything in February, it was to address this crisis. It must be acknowledged that it is not just a crisis of jobs or unemployment, although these hugely significant contributing factors need to be addressed too. It is also a problem of a failed housing strategy. It is a legacy problem. Sixty miles up the road from here, there is a mature infrastructure to deal with personal and corporate bankruptcy and indebtedness. The system in this State is so inefficient, ineffective and insufficient that it has stopped. It is a problem of decreasing wages and increasing living costs. The simple maths of income and expenditure on a household by household basis mean intervention is essential. It is a problem of personal debt. As MABS pointed out yesterday, many people have expensive credit card and other loans to repay as well as mortgages. The numbers do not add up. There is only so much people can give.

That the powers that be in the troika gave us a clean bill of health today says a lot about the criteria they use. It is obvious they have no understanding of the human cost of the memorandum of understanding. While we direct funds away from people and into banks to keep the troika happy, rather than in any attempt to fix the real economy, ordinary people are caught in the cross-fire. In many cases, the proposition is untenable. I am familiar with people who cannot meet their monthly repayments and are in negative equity of anything up to €250,000. I am sure there are probably cases where it is more. I know parents of young children who have lost their jobs, or at the very least have taken a substantial pay cut. They have no flexibility. They cannot get work because there is none. They cannot move because they have a millstone around their necks, and to what end?

I would like to highlight the case of the recently unemployed young parents of a small child, who are in debt to the tune of €200,000. The banks might as well be looking for €200 million off this couple as they do not have it. They could take absolutely everything they have for the next 40 years and they still would not be able to repay the money. They will destroy them as active contributors to the real economy and their lives in the process. To what end? We have seen an increase in the number of suicides, in the incidence of alcoholism, domestic violence and mental illnesses due to stress as people struggle to cope with the effects of this crisis. Every one is crying out for our help and they want us to provide solutions. They do not care for political point-scoring or one-upmanship.

The Fine Gael-Labour Party programme for Government promises solutions, but efforts to date have resulted in very little. It is time for prompt action, as words and reports are not enough. This report from the interdepartmental working group on mortgage arrears is way off the mark in dealing with the crisis. Some of the recommendations made may form part of a comprehensive strategy to deal with the problem of mortgage distress but work to see such a strategy implemented needs to begin immediately. It needs to consider the ideas of others and deliver real and meaningful solutions for ordinary people.

Dominic Hannigan (Meath East, Labour)
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I wish to share time with Deputy John Lyons.

Michael Kitt (Galway East, Fianna Fail)
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Is that agreed? Agreed.

Dominic Hannigan (Meath East, Labour)
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I am glad to have the opportunity to speak about the Keane report. We are all aware of the difficulties many of our constituents are facing in trying to make ends meet. This is particularly the case for those who bought their own homes and have seen a reduction in their incomes and, hence, their ability to repay their mortgages. It is estimated that there are at least 70,000 families in mortgage arrears and many thousands of other families are just about able to pay their bills. Further reductions in income such as through deductions in the number of hours worked or increases in taxation would mean many of them would be forced into arrears or face significant difficulties in paying their bills.

It is for this reason that the Keane report is timely and, undoubtedly, it is a step forward. It provides much for us to discuss and I hope discussions such as this will help to shape the package of solutions arising from the report. It is necessary to listen to what other organisations outside the House are saying about the report. I welcome the comments of organisations such as FLAC, MABS, Threshold, New Beginnings and others. Their views can help to shape the overall solutions we offer to those who need help. These solutions are needed as soon as possible, as there are many who are hurting now and want to see action. There are also many who want to see the proposals go further - for example, I know some want to see the issue of negative equity addressed. However, let us be clear. The Keane report and this debate are not about negative equity but about those in arrears who are finding it increasingly difficult to pay their bills. Some of them are in negative equity but some may also be in positive equity. Up to now, very few concrete proposals have been put on the table. The debate about potential solutions has suffered because we have not been told the quantum of cases involved or how much money is involved. There has been a lack of data, to which FLAC referred in its presentation to the finance committee yesterday.

For the next step, before potential solutions are introduced, we need to find answers. For example, how many are in a distressed state? How many face short-term or medium-term problems and how many are in a situation where something is non-viable? Of those in arrears, how many are in positive equity? We also need to know what the costs are of removing somebody from his or her home, forcing him or her to give up his or her mortgage and then rehousing him or her. It may be cheaper to leave him or her in situ. We also need to talk about the issue of who is responsible for unpayable debt - in short, who pays? We must address questions such as whether somebody in arrears but in positive equity should be treated differently from a person in arrears and in negative equity. In the discussions to date there has been much talk about the parking of debt and providing mortgage holidays. If we were to do this, who would pay the interests on the loans? Should it be society, via the banks, or the homeowner or a mixture of both? If we take over a property in respect of which there is a non-viable mortgage, who will be responsible for any loan shortfalls? Should they remain with the original homeowner, or should they pass to the bank or should it be a mixture of both?

The Keane report provides us with high level solutions. The next step will be to flesh out these solutions and put meat on the bones of the proposals made. A range of solutions will be needed. While I believe there are solutions, we need a debate to achieve buy-in across society as soon as possible. This is because the solutions to the problem may involve a cost to the general purse, although such costs might be less than the alternative of not intervening. It is important that we get this right, that we act fast and that legislation, if necessary, is brought forward. I see the Keane report as being a significant step forward, but we need to move quickly and listen to other groups. We need to undertake a hard analysis and turn the proposals made in the Keane report and elsewhere into practical solutions.

John Lyons (Dublin North West, Labour)
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I welcome the opportunity to speak about the issue referred to. There has been much comment on the Keane report since its release and no more than other Members, I have been contacted by many constituents with queries about it. It is a vital issue, one that has great social and economic consequences.

I remind Deputies listening to the debate and those in the Chamber - few though they are, which is always disappointing when one makes an effort to speak - that this issue has been developing for a number of years. The Labour Party while in opposition tabled a Private Members' motion on the issue. The issues we are facing are not necessarily new, but the attitude and response of the Government are new.

Like Deputy Hannigan, I look at this issue from the point of view of how best to serve those experiencing mortgage arrears. I welcome the publication of the Keane report as it reflects this approach, namely, its main objective is to keep people in their homes. Everybody in the House can draw on a consensus that nobody wants a person to lose his or her home. A "home" does not necessarily mean one he or she owns, as it is a place in which people live, to which they belong and where their families grow up. It has a wider meaning than simply that of a physical entity of bricks and mortar.

It is obvious that we have to consider the social impact of a family losing their home. As we all know, keeping families in their homes and connected with the community is of the utmost importance at this time. The main message I took from the past week is that people just want to be treated fairly and to be given a chance, whether it be, unfortunately, to move to a more suitable property or an affordable home, or to just have somewhere to stay. Deputy McLellan noted that the crisis mainly affected people of my age, those in their 30s. Most Members are aware of the circumstances of those in this situation.

Having spoken to people about the report, it is evident that the range of circumstances in which people find themselves, mostly through bad fortune, has cemented the need for a case-by-case approach focusing on the needs of the individual mortgage holder. This is one of the points suggested in the Keane report, namely, a case-by-case assessment rather than a one-size-fits-all approach. It is very easy to propose a one-size-fits-all solution to a crisis of this magnitude, but it is entirely different to implement such a proposal.

An indicator of the complexity of the issue was given yesterday with reports that the Government was in discussions with the troika and the banks about possible mortgage holidays to enable people to pay off their other debts, that is, personal debts. As Deputy Hannigan said, this, too, would have consequences. It is a positive development, but the point is that having to seek approval from the troika in the first place, given that we are dependent on it to finance the State, is an indication of the complexity of the issue. Those calling for a one-size-fits-all approach are, therefore, mistaken. This requires a range of measures, of which the Keane report outlines a number, from new mortgage options to independent expert advice.

One of the main responses to the issue will be the introduction of personal insolvency legislation. Many of the recommendations made in the Keane report are based on the implementation of such legislation. It has been stated by a number of commentators that overall debt levels have to be examined to resolve the issue of an individual's debt. That is true, as just dealing with mortgage debt in isolation does not recognise a person's ability to pay his or her debts. Moreover, the penal nature of the legislation is wholly inappropriate in dealing with the debt crisis many now face. I look forward to the publication of the personal insolvency legislation mentioned by Deputy O'Dowd.

I wish to make a few points on the report. First, the role of MABS in playing a full part in this process must be identified and supported. In the Chamber last Tuesday evening the Minister for Justice and Equality, Deputy Shatter, detailed figures showing the number of mortgageholders who had approached MABS to seek help. This demonstrates the developing nature of the problem and that the service's role and expertise in the area must be harnessed to help new independent mortgage advisers.

As I am running out of time, I will skip to my final point. Another issue that must be considered is what is expected from banks. I welcome the recent comments by the Financial Regulator, Mr. Matthew Elderfield, on possible restrictions on banks' ability to raise variable mortgage rates, particularly if such actions were seen to push more people into mortgage arrears. Given the support the people have given to the banks in recent years, the latter must now play their role in dealing with this issue.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The mortgage and negative equity crisis is absolutely massive. It faces at least 115,000 people who either are in arrears or, as a result of their mortgages being distressed, have had their mortgages restructured. Moreover, this may only be the beginning of it or, at least, there may be much more to come if the economic situation deteriorates further or if more people get into trouble. This is an emergency and a potential timebomb unless it is dealt with in a serious, determined, fair and sustainable way. Most importantly, it is a huge human crisis for those tens of thousands of families racked with anxiety and fear of losing their homes, having debts they simply cannot manage, worrying about their future and those of their children, as well as about the prospect, if not of losing their homes, of being crippled with debts for years to come.

This human tragedy is also an economic emergency because unless this problem is sorted out, the economy will be crippled for years to come. If this number of people and families are in massive debt, crippled and strangled by it and fighting to keep a roof over their heads, it is obvious they will not have money to spend in the economy and the disastrous stagnation of the domestic economy will continue and worsen. Consequently, there is both a human and an economic imperative to deal with this crisis. In order to do so in a meaningful and fair way, one must establish first principles. This is where the Keane report gets it wrong from the outset. Its guiding principles say it all by stating:

Those who can discharge their mortgage applications must do so. There is no entitlement to a particular solution and solutions have consequences ... it is inevitable that people will lose their homes ... blanket debt forgiveness ... is not recommended.

The report also states the challenges are "to keep people in their homes, where appropriate" and "to avoid inappropriate mortgage holder behaviour, thereby compounding the ... problem". That says it all about the attitude demonstrated within the Keane report.

This is a bankers' report. Moreover, it is the report of bankers and a Government and State that are in hock to bankers, the first priority of which is to pay back bankers, bondholders and speculators and for which the human needs of the mortgageholders, that is, of the 115,000 or more families struggling with unsustainable levels of debt, come way down the line. This is the priority and it is spelled out clearly in the report. From the outset, it was put together with the wrong priorities in mind.

Moreover, it says everything about the manner in which the report was put together that those who actually know what the mortgage crisis means and who deal with it on a daily basis were not involved. Why were organisations such as MABS, the Free Legal Aid Centres, FLAC, New Beginning and Threshold not involved? These are the organisations which actually are familiar with the plight of mortgageholders. It reflects everything about the Government's priorities in setting up the Keane group and setting the report's terms of reference that it chose not to include either those whose concern is the actual mortgage holders or representatives of the mortgage holders themselves. The guiding principles at the beginning of the report set out clearly that the agenda was to do the bidding of the European Union and the IMF yet again. It was to protect the banks at all costs, squeeze as much money as possible out of ordinary householders to make sure the banks' books balanced, because that is what the IMF and the troika wanted. They do not give a damn about the human and social consequences, what will happen to the economy or those who may lose their homes.

