Dáil debates

Tuesday, 22 May 2012

3:00 pm

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Despite many promises and commitments to the contrary, the Government has failed abysmally to deal with the mortgage crisis effectively. There has been a clear lack of urgency, a lack of any commitment to radical action and, indeed, the Government's whole behaviour and response to the mortgage arrears crisis has been one of chronic inactivity. Mr. Matthew Elderfield is clearly becoming very frustrated with the banks. He has said that the scale of the problem has overwhelmed the banks and he is extremely concerned about systems and the absence of expertise within the banks to deal with the issue. Despite the Government's commitments and promises, there are now over 75,000 homeowners unable to pay their mortgage after 90 days, which is 10.5% of homeowners in Ireland. The comparable figure across the United Kingdom is 2.5%.

Clearly, this has been allowed to drag on for far too long. While the mortgage crisis obviously has a very severe impact on the individuals and families concerned, it has a further impact on the wider economy in terms of jobs and a very debilitating impact on economic activity and any sense of dynamic whatsoever. The lack of transactions in the mortgage market is having a massively negative impact.

There is the issue in regard to those in arrears. The other side of the coin, of course, is that there are people out there who can actually afford to buy houses and who have good credit histories but, again, they are not being facilitated by the banks to buy homes and thereby create significant activity within the market and have a wider impact on the economy. There is the issue of interest rates, in particular at Permanent TSB, a State-owned bank which is charging higher interest rates than others while its customers are stuck. They want a fair rate, not for the debt to be written off.

When can we expect real and decisive intervention by the Government to stem this, deal with the issue and resolve both the personal issues of the people involved and the wider economic situation?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I regard the issue of mortgage arrears as the single biggest issue facing our people at the moment. In that sense, I am well aware of the figures that were quoted publicly yesterday. I reject Deputy Martin's assertion that the Government has been chronically inactive in this regard. Deputy Martin is aware that the Government has taken a number of steps in this regard and has established a specific Cabinet sub-committee which deals with reports from the Central Bank, the banks, the Department of Finance and the other Departments involved. We increased mortgage interest relief for those who bought their first home at the height of the boom and this had a significant impact for them. We increased the mortgage interest supplement to help those who lost their jobs to deal with mortgage payments. The Department of the Environment, Community and Local Government and the Housing Agency are working on a mortgage-to-rent scheme and a mortgage-to-lease scheme and design of these schemes is under way. I confirmed for Deputy Martin last week that a great deal of work has been completed on the personal insolvency Bill which will encourage banks to give borrowers a chance to work their way out of their debt problems. That Bill will be published before the end of June and the Minister for Justice and Equality has indicated that he intends to commence Second Stage of the Bill before the summer recess. I would like to see that Bill take priority at the end of this session and at the beginning of the next session.

The Government will also ensure that the Central Bank will have oversight on a range of issues in this regard, including split mortgages, to deal with genuinely distressed mortgage holders, with a determined distinction between those who cannot pay and those who will not pay. This will be set out in the mortgage arrears resolution strategies now being finalised by each licensed mortgage lender. The Central Bank is currently engaging on these with the banks and the sectors involved in different ranges of mortgages are expected to be before Mr. Elderfield shortly. As Deputy Martin is aware, we have maintained protection, through the Central Bank's code of conduct on mortgage arrears, for distressed borrowers and specialist expertise in legal banking, project and policy analysis are available. The Keane report is being followed through and information is available for people who are distressed in respect of their mortgages. I meet many of these people myself.

The end of December 2011 Central Bank data showed that 70,900 mortgage accounts, or 9.2% of total, are 90 days or more in arrears. This is up from 63,000. I would like to think there will be greater impetus from the banks in this regard. We have had face to face meetings with them on the issue on a number of occasions and I am aware that one bank has put a team of 400 personnel together to sit down with borrowers and work out solutions. There will be a range of solutions, depending on the circumstances that apply. I expect the regulator will report to Government at a meeting of the Economic Management Council on the scale of the issues and on how fast we can make progress to achieve a solution. Nobody wants to see anybody lose his or her house and, as the Deputy knows, this is a very sensitive issue. However, we must find solutions and there are a range of them in the Keane report and these are being followed through by Government. I would like to think the banks will show a greater sense of urgency and will sit down with borrowers and, remembering each case is different, work out the best solution so that people can hold on to their houses and not end up in a situation where they will not be able to meet what is a difficult challenge.

This is the big issue currently and I reject Deputy Martin's assertion that the Government has been chronically inactive on the issue. We have been very proactive.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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It seems to me from the Taoiseach's reply that the banks are playing Molly Bawn with him. His response is incredible: "We have had face to face meetings. We have established a special sub-committee." Nothing has happened. The Taoiseach's response is to suggest that the personal insolvency Bill will commence in the autumn. It will not pass through the House this session and we are looking at the autumn session before it passes through the House. The Bill will have to be commenced, implemented and regulations made, which means we are talking about Christmas time before it will have any impact, if we are lucky, in terms of legislative solutions that will emanate from the House. I am absolutely correct to say there is a chronic lack of activity or sense of urgency.

