Pearse Doherty (Donegal South West, Sinn Fein)
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2. To ask the Minister for Finance the action he will take to ensure those struggling with mortgage repayments will be offered genuinely sustainable arrangements that do not threaten the family home; that the banks do not rely on repossession or a legal process that could end in repossession as the main method of meeting the quarter four 2013 target of 15% and the quarter one 2014 target of 25% for concluded arrangements; and his views on the report by Grant Thornton Debt Solutions that many people in debt will not benefit from new insolvency regimes. [41673/13]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, last March the Central Bank set specific performance targets for the six main banks, requiring them to propose sustainable solutions: to 20% of their mortgage customers who are in arrears of over 90 days by end June; to 30% by the end of September and; to 50% by the end of this year.

The Central Bank also recently announced that it has agreed further mortgage arrears resolution targets with the troika. In that regard, the main banks will now be required to propose solutions to 70% of their mortgage arrears customers by the end of the first quarter in 2014. Even more importantly, given that the primary objective is to put agreed and durable solutions in place, the first targets were also set for concluded agreements and these require these banks to have concluded arrangements with 15% of their arrears customers by the end of December 2013 and 25% by the end of March next year. This initiative should see more long-term restructured arrangements put in place.

The strong view of the Government is that, in respect of co-operating borrowers under the mortgage arrears resolution Process, MARP, repossession of a person's home should only be considered as a last resort. The policy measures adopted by Government make that quite clear. The code of conduct on mortgage arrears places an onus on the banks, in respect of a co-operating borrower, to explore all the options for an alternative repayment arrangement to address a mortgage difficulty before any legal action is considered and any proposal to a co-operating borrower by a bank under the mortgage arrears resolution targets, or MART process, will have to comply with the code of conduct.

The Central Bank's MART document sets out three modes of generating a sustainable solution. The preferred solution is an arrangement where payments are re-established on the original, or an agreed revised schedule. The second mode is where the borrower opts for a personal insolvency arrangement. The final option is where an arrangement could not be reached or is not appropriate, ultimately involving surrender or repossession of the property. As the Deputy is aware, in his appearance at the Joint Committee on Finance, Public Expenditure and Reform, the Governor of the Central Bank acknowledged that more than 60% of the end of June proposals by the relevant banks involved the final option. The Governor also informed the committee that the Central Bank has commenced the audit of the banks' returns on the end of June target and the Central Bank will have initial results of the audit in November. This will ensure that the mortgage modifications proposed by the lenders are in fact sustainable.

Additional information not given on the floor of the House

Regretfully, it must be accepted that not all mortgages, due to the individual circumstances, can be made sustainable. There will sometimes be circumstances where the person will have to lose ownership of the home. Indeed, in such cases this may be in the best overall long term interests of all parties. The Central Bank does not expect that repossession will be the lender's preferred solution to mortgage difficulties and in most cases engagement by the borrower will make the legal course unnecessary. However, in circumstances where the borrower does not engage with a lender to address a mortgage difficulty and, subject to fully complying with the code of conduct on mortgage arrears, then there may be no other option for the lender but to commence legal proceedings.

The Keane report clearly stated that without an effective insolvency system the mortgage arrears problem will not be solved. The Insolvency Service of Ireland began accepting applications on 9 September 2013 and while work has commenced on the initial cases, it is too early to make any specific determination on the numbers of individuals that may avail of the different options. There is, of course, a range of options available for the first time such as a debt relief notice, a debt settlement arrangement, personal insolvency arrangement and ultimately the fundamentally reformed bankruptcy arrangements which are more in line with international norms. The detailed operation of the insolvency service and the Personal Insolvency Act is a matter, however, for my colleague the Minister for Justice and Equality.

Pearse Doherty (Donegal South West, Sinn Fein)
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We had a debate during the previous two days in the House on mortgage distress as a result of the Bill introduced by Deputy Joan Collins. The question is specific. We ventilated in this Chamber and at committee level how the banks have used 14,720 legal letters to meet the targets that were originally set down for mortgage holders who will be offered long-term solutions. We know that is wrong. The Minister said it is not allowed or should not be included as part of reaching the targets but it appears the Governor of the Central Bank will allow those letters to be used. We will wait for the audits to be carried out before making a determination on that. The question relates to the real targets - the concluded arrangements - and the targets that have been belatedly announced, that are nonetheless welcome, of 15% in quarter four and 25% at the end of quarter one 2014.

Michael Kitt (Galway East, Fianna Fail)
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Could the Deputy ask a question, please?

Pearse Doherty (Donegal South West, Sinn Fein)
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Will the banks be able to meet those targets by repossessing homes and when does a concluded arrangement take place if it is in the repossession category?

Michael Noonan (Limerick City, Fine Gael)
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The targets will be verified by the bank by means of audit. As I understand it, whatever arrangement is put in place will have to be operating successfully for six months before it will be signed off by the bank. It is not enough to say the deal has been done, but that the deal has been done and the person with the impaired mortgage has paid on the new schedule for six months. That would be the definition of success.

Some repossessions take place all the time. To date, most have been by voluntary surrender because sometimes it suits people to surrender their home voluntarily and give up. It is the Government’s policy that if at all possible people should remain in their own home. That is why in the Keane report there are a number of options, including split mortgages and the effective take-over of houses by local authorities where the status of the resident changes from owner-occupier to tenant but they still remain in the family home. It will be up to the Central Bank to audit the returns and decide what it regards as a sustainable solution.

Pearse Doherty (Donegal South West, Sinn Fein)
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I will put the question in a simple way. The Joint Committee on Finance, Public Expenditure and Reform will have the bankers in again after the end of this year and will ask them how they have reached the 15% target of concluded arrangements to the end of this year. If they say to us that 10% of the figure is made up of repossessions of buy-to-let properties and family homes, is that allowable under the targets issued by the Central Bank and the Government in terms of the 15% target for the end of the year and the 25% target in quarter one of 2014? The statement that was made by the Central Bank contains one paragraph. It is important that we know whether it is possible for the banks to factor in repossessions as part, a bulk or the majority of the targets they are being asked to meet in terms of concluded arrangements.

Michael Noonan (Limerick City, Fine Gael)
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As I and the Taoiseach have stated on a number of occasions, it is a key responsibility of financial institutions to do more to assist those in severe financial difficulties.

Letters threatening repossession or legal action could not be considered a sustainable solution under the mortage arrears targets and should only ever be considered after every possible avenue for a solution has been exhausted. That is the Government's position. The audits will be carried out not by the Government or the Department of Finance but by the Central Bank. They will be presented publicly to the committee of which the Deputy is a member in a transparent manner. He will see exactly what is included and what is not.