Moreover, all the weasel words Members have heard in this debate in the past two days, in which Members have expressed their concern for mortgageholders and commended MABS, FLAC and the Society of St. Vincent de Paul, mean absolutely nothing unless one states, in a way the Keane report point-blank refused to do, that one's priority is to assist the mortgage holders who are in this distressed state and their families. Members must set out meaningful first principles that name the problem as it is. The first principle with which Members must start is that the crisis, this car crash as Deputy Mathews correctly termed it yesterday, was caused by the greed of bankers, developers and the Fianna Fáil Government which facilitated them every step of the way. Those who simply sought to put a roof over their heads during a bubble created by the greed of a tiny minority are not responsible and should not be held responsible. They do not have obligations to pay back the banks, as suggested in the Keane report, because the debt they carry was inflicted on them by the reckless greed, sharp practice and imprudential banking of these financial institutions which created a rigged and distorted market. Those who simply wanted to satisfy the most basic need to put a roof over their heads and who are entitled to so do could only do so in a rigged and distorted market created by the greed of a tiny minority. Members' first principle must be that they are there to protect and any recommendations, proposals or legislation arising from this debate must state these persons are innocent and do not have obligations. They have an obligation to keep a roof over their heads and unsaddle them from this massive debt burden inflicted on them by bankers and bondholders and which the IMF and EU troika wish to continue to hold over them. They must confirm that people have a right to a home. Particularly when there is a massive oversupply running to tens of thousands of empty homes, the idea that anyone might face eviction is obscene. There should be no evictions and people saddled with unsustainable debt should have that debt taken from them.

As for establishing these first principles, at the very least the Government should take on board the recommendations made by the groups such as MABS, New Beginning and so on which appeared before the Joint Committee on Finance, Public Expenditure and Reform yesterday. These are the first principles that should have informed the report. Full information must be provided on the extent of distressed mortgages, which still is lacking, and how many more are likely to become distressed. We need to take all personal debt into account. People in this situation need representation which should be provided by the State and paid for the banks. Any arrangement for people in a distressed situation must ensure there is a dignified standard of living for the families in that arrangement and they must retain their dwellings. Personal insolvency legislation which switches the balance in favour of the borrower and against the bank should be introduced immediately. Yesterday New Beginning made a suggestion that could be done tomorrow if the Government had the will. It proposed inserting a clause in existing legislation requiring judges to take into account the personal circumstances of borrowers when dealing with debt situations.

If we want to remove the car crash that has been caused by the property bubble and the greed of a minority, there must be debt write-off. The Government and the Keane report are again disingenuous on the cost of this. The figure of €14 billion is bandied around, but it was stated that if it was targeted towards people with principal private residences being the criterion, it could be €10 billion and the Central Bank conference on 13 October said the real cost could be €8.3 billion. We put €70 billion into recapitalising the banks, €24 billion of which was to address distressed mortgages. We put €35 billion into NAMA and we are paying €200,000 a year to developers who bankrupted this country to manage their assets. Despite this, the Government is claiming we cannot afford €8 billion or €10 billion to write down the debts of mortgage holders. Of course we can. It is a question of which is our priority: to protect bankers and financiers and do what the troika tells us or to protect ordinary householders, who are in a desperate situation through no fault of their own, and allow them keep a roof over their head. The choice is the Minister's and he should side with the people.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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Our hearts go out to people in mortgage distress who are having problems with cash flow who find it impossible to repay their mortgages. It is a very difficult place to be and it has dreadful consequences for self-image and family welfare. We must acknowledge that as being the context of what we are discussing.

An important principle is that we must deal with distressed mortgages case by case because no two are the same. There are different capacities to pay and different dynamics at work. I congratulate the Fianna Fáil Members who tabled the Private Members' Bill this week and our party acted properly in accepting the Bill. I applaud the work done on the Bill, which will give people the opportunity to deal with an agency that will interface with the banks and give professional advice, which will be an important support to people in distress. Members of this House might underestimate the importance of that for individuals who are not as well equipped to be their own advocates and marshal arguments on their own behalf.

The Keane report and the subsequent Government response are accurate in affirming that we cannot have blanket forgiveness - it is fantasy to suggest we could. It would not work on a number of levels. The taxpayers could not sustain it and in many cases the beneficiaries are also taxpayers. It is not sustainable on the level of community relations and its administration and application would become a nightmare. It is not realistic. A myriad of solutions just short of it are required. Long-term forbearance and dealing with loans by banks is a prerequisite and will have to be accepted. For example the Japanese have double the lifespan of mortgage that we have here. We will need to consider granting much longer-term mortgages in future. In dealing with distressed mortgages, the long-term solution will be central. Therein lies a much better holistic solution than suggesting a complete write-down of debts.

The concept of a trade-down to more affordable mortgages might be applicable in many cases. There is a cultural difficulty with that kind of thing in Ireland and there will be some small community stuff that will make it a bit difficult to administer. However, it needs to be on the menu of solutions and it is proposed in the Keane report. There is no way it can be avoided in certain instances. The idea of splitting the mortgage, making it almost a two-term mortgage and putting payment of part of it back is good and will need to happen in a number of cases.

The major plank of the Keane report is the introduction of a mortgage-to-rent scheme, which has considerable merit in instances where people are unable to pay and would become candidates for social housing anyway. There would be significant long-term costs in supporting them in mortgage subsidy. In many cases mortgage subsidisation is insufficient to ensure they can continue to repay their mortgages. The mortgage-to-rent scheme has inherent value and I commend it as a very realistic proposition. Obviously implicit in that would be a level of debt write-down by the banks, which is made possible by the support the banks have already received from the taxpayers. The level of rent would also need to be manageable. There is no reason for that not to be a very private and discreet situation between the householder, the local authority and the lender. It can be managed at that level and there is no reason for people to have any form of public humiliation.

Over time that system will result in the elimination of mortgage support, which is a reasonable proposition. While I would consider much of what Deputy Boyd Barrett said unrealistic to the extent that we cannot escape international and domestic financial realities and the sovereign agreement with the EU and IMF, I agree with him on the money advice and budgeting service, MABS. MABS should have been more central in the preparation of the Keane report. MABS will have a very important role to play in complementing the work of the new agency to interface with the banks. MABS has a key function in budgeting and managing other ancillary debts. Very few people have distressed mortgages alone and also have credit card debts, and so on. It is mentioned as well in the report that we will need Central Bank control of foreign mortgage lenders where there might be a difficulty.

In certain instances, a level of debt will have to be written off by the banks and mortgage companies, and they will have to accept their responsibility. I would recommend to the Minister that we take a serious look at the proposition by New Beginning. There is a logic to the proposition that people would pay no more than 35% of their net disposable income on their mortgage and there is logic to the proposition that they pay less in the beginning until they accustom themselves to the mortgage and deal with their personal circumstances. These propositions are worth examination and should be incorporated into any solution.

We will need a multifaceted solution. The solution begins with the interaction between the distressed debtor, MABS and the new agency. It will extend to a number of solutions involving forbearance by the banks and putting off the debt in many instances, scaling it over several years, while in other instances involving a level of write-off. In instances where it is not possible to pay, the mortgage-to-rent scheme should be used. It is very difficult to arrive at one solution that will fit all, and every case will need to be dealt with individually.

This is central to the revival of our economy. Many excellent steps have been taken to date to put our economy on a sound footing and these are beginning to bear fruit. Dealing with this issue is a very important part of that mix, because domestic demand would increase immensely if we dealt with distressed mortgages. It is an important debate and I recommend to the Minister that he look at an holistic solution covering every available option.

Mick Wallace (Wexford, Independent)
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I was always taught that when reading a factual book, the first thing I should do is see who wrote it, when he wrote it and in some contexts, particularly in history, where he came from and his background. When I looked at the Keane report, I was surprised that it came from people who did not have a direct relationship with the problems they addressed. That was a mistake. I am not sure if any of them is struggling to pay a mortgage; perhaps they are. However, I noticed there was no criticism of the banks' behaviour towards the borrower, despite the fact that there is much evidence of bullying, threats and intimidation from the financial institutions in their relationship with borrowers. It does not take a rocket scientist to figure out that it is a pretty uneven contest between the borrower and the lender at the moment.

I recently met a group of national organisations who were also very surprised that they had not been involved in this report. I accept that the Government may take some of their ideas on board. Among those present were FLAC, Threshold, Respond, Focus Ireland, the Society of St. Vincent de Paul and New Beginning. It was interesting to hear their opinions because they are at the coalface of the problem. They are dealing with the people who are suffering in a serious way on a daily basis. It would have been a great idea on the part of the Government to involve these people in the report.

The Government needs to connect more with civic groups in general, and not just on this issue. The Government has a responsibility to change the level of disconnection between Leinster House and the world outside. I am a newcomer to this House. I have worked all my life on a physical level and on a business level outside in the so-called real world. I am surprised at the level of disconnection. I am surprised at the lack of understanding in here at times of what really goes on outside and what is really happening. We spoke about Priory Hall only this week and I noticed that people do not understand what happens on a building site, but since they were never on a site, that is probably understandable. They will have to address the lack of regulation in the construction industry. It has been there for a long time, in spite of recent CIF protestations. I do not recall the CIF asking for more regulation over the past ten years. If the Government is to address the problem, its members need to speak to the people who work on building sites and learn from them.

I wish there was a closer relationship between the Government and the people when it comes to mortgages. I wish it was as close as the relationship between the Government and the banks. There is more interaction between the Government and the banks than there is between the Government and the people. The mortgage crisis is worse at this stage, and that is not surprising because things are becoming difficult for many people. They are falling further behind with their payments and they have a great deal of other debt. We still seem to lack a proper way of measuring that debt for some reason. We do not know what they owe, between credit cards, utility bills and so on. We probably do not realise just yet how poor many people are.

The top priority of the Government has to be to keep people in their homes and not to drive them into poverty. Whether the person is in trouble due to his own fault or due to the lender's fault is a different argument. I am not very happy with the current perception that the borrower is the person who always needs to be forgiven. A great deal of forgiveness is required for the lender as well and we need to have a serious look at how we think about the way banks relate to their customers. I do not see much sense of responsibility shown by lenders towards borrowers, but they should accept responsibility. When a borrower takes money from a lender, there has to be more scrutiny of the agreement and there must be a level of fairness in it. The notion that any lender can demand payment of all money owed at 24 hours notice is outrageous. It is completely unrealistic. Who can come up with it?

In my predicament last week with ACC, it was hardly surprising that I could not come up with €19 million overnight. However, let us say a Member in here still owes €200,000 on his mortgage, can he imagine the banks giving him 24 hours to pay that? It would be very difficult for anybody to do that, and not just the builders and developers who might be in a difficult place. We seem to think there is a stigma attached to people who owe money. We have heard a lot of talk about "can't pay, won't pay". Of course, we do not want people cheating the system, that is, people who could pay getting away with not paying. However, there is an unfair stigma developing about the people who are in trouble. In this regard, I saw two elements in the report. It stated that those who can meet their mortgage obligations must do so. It also said mortgage holders are not entitled to any particular mortgage solutions. There is a sense that borrowers are morally questionable, yet there is not a word about lenders being morally questionable and, God knows, they have not covered themselves in glory.