The Taoiseach has identified this issue as the biggest social problem. Along with unemployment, it is clearly the biggest economic and social challenge facing the country. However, I do see there is any sense of urgency with regard to the personal insolvency Bill in terms of reflecting the scale of the problem as described by the Taoiseach.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Has the Deputy a question please?

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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We published the Debt Settlement and Mortgage Resolution Office Bill, introduced by Deputy Michael McGrath. This was accepted by the Government on Second Stage, but now it has been allowed stagnate. Before Christmas, we published the Central Bank and Financial Services Authority of Ireland (Amendment) Bill, which would give stronger powers to the Financial Ombudsman, but that too has been stalled. I remember the Taoiseach coming in here and saying he would welcome suggestions from this side of the House. We brought forward concrete, logical and rational suggestions for debt resolution mechanisms, but none of them has been accepted and no alternatives have come from the Government. When will we see decisive intervention by the Government in terms of ensuring an effective debt resolution mechanism for people in this country?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I made it perfectly clear that we are not talking about blanket forgiveness here. Again, I reject the Deputy's assertion that nothing is happening on this issue. The Financial Regulator expects the banks to furnish to him shortly, if not sooner, their plans to deal with these mortgage problems.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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He is at the end of his patience.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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He expects the banks to furnish the details on the categories and sectors in which these mortgage problems exist. As the Deputy knows from experience, every mortgage case is different, depending on the current circumstances of the borrower. That is the reason driving this issue through a special Cabinet sub-committee is effective, in the sense of requiring the Department of the Environment, Community and Local Government to report to that committee, along with the Department of Finance, and requiring the banks to come up with plans to deal with this. The first element of this is to determine the true scale and nature of the mortgages.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Everybody is reporting to everybody and nobody knows what is going on.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We will not have blanket forgiveness. Deputy Martin has deliberately misconstrued the scale and complexity of introducing what is probably one of the most complex pieces of legislation, the personal insolvency Bill. I assure the Deputy that the Office of the Attorney General, the Department of Justice and Equality and the Department of Finance have worked day and night to put this legislation together. It is an opportunity for a non-judicial recourse to sorting out serious problems of borrowers. It is far too easy to say nothing is being done. Following significant focus on it and a great deal of time and attention from the Office of the Attorney General, I expect that legislation to be published in June. I have no problem with sitting right through the summer to put this legislation through. If the Seanad has to sit specifically for that purpose, then so be it. I would like to see it implemented now, but it has been a very complex, tortuous journey. The Bill will be published at that end of June. Let us start that process, either in the Dáil or Seanad, as one element of the legislation this year.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Much more complex legislation has been passed in a far shorter time.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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It would be nice to think we could have an overall solution for everybody's mortgage problem. Deputy Martin knows the problems of people in County Cork. I know about the problems of people all over the country and they all involve different circumstances.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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The uncertainty is adding to the problem.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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There is a solution by category and sector for each case. I feel for many of those people who suffer from stress in their daily lives because of the problem facing them in terms of the scale of the mortgage they took on. Consider for example the people in Priory Hall who borrowed money to buy apartments that are now useless. Many of them never want to return to them.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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The Government has done nothing there. It has not helped.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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These problems are legacy issues with which we have to and will deal. We cannot deal with them overnight.

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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Deputy Flanagan has not delivered on Priory Hall either.

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael)
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He is not sitting on the fence.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The Taoiseach has said that the mortgage crisis is the single biggest issue facing our people. One would never guess that looking at the level of inactivity of the Government on the issue. Fine Gael promised a lot when it was in opposition and promised a lot in its programme for Government. The Taoiseach said his Government would pursue a radical approach to protect families in fear of losing their homes. He is correct that the individual circumstances of mortgage holders differ. However, the common thread is the gnawing fear families have that they will lose their homes.

We are 14 months into this Government and it has delivered the Keane report. That was seven months ago and there has been precious little else. For people who find themselves in mortgage distress, it is of little comfort to them that the Taoiseach has established a Cabinet sub-committee. The Taoiseach says he wants to establish the scale of the problem. The figures are out there. Some 15% of mortgage holders are now seriously distressed. That works out to 115,000 households. The Governor of the Central Bank, Patrick Honohan, has told us that 25% of all mortgage values are either in arrears or have been restructured. That is the scale of the problem, and well the Taoiseach knows it. Under these circumstances why has the personal insolvency Bill been delayed? Is the Taoiseach allowing the banks and the troika to set the agenda on this matter? When will the Taoiseach be decisive in putting distressed mortgage holders before bankers or his friends in the troika?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I reject the Deputy's assertion that we are allowing the banks or the troika to dictate the agenda. As she is well aware, the Government and the relevant Ministers have made numerous changes to the memorandum of understanding with the troika in respect of the harder pressed, lower paid difficult situations in which many people find themselves. Of course we know the numbers but the regulator has asked the banks for a report by category and sector to see the ranges involved. The overall numbers are very distressing and, with numbers rising, this is a matter of absolute concern.