A point that is pretty obvious to us all was pointed out by the group New Beginning. It is that there is unlikely to be a recovery in the economy until we resolve what is now a mortgage crisis. Until ordinary people can return to economic normality, the real economy will stagnate, which means unemployment, emigration, misery and injustice, too, for a lot of people.

A Dublin man, Michael Lamb, wrote to me and other TDs about his family and his mortgage predicament. He wrote: "As it stands, we can just about cover the monthly repayments and, as such, do not appear as a statistic in the reports that are currently circulating on people who are experiencing mortgage difficulties. My family, including my two young children, make many sacrifices to pay the monthly repayments which would not be possible without the help of our parents." It is so difficult for so many people, and it is a lot worse than we realise. There will have to be some sort of write-down for some people who really cannot pay.

The mortgage-to-rent scheme is dependent on housing organisations that were not going to get access to money themselves and are already seriously overstretched. I realise it can be difficult to involve a local authority in that situation but it is something the Minister will have to examine.

Looking to the future, we must surely rethink our whole philosophy on housing. In the 1940s, 70% of housing was social but since 2000 it has been 6%. That cannot continue. The notion that everybody will be able to afford a home is unsustainable. The State should change its mindset and consider having a serious social housing programme if it wanted to take proper care of its citizens.

Bernard Durkan (Kildare North, Fine Gael)
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I am glad of an opportunity to speak on this report which will lead to legislation. I have listened with interest to various contributions from both sides of the House and we need to concentrate on a couple of matters at this stage. First, we should all be conversant with the situation as it affects our constituents. I am sure each Member of the House has had direct contact with constituents who find themselves to varying degrees in deep debt arising from circumstances outside their control. The Keane report touches all the right buttons and examines them, but some of the proposals are not feasible and I would definitely advise against some of them.

About three years ago, we all recognised that the situation would get worse. I remember asking Ministers in the previous Government whether they were prepared to introduce legislation to deal with household mortgage debt. It was mentioned at the time but nothing further happened. I fully understand that we must take various tentative steps before we can deal with the situation definitively.

To be fair, some banks are willing to talk to householders and assist them. Others, however, just go through the motions and say, "If you come to us in time, we'll deal with it and we'll work something out". They do not always live up to that, however. We should be aware that some of the latter institutions have been beneficiaries of considerable assistance from the State. Other lending institutions that have not been beneficiaries of State assistance have been willing, and are currently working out a formula, to help out householders.

The concept of compound interest must be abolished. There is no sense whatsoever in attempting to collect compound interest on a €250,000 mortgage from people who are unemployed through no fault of their own. In any event, compound interest is highly questionable because it only acts as a multiplier to give a book value for accountancy purposes to the lending institution. It does nothing else. It drives the situation further down the road so the householder can never recover from debt. If one follows that to its logical conclusion, what happens eventually is that the house in negative equity is repossessed and sold on the market if they can find a buyer. As a result, the bank, and the Government that has funded the lending institution concerned, will suffer.

Over the last three years, in common with everyone else in this House, I have dealt with countless constituents who have been faced directly with this particular difficulty. Discounting compound interest should be a prerequisite to everything because nothing will work if the previous attitude is continued. If one tries to work out a programme for somebody to get out of their difficulty and they happen to be unemployed, the lending institution will say "That's not sustainable, Deputy". However, when the mortgage was granted in the first place it was not sustainable either, yet nobody seems to recognise that now. The sustainability of mortgages that were granted a few years ago must be measured against the current situation.

Deputy Wallace mentioned some interesting things with which I agree. According to an old rule, 2.5 times the borrower's annual income dictated the level of mortgage to which one was entitled. That was deemed to be sustainable. In the 1980s it was regarded as a bit too restrictive, so we extended it to three times the borrower's income. It was therefore possible to borrow three times the major earner's income, and repay at the rate of one fifth. That scheme gave a considerable amount of scope, although most lending agencies criticised it. The insurance companies and investors were also highly critical of it. The insurance funds were supposed to be attracted by this scheme but they did not like it because it did not work for them and there was not enough return. Of course, there was never enough return for investors, which is one of the problems that has left us where we are at present.

We need to go back and establish what is sustainable now. In seeking to resolve any such problem facing us we should determine what is sustainable for people, given their current income. There is no sense in saying that they have a prospect of getting a job next week because we do not know that. They may or may not have a job next week. Over a period of two or three years we must work out an achievable programme that will be within their reach.

The mortgage-to-rent scheme is a good idea.

Where there is no hope of recovery, that is the way out. It is a temporary option, but one must question who will determine the rent to be paid. On what Deputy Wallace said, many housing units are in the hands of investors and landlords. The banks or lending institutions will have a strong vested interest in determining the level of rent to be paid. Will they determine it? If so, that is bad. The rent to be paid must be determined by somebody else.

I strongly disagree with voluntary agencies taking on a major role. There are voluntary agencies which have been funded in the order of 100% by the State. They have been allocated free sites and capital allowances to build houses and, in some cases, receive an ongoing grant from the respective Departments to spend. In some cases, there is no company; articles of association have not been observed; there is no proper accounting and no annual returns are submitted, yet they are pursuing their tenants in court. They are pursuing them, despite the fact that they did not exist for a considerable period. I am deeply concerned, therefore, about handing over any responsibility to voluntary agencies. While some are good, I can assure the House that there are some serious problems also. In the next five years these will emerge to a far greater extent than we have witnessed heretofore.

Some 25,000 houses are already in the care of voluntary agencies. The concept behind voluntary agencies sounds great, but it is very difficult to control the system which was introduced by a former Minister, whom I will not name, as a means of taking responsibility from the local authorities. The local authorities regarded their not having to take responsibility anymore as a great opt-out, but now they want to regain control of the housing stock because they have none. That is the point correctly made by Deputy Wallace. For a period of 15 to 20 years, there was little investment in what is now called "social housing". It was called "local authority housing" at the time. Some genius came up with the term "social housing" and immediately responsibility was abdicated by the local authorities. However, they now want it back and they are right because there is a serious problem associated with considerable dependency on private rented accommodation. There was not this demand 20 or 25 years ago, or even ten to 15 years ago.

I would love to have at least half an hour to talk about this subject because, unfortunately, I have had to appear in court with some of my constituents on numerous occasions in the past three years. Thus far, we have not lost much ground, except in very extenuating circumstances.

I noticed in the past couple of days that assessments of a person's ability to repay a loan or mortgage took child benefit into account. It is not supposed to be taken into account in such assessments. Doing so is a new phenomenon. The benefit is payable for children. It used always to be excluded, but some smart alec introduced it in recent times in the assessment of mortgage eligibility. From where in God's name did this come? I could elaborate on this issue and apologise to the Minister for ranting about the subject. It annoys me intensely. Unfortunately, we must now all deal with it to a far greater extent than we used to.

Some of the proposals made are reasonable, while some are dangerous. However, all of them need to come within the control of the statutory authorities for implementation at a later stage.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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There is unquestionably a mortgage crisis and no one can see clearly where or when it will come to an end. It is certain that if it is not addressed comprehensively, effectively and very soon, many more people will be forced into poverty and homelessness. We will see more repossessions of homes and more families forced to make the choice between paying the mortgage and buying food or essential medication.

Throughout the country families are looking forward to the festive season, albeit several weeks away, not in anticipation but with trepidation. I have much evidence of this already. Tens of thousands of families are in what can only be called mortgage slavery. Houses and apartments purchased at grossly inflated Celtic tiger prices are now in negative equity and the purchasers are chained to massive mortgages that swallow up their ever decreasing incomes. The consequences for individuals and families are devastating, while the consequences for the wider economy and society are deeply damaging, as disposable income disappears into the black hole of mortgage debt. This is a direct result of the deliberate inflation of the property bubble by previous Governments and the free for all unregulated market in land, property development, construction and loans that prevailed in that era of madness – that is what it was – known as the Celtic tiger. Many were taken in by it, understandably so. For tens of thousands of young people, the opportunity to get on the so-called property ladder had come and they grabbed it with both hands. The regulators who should have protected them were negligent in the extreme, asleep on their watch. Given that background, there is a great moral obligation on the State to move heaven and earth to support those who, through no fault of their own, have been plunged into what I have described as mortgage slavery. Instead of our witnessing its meeting of this obligation, we find half-hearted milk and water measures or no action being taken at all.

The Keane report is a bitter disappointment. Once again, it represents a cringing approach to the banks, a genuflection to the board rooms, yet many of the grossly overpaid culprits are still in positions of power. The report rules out increasing the mortgage supplement and extending mortgage interest relief. A legally empowered debt management agency is also ruled out. There is nothing to protect mortgage holders from ECB interest rate increases. There is little or nothing to protect them, yet the Fine Gael-Labour Party programme for Government claims that on 25 February 2011 "a democratic revolution took place in Ireland". It speaks of new hope and states "a new Government, guided by the needs of the many rather than the greed of the few, can make a real, positive difference in your life." I presume these stirring words were inserted by the Labour Party drafters, but they turn to dust when one sees what precious little hope is offered to those in mortgage slavery.

It is not that there was a lack of positive and constructive proposals from many quarters to address this crisis. The new Government invited such proposals but has, sadly, paid scant attention to them. From the beginning, Sinn Féin has called for thorough and radical measures. This was reaffirmed at our party's Ard-Fheis last month in Belfast, at which we pointed to the rapidly growing number of mortgage holders in distress and the serious impact of mortgage distress on families, local economies and the financial stability of the national economy. We called unanimously for the establishment of independent statutory distressed mortgage resolution processes in both jurisdictions on the island of Ireland, the purpose of which would be: to reach a legally binding resolution of mortgage distress on a case by case basis; to protect the family home through a variety of measures, including loss sharing, shared equity and transferring tenure type to social renting; to enable those unable to remain in the family home to downsize or transfer to more sustainable mortgage arrangements via short sales or property-mortgage swaps; to protect the taxpayer by ensuring mortgage lenders and inter-bank commercial lenders share a portion of the burden involved in the problem of mortgage distress; and to implement the Law Reform Commission's recommendations on the reform of the bankruptcy laws to enable people to make a fresh start if formal bankruptcy is the only way of addressing their mortgage distress. These are real, concrete and far-reaching proposals and to introduce and implement them would require an unprecedented level of political resolve and strong, resolute leadership. Are the Fine Gael and Labour Party Members familiar with these words? They should be because they are the words used in the construction of the programme for Government.

Michael Noonan (Limerick City, Fine Gael)
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That is what the country is getting.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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The Government need not begin by implementing the Sinn Féin proposals but it should implement what it has committed to in the programme for Government, but we are not getting that. I remind the Minister that he has made the following commitments: to increase mortgage interest relief to 30% for first time buyers from 2004 to 2008; to introduce a two-year moratorium on the repossession of modest family homes where a family makes an honest effort to pay the mortgage; to fast-track personal bankruptcy reform; to convert the Money Advice and Budgeting Service to a strengthened personal debt management agency with strong legal powers; and to make greater use of mortgage interest supplement to support families who cannot meet their mortgage payments. This is not what we are getting, but why has no action been taken to implement any of these commitments, to which the Minister is a signatory?

Do the Members opposite realise the scale of the crisis? They must; they cannot be inured from that reality in their respective constituencies.

Michael Noonan (Limerick City, Fine Gael)
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Why does Deputy Ó Caoláin think we are holding this debate?

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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The Financial Regulator figures show that 55,763 mortgages were in arrears for more than 90 days at the end of June this year. Some 69,837 residential mortgages are categorised as restructured, including interest-only payment plans and, of these, 30,442 are also in arrears. Some 95,158 residential mortgages are in arrears of more than 90 days or have been restructured. This represents 12% of residential mortgage holders in some form of mortgage distress. These are serious facts. Rent supplement claims have increased from 63,658 to 96,809 applications. Mortgage interest supplement claims have increased from 5,212 to an incredible 18,564. Almost 100,000 families are on social housing waiting lists, twice the number that were on the lists in 2008, only three years ago.

This is not simply a mortgage crisis; it is a full-blown housing crisis. There is no other way to describe it. I have never stood up and I will not stand up here and use the opportunity to have a go. Were the Government to introduce effective measures to address this crisis and support families and individuals or simply to hold to the measures to which it has committed, it would have my and my party's wholehearted support and acknowledgment but if it fails to do so we will continue to pursue it until it takes the urgent and extensive action which, clearly, is required.

Joanna Tuffy (Dublin Mid West, Labour)
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I wish to share time with Deputy Anne Ferris. I would have preferred more time to read the report. Some material in the report is rather technical and it would be good for Deputies and Senators to receive a presentation by the authors of the report at some stage to outline the various measures. Now that the report is out, anything that is non-contentious and straightforward should be implemented as soon as possible. A strong awareness programme should be arranged. It need not be an expensive public relations campaign but it could use press conferences, leafleting or whatever is available to get the message out about the measures and to let people know that a range of measures are available to help. There is some confusion about whether anything is available to help people in difficulty with their mortgage. There is also confusion about who might need help. It was apparent on the "The Frontline" programme that there is a merging of people who may have speculated on property on the one hand and those who are in negative equity on the other. There should be a strong awareness programme to explain the problems to people and to explain the solutions to address these problems.

Many of the relevant NGOs are well-intentioned but they are also jockeying for position in terms of who has the monopoly of wisdom on the issue. No one has a monopoly of wisdom on what should be done to address the problems. There should be consultation with the groups that have expressed views on the process and which have been critical of the Keane report but none of these groups has a monopoly on wisdom. A great deal of experience is available, including from public representatives who have worked as councillors and know about the availability of schemes such as the shared ownership scheme and whether they worked.

The Keane report stated that mortgage interest relief was a State subsidy to the banks. A reply to a parliamentary question asked of the Minister recently stated that some €77.2 million was allocated to mortgage interest supplement in 2011. That represents one funding stream. Tax relief also applies on mortgage interest and the cost to date in 2011 for that relief is €400 million. These subsidies are in place as well as the bank recapitalisation.

Recently, I asked the Minister about the Bank of Ireland's outsourcing of biometric software development to a company in India called HCL Technologies. The Minister's reply was critical but he suggested there was not much he could do about it and that the banks should be kept at arm's distance from the Government and the Oireachtas. I do not agree. There should be independence in the way the banks operate but there is considerable and ongoing State investment in the banks. If the Bank of Ireland is outsourcing to companies in India, it should be made to invest in companies here in the software development area or to train its staff in software development or, for example, it could get involved in set-up companies in partnership with the universities. Of all the sectors, Ireland has great potential in software development. I realise this is somewhat off-topic but the banks should be made to do certain things having received such an amount of State funding.

One element missing from the report is any mention of a scheme such as the shared ownership scheme and this surprised me. We are all aware that there were problems with the shared ownership scheme but something like it could be developed as part of the solution for those who have problems at the moment. We should return to old-fashioned council housing. On the one hand we appear to suggest to people that they should not expect to buy houses but on the other hand we appear to move away from traditional social housing in our local authorities. This has been a bad move and it has contributed to our property boom and collapse because not enough social housing has been built. In reality, affordable housing was simply a prop for the market. We should return to these things. The Money Advice and Budgeting Service, MABS, has made criticisms and points about the proposals which should be taken on board.

Anne Ferris (Wicklow, Labour)
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I welcome the opportunity to speak on this issue which affects thousands of families throughout the country and in my constituency of Wicklow. The economic crisis which the previous Fianna Fáil Government led this country into was not only a crisis that affected our banking and financial system, but one the effects of which have threatened the homes in which people live. Let us be clear: the home is at the heart of the family. It is where young couples seek to found a family, where children can be raised and where elderly people can retire in later years. The idea that the home could be under threat is a terrifying prospect but one thousands of people face. Something should have been done by the previous Government to address this but it was not. Much like other economic challenges, this challenge has been left to the current Government. We have responded well on this issue.

The Keane report sets out a number of targeted measures which will give options to families who are struggling. In some senses, it throws a lifeline. While a blanket debt write-off will not be introduced given the estimated €14 billion cost of clearing the negative equity in mortgage portfolios, other measures will, I hope, have a direct and meaningful impact on struggling home owners. These measures are set out in a decision tree, albeit one which is not intended to provide an exhaustive list of proposed solutions. The options include a split mortgage, under which a household that is not in a position to meet all the payments owed on a full mortgage could instead repay on a reduced amount and meet the outstanding amount using a pre-agreed formula which would be dependent on a number of factors. Other ideas include mortgage to rent schemes under which the property is acquired from the banks by an approved housing body or through a long-term lease to a local authority. In such circumstances, the State would avoid having to add to a burgeoning social housing list because the housing stock would be purchased with tenants who would be able to remain in their homes.

The reform of personal insolvency legislation must be progressed as quickly as possible. Such legislation will alter the relationship between the mortgager and mortgagee by providing new judicial and non-judicial bankruptcy options. While I am aware the Minister for Justice and Equality is working on the heads of a personal insolvency Bill, the sooner it is introduced the better because it is urgently needed.

The measures outlined in the Keane report are important and necessary. They may not provide a complete solution to the problems facing households but they offer a substantial range of options which should and must be pursued to put a human face on the current financial challenges. Many people bought homes because they believed they would never get on the property ladder otherwise. If they waited any longer, they believed the price of a home in their local community would increase to the point where they would be forced to move away from their community and family support network. They now find themselves in the middle of an economic storm that has left them in financial and emotional shock. The Government must do its level best to help them.

Deputy Wallace correctly noted that the banks must play their part in helping those at whom they threw money, often unwisely, and who are now struggling. I do not share his view that the Government is closer to the banks than citizens. I do not have bankers queuing up weekly outside my clinic for a chat, whereas I have many families visit me who are struggling to pay their debts.

Although times are not easy, we have lived through difficult times before. Many Deputies remember previous bad times which we overcame. We will do so again by showing strength and toughness, two of the defining characteristics of the people of this island. The Government must also display these characteristics in order that we can meet the responsibility bestowed on us by those who voted for us. We must take every possible measure, including implementing the proposals in the Keane report. Deputy Durkan stated that some banks are being helpful. In my experience many of them are not being helpful. I join other Deputies in urging them to do everything possible to help out those who are in crisis.

Clare Daly (Dublin North, Socialist Party)
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It is not a secret that the Keane report has come as a bitter disappointment to the hundreds of thousands of individuals who are being crucified under the burden of mortgage debt. I refer to those who are included in the statistics and others who are juggling expenses and bills as they try to hold their heads above water and ensure their properties do not go into arrears. The first step to be taken in addressing a problem is to quantify its scale and the first flaw in the Keane report is its failure to do so. Unless one understands the scale of a problem, one cannot address it. The Keane report consciously sets out grossly to understate the scale of the mortgage crisis. The figures cited indicate 45,000 households are in arrears of nine months or more. We have also heard that between 7% and 11% of the mortgage book is in trouble. From where do these figures come? They were provided by the banks, the source of many of the problems with which we are grappling and for this reason they cannot be considered reliable.

The sub-prime lenders have generally been excluded from the figures. These are the companies which preyed on the most vulnerable and hard-pressed citizens. In January 2011, for example, Start Mortgages had arrears on approximately 40% of the loans in its mortgage book. This figure is far in excess of the figures cited in the Keane report. The fact that 55,000 households are deemed to hold restructured mortgages is cited as if the problem had been somehow solved. We all know that many of these 55,000 cases amount to little more than dressing up the problem. Applying an interest only arrangement for six months buries the problem and it will re-emerge when the six month period has elapsed.

Our starting point must be to accept that mortgage debt is a massive problem, which extends far beyond 100,000 households. Hundreds of thousands of people are affected even on the basis of this figure. The problem will not be addressed by the measures proposed in the Keane report and the fact that the Irish Banking Federation was the only organisation to welcome it tells its own story. The report is more to do with the interests of the banks than those of homeowners. As others have stated, many of the groups working at the coalface providing assistance to homeowners believe their views and the valid submissions they made to the process have not been taken on board. The report has suffered greatly as a result and is simply not good enough.

Having initially indicated that the Keane report would provide a solution, the Government is now presenting it as some form of discussion document. This issue cannot be allowed to rest as to leave matters as they are would store up massive problems, not only for the individuals affected but for society as a whole. As Deputies are aware, it is difficult for someone who is having mortgage difficulties to acknowledge the problems with which they are grappling because they view them as personal. We must acknowledge that the problem of mortgage debt is one for society. In addition to the consequences this debt has for individuals, failure to address it will hold back the economy for decades in a Japanese type period of stagnation. Ireland is already the most indebted country per capita . A solution to our economic problems will not be found until we address the crippling debt under which people are burdened.

The starting point must be to keep people in their homes. Apart from the obvious benefits to the individuals in question, the economic and social cost of any failure to keep people in their homes would be immense. We cannot have any more cases of banks repossessing family homes and seeking to sell them for a price below what the mortgage holder could have afforded to pay. Homeowners and their families have been moved out of their communities and forced into bankruptcy at a cost to the State of tens of thousands of euro in rent supplement and social welfare payments. Those days must be consigned to the past. People must be allowed to remain in their homes.

As an absolute minimum, we must adopt the idea put forward by a number of groups, including New Beginning, that repayments be based on 35% of net disposable income. This is the only logical and sustainable debt repayment figure. Splitting the mortgage and warehousing a section of it, while an important idea, must not involve interest being applied to the warehoused element. Where else would one be presented with the scenario outlined in the Keane report under which the banks would continue to receive interest on warehoused parts of mortgages and ultimately receive more money for them than they would have received if the original mortgage agreement had remained in place? This is a ludicrous proposal given the background to this issue.

The main question is what will happen to the part of the property which does not relate to its current value. Without a debt write-down, we will not find a way out of the crisis. It is completely wrong to use the term "debt forgiveness" as if homeowners are a type of criminal. The owners of family homes, as opposed to trophy homes, buy-to-let or second, third or fourth properties, are victims of the crisis. The only argument made against the idea of a debt write-down in the current circumstances is that it would cost the banks more money, which is, of course, true. If it does not cost the banks more money it will cost the home owners more money. They do not have it so the banks will not get it in any case. We must start by recognising that reality.

I fully support the need to have a general write-down of all properties in negative equity. People who purchased their homes between 2003 and 2007 paid an uneconomic price in a false market. They were scandalously ripped off because the houses were not worth the prices paid. For those people, their children or their grandchildren, carrying that debt for decades is unsustainable and will cripple this economy into the future. As was noted, the banks have already been given between €10 billion and €14 billion to absorb some of these costs. Twenty-nine billion euro was pumped into Anglo Irish Bank to absorb its problems. We must also look at what was done for NAMA and the big developers here. Billions of euros of loans for private individuals have effectively been parked. Figures were given out showing that 180 individuals had loans of €62 billion. The write-down of those debts has cost the banks - namely, the taxpayer - €36 billion in bank losses. That private debt was transferred to the banks. The very least that home owners deserve is the same treatment. Unlike some of the speculators, who fuelled the economic crisis for which we are all now paying the price, home owners were always only victims in this situation into which they were encouraged and cajoled by banks and the establishment. This is the only way to act and it must be done for all properties, not only those with regard to which people are currently struggling.