I do not expect the Cabinet sub-committee, which I formed because of my concern for this, will have all the answers but it has the clout to call in the agencies, the Ministers, the Departments and the banks to get constant updates on what is happening. I would like to see the report from the Financial Regulator, who knows what he is doing. He has put pressure on the banks - as has the Government - to categorise this so that we know the sectors and the nature of mortgage distress and people can sit down and say: "In your circumstances we propose the following options."

Nobody wants to see someone in this country lose a house but it seems clear that some are in dire straits. There are those for whom solutions can be found, be it through mortgage to rent, split mortgages, trading down or the negative equity opportunities offered in a number of new initiatives. I understand 1,000 homes were repossessed last year in Northern Ireland. I do not want to see that on any scale down here, although clearly some people realise the serious difficulties they face.

As soon as the regulator has the report from the banks we want to determine how it sets out the scale, nature and categories of distressed mortgages. The personal insolvency Bill is not delayed by virtue of Deputy McDonald's assertion that the banks or the troika run the agenda. A great deal of work has been done on the Bill and I expect that it will be published in June. I am sure the Deputy will contribute constructively on the Bill when it comes before the House. I would like to see it passing through the House before we rise for the summer but it may not be possible to do that. It is major and complex legislation which deals with something that has never been attempted previously, namely, a non-judicial route for borrowers to get out of their distressed situation. There is an opportunity for banks to assist in that regard.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am astonished to hear that the Taoiseach has to establish a Cabinet sub-committee -----

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I established it a long time ago.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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----- to assert his clout in these matters. I would have thought that, as Taoiseach and Head of Government, he has sufficient clout to call to account whatever Department or statutory agency he so wishes. He behaves as though he is a spectator in these matters.

The Financial Regulator must be tearing his hair out at this stage. Yesterday he stated that banks need to do more than offer interest only repayment periods. That appears to be the only solution on offer. The Taoiseach seems to be happy to allow the regulator to flap about but he is reluctant to intervene in a decisive way as Head of Government. Last July the Government recapitalised the pillar banks to the tune of €17 billion. These banks have the capacity to absorb some of the losses from distressed mortgages but he is not prepared to put pressure on them.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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A question, please.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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He seems to have long conversations and chats with them. Perhaps they also visit his sub-committee. What we need now, however, is action.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Can we have the Deputy's question? We are over time.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The personal insolvency legislation has been delayed. Is the Taoiseach saying this did not happen at the behest of the banks or the troika? Is it simply down to Government inefficiency or, perhaps, his own lack of clout?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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Clearly Deputy McDonald has no clue about how legislation is drafted nor has she experience of how Cabinet sub-committees work.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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This one is not working.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The Office of the Taoiseach, which I am proud and honoured to occupy, has the necessary clout but one requires a structure in which to use it. The structure that I use is to chair relevant Cabinet sub-committees which call in agencies, Ministers and banks as necessary to focus on these issues.

Mr. Elderfield was speaking about a mortgage problem causing a bank problem further down the line but the Deputy deliberately misinterpreted him. She is certainly not an unintelligent person but she deliberately misconstrues the way in which legislation is processed, put together and implemented through the Cabinet or Cabinet sub-committees. The personal insolvency Bill has not been delayed because it has not been finalised. The reason it has not been finalised is because of a range of legal, constitutional and other forms of complexity. When it comes before the House the Deputy will have an opportunity to have her say on how facile or simplistic she appears to think it is.

The lifetime projections by Blackrock under the PCAR analysis assumed losses on the mortgage of our banks of between €5.7 billion and €9 billion under base and stress case scenarios over the period from 2011 to 2013. In addition, the banks have achieved better than anticipated prices on the deleveraging of non-core assets and, as a result, have additional capital to cover possible losses in other areas. In conjunction with the Central Bank, the banks are now implementing strategies to assist people with mortgage arrears on a case-by-case basis because there is no uniform solution to these problems. Despite the fact that the Deputy might think otherwise, this requires the banks to sit down with individual borrowers and look at the circumstances in which they find themselves before considering the options and attempting to provide a managed way of allowing people to deal with their mortgages keep the roof over their heads.

That might be too simplistic for Deputy McDonald. Sinn Féin seems to take the view that it can wave whatever magic baton it carries in its bag to get immediate results. That is not life. If the Deputy ever gets the opportunity to understand the way legislation is processed and drafted, she will appreciate it does not happen overnight.