The argument has been made that because the taxpayer now owns the banks the debt will be transferred to the taxpayer. However, we already paid that hit and the bondholders should take this one. It should not be transferred to the taxpayer. A key part of the problem for the Government in regard to this report is that it does not recognise reality. The money is lost in any case. These debts are unsustainable and people cannot afford to pay them

Some other aspects of the report need to be addressed and should be referred to, briefly. The report mentions 100 extra advisers who are to enter a new set-up. A point was made by MABS, with which I agree. Why is this new arm not linked to the MABS structure? MABS is clearly under significant pressure and needs extra resources. Crucially, it also needs legislative support to back up the positions it takes. Why is its role as an independent adviser to homeowners not being enhanced rather than have an extra 100 advisers placed under a new guise, umbrella, quango, or whatever? It does not make any sense. We should tap into the expertise already in place. More than anything, this shows the urgent need to bring forward the legislation on personal debt and bankruptcy. There is now a virtual cottage industry of companies that entice people to register in Britain, declaring themselves bankrupt in that country. These companies extort thousands of euros from people for a process that costs £500 for registration. We must address that anomaly and introduce legislation akin to the British system which allows people to start again after a year.

This report cannot be the end of this discussion. It is a completely inadequate answer. In his better moments, the Minister of State, Deputy Penrose, would probably acknowledge this. The real question is the next step in dealing with this issue. The Keane Report is not that.

Willie Penrose (Longford-Westmeath, Labour)
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This is one of the most important debates we will have in this Dáil. Like many of my colleagues, I wish we did not need to have it. I hope for the sake of young couples and families around the country we will need to have it only once.

Almost three years ago, in December 2008, the present Tánaiste, my party leader, Deputy Gilmore, described the mortgage arrears crisis as a ticking time-bomb. The ticking grew steadily louder for many months and it has now exploded. At the time, the previous Government chose to do what it had done for years when anyone raised a concern about the ballooning housing market. It tried to shout him down and deny the existence of a grievous problem. The problem of mortgage arrears is the most painful, most shameful and most acute legacy of the boom years. The time has come when we can no longer keep kicking the problem down the road.

This report contains wide-ranging, meaningful and comprehensive measures but does not purport to be the final word on the problem. The Government is not holding it up as a panacea. The problem is simply too complex, as Deputy Clare Daly noted. We welcome inputs and contributions from elsewhere, whether in this House or beyond. I met the New Beginnings group this week and was keen to examine its proposed solution which is underpinned by key principles that should be explored and evaluated. No solution to the mortgage arrears process should be discounted. Perhaps the most important lesson to be learned from this report is that there is no one solution. It will take a wide range of measures to even begin to resolve this most intractable problem.

We need to be realistic. We should avoid irresponsible claims that there are easy solutions - there are not. For every solution proposed there are consequences - for the Exchequer, the taxpayer and other mortgage holders, for people who decided not to buy a home and for banks which have a significant role to play in resolving this issue. There is a collective responsibility to deal with the problem. We cannot cut loose those whose lives have been devastated by chronic arrears. They cannot be left to sink or swim without assistance. It is right that all of us, as a society, should contribute and it is in our national economic interests that we should do so.

To that end the report sets out a range of recommendations, targeting households with arrears problems of varying degrees. Mercifully, not all households in arrears will be in that position permanently. Many will recover and, in time, will return to paying their way. These households do not need and would not want the State to intervene permanently in their housing circumstances. Forbearance will work for some of these households and although these are worrying times for them many will emerge on the other side given time and proper breathing space.

Others with more pervasive arrears problems will need forbearance and temporary income support from the State through mortgage interest supplement. Demand for this support has, as one would expect, grown very considerably in recent years and has increased more than fourfold since 2007. It will continue to play an important part in supporting people in their efforts to keep the show on the road and remain home owners, although it must be recognised as having limitations. For some householders, being a mortgage holder and a home owner is no longer sustainable. It gives me no pleasure to say that but it is a fact and must be recognised. Only when we recognise this painful fact can we begin properly to plan solutions.

Even in advance of the report, my officials have been working on possible mortgage-to-rent schemes, identifying two variations. These would target householders whose mortgages are unsustainable and who meet social housing eligibility requirements. Under each scheme the household will get to remain in the family home although it will no longer be the owner. Instead, ownership will transfer either to a housing association or to the bank which provided the mortgage originally. Where a housing association becomes the owner it will do so by acquiring the house at market value from the bank after the house has been voluntarily surrendered by the mortgagee. A discount will apply to reflect the benefit to the bank of avoiding legal costs. The acquisition will be financed through a mixture of loan finance, provided by the bank, and from Exchequer funding. The householder will move from being a home-owner to being a social housing tenant, paying a differential rent based on his or her new household circumstances, and the housing association will lease the property to the relevant local authority. Under the bank-owned option, the same voluntary surrender process will take place but this time the bank will acquire the house itself which it will then lease to the relevant local authority on a long-term basis. The household will pay a differential rent as under the first option. These will be extremely helpful measures for many households that are currently facing a very uncertain future.

I want to achieve the maximum impact with these schemes and am already moving to set them up on a pilot basis. The pilot schemes will be based in a single local authority area and will involve one housing association and one bank. The pilot phase needs to be sharp and focused so that any bumps or issues which arise can be quickly ironed out ahead of wider implementation.

The Minister for Social Protection, Deputy Joan Burton, has set out reforms in her area. The establishment of a dedicated mortgage support and advice function will be a critical to households facing one of the most difficult crises they will ever experience. In the midst of the pain and anguish people are enduring, it is impossible to put a price on independent impartial advice to help them consider their options and make the right choice.

Reform of Ireland's archaic legislation is also required to bring about a resolution of the bankruptcy and personal insolvency regime. The dynamic of the relationship between lender and mortgage holder must change if the arrears problem is to be dealt with effectively and compassionately. Not all cases should go through the courts because only lawyers will benefit from this. What is required is a non-judicial settlement option to stand alongside reformed and modernised bankruptcy laws. These legislative interventions must be made either in conjunction with or prior to any ultimate solution in respect of this matter. The entire thrust of policy must be aimed at ensuring that people who find themselves in difficulty will retain a roof over their heads and that the threat of their losing their homes will be removed. People must be allowed to continue to live in some degree of comfort.

I would like to explore, in the context of the mortgage-to-rent schemes, situations to which other Members have referred, even outside the House in the course of private conversations. One Member inquired as to what would happen if a person who is a tenant or who has a long-term leasing arrangement recovered financially after a period of three or four years. We must explore the options available for such individuals. After a certain period, those who are currently social housing tenants acquire tenant purchase rights. We must explore all of these matters and that is why the scheme should be initiated on a pilot basis in order that it might be amended as we proceed. As already stated, we should not be blind to ideas from any side of the House or to those offered by people outside it, such as individuals who have served as local authority representatives for many years. Their wisdom with regard to how we might identify a solution to this massive problem should not be dismissed. Indeed, it should be incorporated within the overall process. I would be keen to examine and evaluate the merits of any proposals aimed at resolving this issue.

We have made clear the importance we attach to dealing with this issue comprehensively and promptly. We have also tried to approach the problem in a responsible and mature way, seeking to avoid raising unrealistic expectations regarding what will and will not be possible. It bears repeating that there are no easy solutions. We are open to all contributions to the debate and will consider all proposals and act on those which have merit and which stand up to scrutiny. This is not a time for anyone to take to the trenches in defence of narrow sectoral or political interests. Neither is it a time to reject solutions because they have not been tried before. We need to be bold and brave. We must examine every option and if it can contribute to solving the problem then we should try it. As stated earlier, these are not times for the faint-hearted. We must be bold, brave, imaginative and creative. However, we must also display compassion and a sense of equity, fairness and balance. In that context, I hope we will not be found wanting.

Stephen Donnelly (Wicklow, Independent)
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Earlier this week I sat down with one of my constituents at her kitchen table to discuss her situation. For the purposes of this example, I will refer to her as Laura. The woman in question is self-employed, has worked for more than 20 years and has paid her taxes. She is a single mother with a daughter in university and, during the boom, she bought a nice semi-detached house in a new estate in Wicklow. Her business clientele comprises mainly young professionals. She was doing fine but, as is the case with many of our constituents, when the recession hit, she was badly affected. In the run-up to the budget of 2010, people became very concerned and stopped spending money. Laura informed me that as this year's general election was approaching, people again stopped spending and, as a result, she fell into arrears for the first time. She said she immediately went to the money advice and budgeting service, MABS, which negotiated a six-month agreement with her bank. She is now back in arrears because the domestic economy remains depressed. People are again not spending money because they are concerned about what the forthcoming budget will contain. Laura is now in negative equity to the tune of between €200,000 to €300,000.

Three days prior to the end of the six-month agreement to which I refer, multiple branches of the bank with which Laura has her business began to telephone her place of work several times each day to inquire what she intended to do to meet her repayments. Before the end of the agreement, one of the bank's debt collectors called to her front door. When she arrived home that day, her daughter handed her a letter from the bank which basically said "We need to talk". It was then that my office first heard from her. I am sure the Minister of State has had experiences similar to mine in this regard. Laura is absolutely distraught, she has not been sleeping and she does not know what she is going to do in respect of her business. She feels humiliated. What really struck a chord with me was when she said she feels violated by what her bank has done. Laura went back to MABS but was informed that it does not have the capacity to help her any further and that she is on her own. She has called in favours with several people and asked them to support her as she attempts to renegotiate with the bank this week.

It is fair to state that every Member of the House wants to solve situations such as that to which I refer. The obvious question that arises relates to why we cannot just write down Laura's mortgage. If she owes €500,000 but can only make repayments in respect of an amount of €300,000, why not just write off the remaining €200,000? If we could afford to do this, it would be a great solution because Laura would be economically productive again, would be able to invest in her daughter's future, would be able to pay the bank as much as possible and would be able to get on with her life.

Two arguments are repeatedly put forward with regard to why we cannot write down mortgages. These have merit but they need to be challenged. The first argument - which I do not accept - relates to moral hazard and is continually put forward in the Keane report. There is a notion abroad that a swathe of mortgage holders are waiting for the opportunity to make gains against the system and obtain write-downs they do not need. There are two aspects to the moral hazard argument. The first of these is that if we write down Laura's debt, she might borrow again, purchase a bigger house and try to get back to the position she previously occupied. The second interpretation is that other people monitoring her situation might decide to work less and reduce their incomes to try to create a false case and obtain a write-down. I do not believe that the first of these aspects of the moral hazard argument is credible. The second is credible but it can be controlled through legislation and by dealing with matters case by case.

The second argument put forward in respect of not allowing mortgage write-downs is that we cannot afford them. The belief is that we own the banks and that, therefore, any surrender by the banks of a call on a loan would essentially mean a hit to the State. In that context, I am obliged to state that we do not own all of the banks. We own one or two banks in full and we own parts of a number of others. However, there are also banks which are extremely active in the Irish mortgage market which we do not own at all.

There is a second aspect to the argument which states that we cannot afford write-downs, namely, what will happen if we do not proceed with them? I return to the case of Laura. If she cannot obtain a write-down, she will find herself involved in bankruptcy proceedings, the bank will inevitably seek to repossess her house and the State will be obliged to rehouse her. She may not work again and may not be in a position to invest in her daughter's future. As a result, there is an immediate cash cost and a longer-term social cost to not allowing write-downs.

What we were all seeking from the Keane report was suggestions with regard to how Laura, and the tens or hundreds of thousands of others who are in similar situations, might be provided with assistance. In referring to the report, the Minister of State, Deputy Penrose, used the phrase "wide-ranging, meaningful and comprehensive". While there are parts of the report with which I am in absolute agreement, especially the emphasis placed on reforming the bankruptcy regime, I do not believe that it is, in its entirety, wide-ranging, meaningful or comprehensive. None of the solutions offered in the report supports the principle of real burden sharing. The split mortgage and mortgage-to-rent models protect, in so far as is possible, the value of mortgages for the banks. They do not offer solutions for those who purchased houses for €500,000 but which are now valued at €300,000. These people are in a situation which is unsustainable. The banks will inform those to whom I refer that they should not have borrowed the money and that it should not have been given to them in the first instance. The banks may have given a 100% mortgage or six, seven or eight times a person's income for a mortgage. The banks were the experts and knew the property market was overheated and inevitably property prices would come down, so they are also at fault and should share the cost. There is nothing in the Keane report to suggest that will happen.

The Oireachtas Joint Committee on Finance, Public Expenditure and Reform met representatives of New Beginning, the money advice and budgeting service, MABS, the Citizens Information Board and Mr. Keane. I was impressed with Mr. Keane's presentation but it is fair to say that the burden sharing he referred to is the same type of burden sharing that the people from the banks referred to when they were before the committee. Essentially, the banks would make a provision on their balance sheet because they did not believe they would get everything back from debtors but that would not be passed to the people.

The numbers are important in this regard. After asking the question several times of the people from AIB and Bank of Ireland in the finance committee, two important figures emerged. For AIB, the total value of loans to which it surrendered any legal claim was €600,000. We have given AIB approximately €3 billion to deal with distressed mortgages and the bank has made a provision for approximately €836 million. It has passed on €600,000 of that. Representatives of Bank of Ireland were asked the question approximately six times at the committee and it took an intervention from the Chairman to force them to answer. When we found out the answer, we were not surprised as the figure was zero, or not a single penny. The mindset of the banks is clear: they will make provisions on their own balance because it is prudent accounting but they will go after debtors for everything they can get. The banks do not accept responsibility and although they accept they must deal with the financial consequences, they do not accept any moral responsibility or burden sharing. That is where the Keane report falls down.

I was going to spend most of my time addressing the shortcomings of the report but I am happy that there seems to be a growing consensus in the Houses that although the Keane report has some useful ideas, it is far from enough. I hope my perception is correct. Rather than spend my time addressing the shortcomings of the Keane report, which have been laid out very well by Members in the House, I offer ideas, some of which I submitted for consideration in the formulation of the Keane report.

The first is a debt for equity swap which is critically based on the purchase price of the property. If a house, for example, cost €600,000 and is worth €400,000 now, a debt for equity swap would lead to the bank writing down the mortgage by €200,000, and for that it gets €200,000 off the purchase price, or a third of the house. Working this process benefits the bank because the mortgage becomes sustainable for the mortgage holder, as it can be paid down, and the bank would take a relatively small hit. The mortgage holder would be kept in the house and although he or she would still be in negative equity, the mortgage would be sustainable and could be paid off. I submit that proposal for consideration.

A second idea is not mine but comes from a Government party Member, although I will not say who because I am not sure if he has announced it. We should find a mechanism to treat the negative equity portion of a mortgage as a pension contribution. In effect, it is a negative contribution and until the negative equity is paid off, a person cannot start saving for a pension. By treating it as a pension contribution, it becomes tax deductible.

I will submit more ideas to the Minister. Payments should be set at 30% to 35% of what a household can achieve and bankruptcy laws should be implemented very quickly. There is an interesting mechanism used in the US where the banks are given tax credits for write-downs. An idea was mentioned by Ross Maguire at the finance committee yesterday that could be implemented immediately. We could quickly pass legislation giving the courts discretion in cases where the banks have taken mortgage holders to court. Currently, the banks want to but are not able to apply discretion and we could bring in a law to allow them do so very quickly. I would like the Minister to consider setting up a cross-party working group to pull in elements of the Keane report and what we have heard in the finance committee and in the Dáil before formulating proposals.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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We are almost at the time allocated for questions to the Minister. There are a couple of speakers offering, Deputies Kyne, Fitzpatrick and Ó Snodaigh, and they will have to wait until the next time when they will be the first speakers. However, I offer them the opportunity now to ask questions first. As they do not wish to avail of the opportunity, we will proceed with questions to the Minister, the first being from Deputy Tóibín.

Peadar Tóibín (Meath West, Sinn Fein)
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The Keane report has been described as minimalist in its approach to the growing crisis. Sinn Féin's view is that it will provide little meaningful assistance to the hundreds of thousands of families currently unable to pay their mortgages. It is difficult to believe that the report does not even consider, let alone advocate, targeted debt restructuring in which mortgage write-downs would be exchanged for an equity share of the property. Given the level of recapitalisation in the banks recently, it is clear they have a capacity to absorb a portion of losses arising from the mortgage crisis. This point was accepted by the Central Bank Governor, Mr. Honohan, during an Oireachtas finance committee meeting. Will the Minister explain why this option was not even considered and what the Government's objections are to a targeted use of instruments like a debt for equity swap to enable people to remain in the family home?

Michael Noonan (Limerick City, Fine Gael)
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I thank everyone for their contributions to the debate. The Keane committee did a great deal and worked through the holiday period to meet very tight deadlines set down by the economic management committee of the Cabinet. I thank the Keane committee members for their hard work in producing the report. It is not a minimalist report and there are very good ideas in it. The committee was asked to address the problem and those involved were independent in the exercise of their powers of analysis and in reporting. Some of what is contained in the report does not particularly suit the Government, advising in one case against an element in the programme for Government, as many Members have pointed out.

The report is independent and has been published for consideration. As I originally promised, we brought it into the House as quickly as possible so that everyone could share the findings. In parallel, outside groups with a contribution to make to the debate were invited before the finance committee. We will examine the contributions made by outside groups and, by combing the record, take careful note of any proposals for solutions.

I am not ruling out debt for equity but there is a problem with facile solutions, although I am not saying it is facile. We will study the process. One of the models in the report, for example, mentions a need for further analysis in the context of the solutions around the warehoused part of the split mortgage. If a mortgage is being split, and the report indicates further analysis should be done, this is a pointer that considerations for equity for the part not being dealt with could be valid. We must analyse such matters before returning to the House and announcing Government intentions.

We must always remember that there is no borrower without a lender and no debt without a creditor. We have capitalised and have the majority share in most of the banks, which is relevant to mortgages. It is true to say that we have 98% of AIB and 15% of Bank of Ireland, along with many preference shares and much money lost by the previous Government in there as well. There are real lending agencies that underpin the housing market, such as the building societies.

Irish Nationwide, EBS and Permanent TSB are all either out of business or impaired in one way or another and have had to be recapitalised. The three big mortgage names among the building societies are either out of business, like Irish Nationwide, or in State hands. If one decides to write off debt, a lot of the time one is transferring it from the mortgage holder to the taxpayer because at the end of the day, that is what happens.

Deputy Boyd Barrett made a great plea and challenged the Central Bank's figures. He said the cost of impaired mortgages is not €14 billion, that when one examines the figures one can reduce them to €8.5 billion. Let us consider €8.5 billion for a Deputy who cannot take the pressure of budgetary adjustments of about half that size. Where are we going to get the money? If we impose that on the banks the taxpayer must immediately put further capital into the banks. It is not an easy solution.

I am very interested in the opinion of Deputies because the one thing about them is that they are meeting people all the time who have difficulty. They understand individual cases and, frequently, the nuances of those cases. There are other theoretical commentators who do not understand what they are talking about a lot of the time. They are very good on the theory but they are not very good on the practical examples.

One could ask where we are to go from here. The Minister for Justice and Equality is working on the insolvency legislation. We have accepted that the Fianna Fáil-sponsored Bill on insolvency which is based on the recommendations of the Law Reform Commission will move on to Committee Stage. Independently, the Minister is bringing forward his own insolvency legislation. He is not delaying on it. He nearly has the heads of the Bill ready. We are within weeks of them being ready and being able to move on to the drafting stage.

Much focus has been placed on people continuing to live in their own homes and their status changing from owner-occupiers to tenants of a local authority or housing agency. That is the back-stop. That is the last case scenario. Mr. Keane recommends a range of interventions in between where people will continue to own their house. Various arrangements will be made with them through the banks. There is no one solution but there are a number of things in the report that provide solutions for individual cases. If Members wish to add to those solutions, I make the commitment that we will take the proposals, analyse them and see whether they fit. When we come back in a couple of weeks we will put a portfolio of possible solutions for individual cases with impaired mortgages. We all know the scale of the problem and we all know the need for solutions. Many of the problems are not easily addressed but we will do our best.

Peadar Tóibín (Meath West, Sinn Fein)
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Governor Honohan said there was capacity to deal with a debt for equity swap within the system. My question was what the Minister's objections are to that. A criticism of the Keane report is that its approach is to just leave it to the banks. FLAC has said there is an unwillingness within the Government to impose solutions on the banks. Considering the failure of lenders to respond adequately so far, what makes the Minister think that things are going to change in that regard? Does it mean that the Government has abandoned the programme for Government initiatives that were discussed earlier?

Michael Noonan (Limerick City, Fine Gael)
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The Deputy's question was whether I would consider debt for equity. I am saying that Mr. Keane has allowed for a consideration of debt for equity in the residual portion of the warehoused mortgage if a split mortgage is the solution. However, we must do further analysis and consideration of that approach. The difficulty with equity stakes is that much of the time there is no equity.

Bernard Durkan (Kildare North, Fine Gael)
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That is correct.

Michael Noonan (Limerick City, Fine Gael)
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That is the problem. If one has a situation where a mortgage is impaired and if it has also gone into negative equity and the bank is holding the deeds against the full mortgage, any swapping around with equity is the bank subdividing its own collateral. The problem is that a lot of the time there is no equity to play with, but sometimes there is, and what I am saying is that there are a range of possible solutions. Where we think the debt for equity solution fits in is if the initial decision is to do a split mortgage which then raises the question of how to deal with the bit of the mortgage that is warehoused. Rather than accumulating compound interest, as Deputy Durkan said, there may be a solution in having an equity basis for that. I am not rejecting Deputy Tóibín's idea. I am just saying we will explore it and see whether we can work through it.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I thank the Minister for being present and responding to the questions. I acknowledge that the Government has agreed to accept the Second Reading of the Private Member's Bill yesterday. The public would like to see the House working collectively rather than points-scoring in a partisan fashion.

Does the Minister not accept that one cannot just deal with mortgage debt on its own? Anyone with a mortgage debt will also have many other debts. The report is an important input into the debate but it is only an input. I accept the Minister is open to other proposals. Personal debt must be taken into account.

There is a big emphasis in the report, because it is in the terms of reference, on mortgage interest relief. Approximately 18,000 people benefit from mortgage interest relief but there are probably 60,000 or 70,000 people on rent supplement issued through social welfare payments, the local authorities and the HSE. That is part of the funding the Exchequer is providing towards housing. That was not dealt with in the report but it is part of the mix. It does not relate to people with mortgages but it is part of the mix of funding the State provides.

Will the Minister indicate how he sees the approximately €5 billion, which has been provided for the banks to allow for mortgages that will be in difficulty over the next ten years, trickling down to individual customers? It is fine for them to have a general figure but it must be made specific to individual customers somewhere along the line.

Does the Minister consider that there needs to be an intermediary between the bank and individuals because the relationship between them is unequal? People need an intermediary to help them.

People were often shocked to hear about 100% mortgages. The Minister and I are aware from our constituency clinics that banks were giving out 130% mortgages. They gave out the full value of the house, the cost of furnishing it and the cost of the wedding and honeymoon.

Bernard Durkan (Kildare North, Fine Gael)
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That is right. We know.

Seán Fleming (Laois-Offaly, Fianna Fail)
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It is a fact. I have seen it in my constituency. I asked how people got their mortgage. People took out a 35 year mortgage on a wedding but some of the marriages might not have lasted 35 months.

Peter Mathews (Dublin South, Fine Gael)
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We are laughing at the absurdity of it.

Seán Fleming (Laois-Offaly, Fianna Fail)
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That happened. I want people to know. People got credit cards and other bills added together. The situation is that clearly there was irresponsible lending by the banks. I am only talking on a case-by-case basis. I know one cannot generalise. I refer to cases where banks gave out loans they should not have given out based on projected incomes that were never going to materialise. They calculated that each young person to whom they gave a loan would take in three tenants at €10,000 a year each and they factored in a make-believe extra income of €30,000. That is what happened in the banks.

Peter Mathews (Dublin South, Fine Gael)
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Deputy Fleming is correct. The evidence is on the files.

Seán Fleming (Laois-Offaly, Fianna Fail)
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In those cases the banks should be made to pay a heavier contribution to resolving the problem because the loans are unsustainable. I do not blame the young 20 year olds who out such loans. When one is dealing with a big financial institution that is in business for donkey's years, one expects it to know that end of the business. The banks in those cases should pay a heavier contribution to resolving such debts.

Michael Noonan (Limerick City, Fine Gael)
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One of the ironies is that in trying to punish a bank that has been totally recapitalised by the taxpayer, one ends up punishing oneself and all one's tax-paying colleagues. Not everything can be done.

The mortgage interest supplement is a very good scheme that is keeping many people out of major difficulties, but it was designed as temporary assistance for people in temporary difficulty. What we must do is move from a temporary situation to a permanent solution for people who are not in temporary difficulty and where it is clear that they will be in difficulty for years. That is why we have the alternatives as the final back-stop where a person on mortgage interest supplement is getting a lot of money from the State already. In future, an arrangement will be entered into between the local authority and the lender and it will become a social house. The person who is the mortgage holder will have a change of status from owner-occupier to tenant but will remain in the house. That has obvious social benefits. Someone asked who will decide the rent. The rent regime will be the same as that which applies to social housing. It will be no different from how rent is decided for other local authority tenants. In regard to whether an individual will ever get an opportunity to buy back his or her house, a buy-back arrangement from the original lender is not envisaged but he or she will benefit from the normal house purchase schemes applying to local authorities. Those of us who are familiar with such schemes will agree they are more beneficial than any arrangement that might be made with a lender. Many people thought our only aim was to turn owners into tenants. That will only be done in a worst case scenario.

The Deputy is correct about taking into account the entire quantum of debt because, in addition to mortgages, people can also have credit card debts, short-term credit and credit union loans. If the arrangement with the local authority is the end of a long line of options, the first option is solvency legislation. The solvency and bankruptcy legislation will provide for managing the entirety of an individual's debt. Prior to someone becoming bankrupt or insolvent, the entire quantum of debt will have to be taken into account.

Some people dismissed the Keane report without reading it. That is normal among outside commentators, although not among the Members of this House. If we can put in place the various recommendations of the report and add on to them some of the ideas that Deputies and other agencies have suggested, we will go a distance towards a perfect solution.

The prudential capital assessment review, which formed part of the Central Bank's financial measures programme, provides for an annual stress test of the capital resources of the domestic banks under a given stress scenario. The loan loss exercise in the financial measures programme, which includes estimated losses on residential mortgages, assesses the loan losses banks might experience under the base and adverse stress scenario over a three-year period and a loan lifetime horizon. The Central Bank's three-year projected base loss for the Irish residential mortgage loan book is estimated at €5.8 billion, while the adverse scenario is in excess of €9 billion. Under the PCAR requirement, the banks will be capitalised to meet the Central Bank's projected three-year stress losses. In regard to how bank recapitalisation trickles down to dealing with impaired mortgages, the banks will negotiate case by case. As the expected losses under stress are reflected in the overall figures, provision is made for writing down debts but this will be done according to the features of individual cases.

The Deputy asked me another question which I have not yet answered.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I asked about intermediaries between banks and borrowers.

Michael Noonan (Limerick City, Fine Gael)
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The Keane report proposes to deploy 100 experts.

Seán Fleming (Laois-Offaly, Fianna Fail)
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Will they be bankers?

Michael Noonan (Limerick City, Fine Gael)
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They will probably be accountants or people who understand the mortgage business. They will address the inequality in the relationship. In other words, a couple may have considered it a good idea to take out a 100% mortgage to purchase a house because the alternative was social housing.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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What social housing?

Michael Noonan (Limerick City, Fine Gael)
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I do not think the Deputy knows any poor people. I do not think he has met a poor person in the past six months.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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You must be joking.

Michael Noonan (Limerick City, Fine Gael)
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Most of the time he has no idea what the real world is like. He is all theory. He should speak to his colleagues who run clinics every week and understand these matters.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I run clinics every week.

Michael Noonan (Limerick City, Fine Gael)
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That is the idea.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Minister is welcome to visit my next clinic on Monday.

Bernard Durkan (Kildare North, Fine Gael)
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I would be worried about the outcome.

Catherine Byrne (Dublin South Central, Fine Gael)
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He will probably be waiting outside with a band.

Michael Noonan (Limerick City, Fine Gael)
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I would never find my way around the gold coast. I have not been there for a long time.

I do not yet know what we will do in terms of developing a legal base for these intermediaries but I will take advice on the matter. The intention is that 100 individuals with expertise would act as interlocutors for people with impaired mortgages to equalise the relationship. They would carry out the negotiations. I am open to the question of whether we will attach them to the money advice and budgeting service, MABS, or deploy them in some other way.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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For the Minister's information, I run a clinic every week and I am opening an office on the main street in Dún Laoghaire.

Bernard Durkan (Kildare North, Fine Gael)
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Can we all go down?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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None of the Fine Gael Deputies in our area runs clinics, however. They do not have to deal with people coming in to them.

Does the Minister agree that the Keane report got it badly wrong given that it fails to utter one word of criticism of the bankers for their role in this crisis? Given that its guiding principles do not say anything about the culpability of bankers, developers or Fianna Fáil politicians, it is starting from the wrong point. Is it not outrageous that the report states there should be no entitlement to particular solutions, that it is inevitable that some will lose their homes and that people should keep their homes "where appropriate"? The latter statement implies there are times when it is appropriate that a person should not keep his or home and that one of the problems we have to address is inappropriate mortgage holder behaviour. The entire emphasis of the guiding principles is on the so-called irresponsible mortgage holder. Does the Minister agree that is a disgraceful starting point for a report?

In setting up the terms of reference for the working group, was it not wrong to exclude MABS, FLAC, the Northside Community Law Centre, New Beginning, the Society of St. Vincent de Paul and all the other groups which deal daily with the victims of the mortgage crisis?

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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Has the Deputy a question?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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In directing the debate in the coming days, will the Minister state that the majority of people with distressed mortgages are victims of a problem that was created by bankers? They do not have an obligation to pay back inflated debts which resulted from the gross distortion of the property market by bankers' reckless lending and developers' irresponsible behaviour. Does he agree that is the correct starting point? Will he state that the burden which built up during the property bubble should be removed from the backs of people who bear no responsibility for their unsustainable debt burdens?

The Minister claims we cannot afford to write down negative equity and unsustainable debt and that it is theoretical to suggest otherwise.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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The Deputy should conclude.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I am nearly finished. How is it that €24 billion was put into the banks to guard against the worst case scenarios, including €8 billion for negative equity and unsustainable debt?

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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I ask the Minister to reply.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have to finish the question.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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The Deputy asked several questions.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It will not cost the public or the taxpayer any more to write down the negative equity. The banks will face the cost but that is why the money was given to them. Unless we take that course of action we will cripple our economy when it suffers the real cost of hundreds of thousands of families saddled with debts they cannot pay.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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It is not a Second Stage speech. The Deputy should ask questions.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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All of them were questions.

Michael Noonan (Limerick City, Fine Gael)
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We have had three inquiries into the banking system. They have been debated in the House. If the referendum arising from the Abbeylara judgment goes through next week, it looks as if we will have another in-house inquiry into the banking system. When the economic council of the Government set up the Keane group, it wanted a report to be prepared very quickly. We were responding to many questions and many debates which stressed the urgency of taking action. It was not set up to have another round of the blame game.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Why were the mortgage holders blamed then?

Michael Noonan (Limerick City, Fine Gael)
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We know what happened. There are three reports on it. We do not have to remember it for the future. We do not have to keep flogging it all the time. It is much more important to move on a blueprint to help people with impaired mortgages, rather than having another shouting match about it.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Government needs to get a move on.

Michael Noonan (Limerick City, Fine Gael)
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I asked the Keane group to report by the end of September. It did that. It did not involve outside bodies because I wanted an initial blueprint to put before the House so we would have some kind of framework for action. It is not true to say the group ignored the banks, or took the side of the banks. Like much of the language of the public service, the group's language is unemotional. If one examines the report closely, one will see it is not in favour of the bankers. In effect, the group's proposals change the balance between mortgage holders and bankers. That is an essential piece of placement that has to be done at the start. The report recommends a fundamental reform of the relationship between the lender and the borrower. That is the key concept that is underpinning the proposals. Many of the changes suggested in the report will place additional constraints on the institutions. The institutions will not like the proposed bankruptcy reform, for example. Do Deputies think the institutions want people to be able to work their way out of bankruptcy in three years?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I welcome that.

Michael Noonan (Limerick City, Fine Gael)
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Do Deputies think the institutions are pleased about the possibility that people with incomes will be able to move towards bankruptcy as a means of resolving their problems with impaired assets? Of course they are not.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Should they have to plead in front of a judge for leniency in respect of debts that were forced on them?

Michael Noonan (Limerick City, Fine Gael)
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Under the mortgage-to-rent scheme, the bank will have to retain property and lease and manage it. They will not welcome that. Does the Deputy think the banks want to release property to local authorities while maintaining ownership of it? Rather than the banks collecting mortgage repayments, the local authorities will be collecting rent. When one examines the individual proposals, one sees the banks are not getting a free run here. The split mortgage system, for example, will mean the banks have to amend the mortgage repayment schedules of a number of their customers. They will have to agree to new arrangements. As a result of the independent mortgage function, the cost of which the banks will have to meet, they will have to contend with more informed distressed clients. I made a point to Deputy Seán Fleming about getting 100 people with experience to represent people with impaired mortgages. When one goes through the report, one will see the recommendation that the banks, rather than the taxpayer, should be levied for the cost of this new service. Does the House think the banks are welcoming that? Of course they are not. The process is governed by the protections included in the mortgage arrears resolution process, which is overseen by the Central Bank. The mortgage arrears procedures are laid down by the Central Bank. I would like to kill another criticism by pointing out that the mortgage arrears procedures set down and applied by the Central Bank apply to foreign banks as well as domestic banks.

Bernard Durkan (Kildare North, Fine Gael)
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Yes.

Michael Noonan (Limerick City, Fine Gael)
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It is not true to suggest that foreign banks which offered mortgages here are totally outside the scope of these recommendations. They are not.

Bernard Durkan (Kildare North, Fine Gael)
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Correct.

Michael Noonan (Limerick City, Fine Gael)
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It comes together with the Central Bank's procedures. There is a pretty strong policy unit in the Department of Finance. We brought in the expertise that was in the National Treasury Management Agency. There is a banking policy unit there now. We are going to drive these recommendations. I am not saying these are the only recommendations we are going to drive. Mr. Keane did a very good job in an unemotional way. His group produced a series of workable proposals. If we can get them moving forward, they will help many people. It is not a complete answer. If any of the Deputies opposite can come up with solutions that I can add onto this list, I will take them on board. We will analyse them. If they are workable, we will add them on. We will put them into the portfolio.

We are not in the business of coming in here just for the sake of talking about it. This has to move forward. This has to move to interventions very quickly. We already have a commitment from the Minister for Justice and Equality, who has been told to prioritise the insolvency and bankruptcy legislation. He is doing that. He is far up the road with it. The Minister of State, Deputy Penrose, is already designing two pilot schemes on local authority involvement and housing agency involvement. The Department of Finance has been instructed to engage with the banks immediately to make preparations for them to use the portfolio policy instruments when they are resolving mortgage situations. There are other things we have to do. I have not yet figured out how we will recruit 100 experts, how they will fit in and how they will relate to the Money Advice and Budgeting Service. The concept is very clear. When we move it along, move out of the debate and consider the outside representations that have been made, we will put an implementation group in place and go forward with it. This is practical stuff. This is not theory. We have to move on it. All Deputies know the difficulties families are facing, so we have to move on it.

Terence Flanagan (Dublin North East, Fine Gael)
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In July 2011, the High Court issued a judgment to the effect that banks could not repossess any more properties. Obviously, it is not good for borrowers when the interest on their borrowings is continuing to increase, and the banks suffer when it comes to funding costs because the mortgages are not secured. I know the issue relates to the Department of Justice and Equality. If the Minister has some information on it, perhaps he can give it in his response. The Keane report does not relate to buy-to-let mortgages. Will there be a second Keane report to deal with that? We are four years down the road. This country has been in recession for some time. The real economy is suffering. Decisions on arrears are made by bankers. I hope this report offers some hope to struggling home owners. It is imperative that we see action from the banks in relation to sorting out the situations of home owners who find themselves in arrears.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy's first question related to a court judgment under the Land and Conveyancing Law Reform Act 2009. The Department of Justice and Equality is assessing the implications of the judgment. They will introduce proposals in the context of its package of legislation on insolvency and bankruptcy. There is no commitment or intention to have a second Keane report that would consider the rental end of the market. There are problems in that regard. Buying to rent is a business. It is not the same as someone buying a family home that he or she could lose. From what I see around Dublin, rents have not decreased very much so far.

Finian McGrath (Dublin North Central, Independent)
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Hear, hear.

Michael Noonan (Limerick City, Fine Gael)
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Certainly, I do not see any particular reduction in rents within a couple of miles of this place. The buy-to-rent market in certain parts of the country has gone very well. There are problems with the buy-to-rent market to the extent that some of the development was driven by tax breaks. The main prop when some blocks of apartments were being developed was a tax break. They were not really run on business grounds at all. There are difficulties in that regard. If people are in the business of risk, I do not think the taxpayer has to go in on every occasion to bail them out if the risk goes wrong.

Stephen Donnelly (Wicklow, Independent)
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The Minister should say that to the bondholders.

Michael Noonan (Limerick City, Fine Gael)
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There is a very clear distinction between owner-occupiers and people who developed property for rental purposes.

Finian McGrath (Dublin North Central, Independent)
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Money talks.

Stephen Donnelly (Wicklow, Independent)
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Investors should not be bailed out unless they are big and powerful, in which case they should be bailed out totally.

Bernard Durkan (Kildare North, Fine Gael)
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That is an interesting idea.

Joanna Tuffy (Dublin Mid West, Labour)
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The Minister referred to the 100 new experts and how they would relate to and consult MABS which I know has issues with the proposals made. I note, for example, that there is no MABS office in Lucan and that its offices tend to be in locations chosen in line with the Celtic tiger economy. There are no offices in many towns and villages in which many people have recently lost jobs or got into difficulty. Therefore, changes are needed in this regard.

The Minister of State, Deputy Penrose, stated that under the mortgage to rent schemes, a property would be bought at the market value with a discount. Will the discount reflect the subsidy the banks have received, including for recapitalisation, which allowed for a debt write-off?

I made the point earlier that there did not appear to be any scheme similar to the shared ownership scheme. I would have thought this would be one of the solutions, given that not everybody is in a situation where they will give up his or her home. Some will get back on track and own their home in the long term. I accept that there were problems with the shared ownership scheme. Deputy Clare Daly has mentioned that if people were given two distinct payments such as rent and interest payments under the shared ownership scheme, the amount they had to pay was prohibitive, with the result that many got out of the scheme as quickly as possible. It is very important that the schemes put in place do not leave participants with unsustainable repayments if they have to pay rent and also keep a certain amount of equity in the property.

These are the questions I would like to have answered. Does the Minister have proposals in regard to shared ownership? Will the discounts take into account what the banks have received in regard to recapitalisation? Will there be consultation with MABS and changes to the spread of offices?

Michael Noonan (Limerick City, Fine Gael)
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I will deal with the questions in reverse order. The shared ownership scheme involved a type of split mortgage, with the local authority taking an equity share. It is not a million miles from the solutions we are proposing. An examination of that model might offer a way of structuring the split mortgage subsequently.

The Deputy referred to the Minister of State, Deputy Penrose. The reason he is proceeding by putting pilot schemes in place is to work out the detail. We can see many difficulties would arise, but we will probably find solutions by trying out practical examples and testing them in practice rather than in theory. We hope many of the difficulties indicated by the Deputy will be resolved as the Minister of State moves through a tranche of homes with owners on a pilot basis before schemes are firmed up.

On the absence of MABS offices, I do not think we will attach the experts or interlocutors acting on behalf of householders to MABS offices. There might perhaps be an arrangement where cases may be referred by a MABS office to certain individuals in certain areas who will do the negotiations with the lending agency on behalf of the householder. While I am not sure how we will structure it legally - we are trying to figure this out - it does not seem to be an insurmountable obstacle. One would not need a lot of face-to-face connections, as much of the process will be based on documentation. If there is somebody with experience in accountancy who understands the mortgage business and receives the file, it should be possible to negotiate on the basis of what is in the file having met the householder for a short interview. It will be something along these lines, but the Deputy should not tie me to what I am saying. I am exploring the issue by having a conversation with her. We will work through it to see what comes out of it. However, we are not going to keep talking about it; rather, we are going to do it. We will test it to see if it will work.

Catherine Murphy (Kildare North, Independent)
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This report is from the interdepartmental mortgage arrears working group. One would have expected to see Departments represented on the group. However, the list includes the AIB, the EBS and the Central Bank, which are not Departments.

Michael Noonan (Limerick City, Fine Gael)
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Sorry, I did not hear what the Deputy said.

Catherine Murphy (Kildare North, Independent)
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We are talking about the interdepartmental mortgage arrears working group. Therefore, one would have expected to see Departments represented on it, but the AIB, the EBS and the Central Bank were all included. Essentially, this skewed it in a particular direction. It should have involved Departments plus the banks and the people who are the victims in all of this. Does the Minister agree that the report is much less satisfactory as a consequence of not having that balance and not including organisations such as MABS and New Beginnings?

I am confused about what the Minister intends to do with the interlocutors. Timing appears to be very important in terms of when, for example, the new bankruptcy or insolvency laws will be introduced. The report states on page 17:

The State currently has no infrastructure or resources in place to run a non-judicial debt settlement process. This is likely to be very complex and take time to implement.

Is it intended to put in place such a system? I am not at all clear on what is intended. It is one thing to think about solutions and another to think about how they will be practically implemented. In the absence of having a mechanism in place, is this issue being worked on? If so, will it require legislation? Are there practical arrangements in hiring people? Are there institutional arrangements that need to be made? This raises questions, but it does not give us a very good insight into possible solutions because, without such a mechanism, I cannot see how whatever solutions are arrived at can be rolled out in a way that would give certainty. That is the primary issue I would like to have addressed.

Michael Noonan (Limerick City, Fine Gael)
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The composition of the group represented a pragmatic arrangement. Mr. Keane has been seconded from KPMG to the Department of Finance for some time. He is primarily an accountant with necessary expertise. Therefore, we put him in as leader of the group. There were officials from the Department of the Environment, Community and Local Government because they had expertise and responsibility for housing provision, in particular social housing. There were officials from the Department of Social Protection as they had connections with mortgage interest supplement and so on and realised the difficulties families got into. Their expertise was valuable. The Department of Justice and Equality has officials working on insolvency and bankruptcy legislation. The Department of Public Expenditure and Reform was involved because all of this had cost implications and it was represented to monitor them.

As a previous speaker rightly said, this was a group of public servants and, while they had their own mortgages, they did not deal with impaired mortgages in their working day. Therefore, it was very important that we accessed individuals who dealt with mortgages, including the issues of the granting of mortgages and impaired mortgages. Allied Irish Banks and the EBS are now in the one group, of which the State owns between 98% and 99%. We got two individuals in from the mortgage department because we needed particular expertise in order that that theory could be tested against the practice. It was not that they were given an inside track, it was just that we needed their expertise and Mr. Keane needed their expertise when he was drawing up the report.

To revert to Deputy Tuffy's question, which the Deputy has repeated in a different way, the Keane report suggests in respect of advisers that they "should operate in 3 to 4 regional clusters in order to ensure that expertise and knowledge is captured and shared". The report also recommends the linking of such clusters to MABS offices. It suggests:

The clusters could be legally part of MABS but would not have to be. However it would be important that there is a link to the MABS network to ensure that mortgage holders know how to access the advice.

Strict operating protocols would need to be enforced between MABS and these mortgage support clusters.

It would be envisaged that the need for this function would be [limited in] time [to] perhaps 3 years.

In respect of its scale, the report goes on to state:

It is very difficult to determine the number of people that will need this support.

Given that mortgage lenders estimate that they collectively require over 600 people in their Arrears Support Units it would be safe to assume that over 100 independent advisors would be needed in the first instance. However it would be quite likely that [the] number [would] increase in time.

Moreover, "The skills required would include financial, accounting and legal", and with regard to the funding of the group, Keane recommended the "funding for this function should be provided by mortgage lenders".

In other words, it is not just a suggestion but is fairly well fleshed out or filled out in the report itself. My point is I do not regard anything Mr. Keane recommends as being the final say on the issue. I want to hear what Deputies and outside groups think, after which I will bring proposals for the Government as well as an implementation mechanism to get this in place as quickly as possible.

Michael Kitt (Galway East, Fianna Fail)
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I must now interrupt the Minister, although statements on this matter have not been concluded. As it is now 3.42 p.m., we must move to Topical Issues. I do not have to hand the schedule for next week but I understand the House will return to this issue and I will have a list of those Deputies who wish to contribute.