Pearse Doherty (Donegal South West, Sinn Fein)
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5. To ask the Minister for Finance if he will provide an update on the mortgage crisis; if he has communicated to the Central Bank that legal letters threatening repossession will not be counted as sustainable offers under the mortgage arrears resolution targets, MART; and the options being explored on the issue of tracker mortgages at State-owned banks. [49577/13]

Pearse Doherty (Donegal South West, Sinn Fein)
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We are about to enter the sixth calendar year of a mortgage crisis which has got out of control and doubled during the course of Minister's tenure. Despite efforts and various proposals, it seems it is not waning substantially. There has been much discussion on threats of repossession, the letters issued by the banks, the mortgage arrears resolution targets, MART, and the issue of tracker mortgages. What communication has the Minister had with the Central Bank on these targets, particularly the legal letters issued by the banks?

Michael Noonan (Limerick City, Fine Gael)
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I have stated on many occasions that it is a key responsibility of financial institutions to do more to assist those in severe financial difficulty. The implementation of sustainable mortgage arrears strategies and solutions by individual banks for their distressed customers, with Central Bank oversight, is, therefore, a key element of the overall framework to address the mortgage arrears problem. The Deputy will be aware that the Central Bank’s mortgage arrears resolution targets, or MART initiative, which was announced last March set time-bound and measurable targets for the six main lenders, requiring them to systematically address their arrears books. The Central Bank initially required the main mortgage lenders to propose sustainable solutions to 20% of mortgages in arrears for over 90 days by the end of June. The initial results of the Central Bank's audit of the banks' end of June returns will be available shortly. They will provide an independent assessment of compliance by the banks with all MART requirements.

The target for proposed solutions rose to 30% by the end of September and will increase to 50% by the end of December and 70% by end of March 2014. Lenders have submitted their end of September returns to the Central Bank and indicated that they have met and, in some cases, exceeded the 30% end of September target. The Central Bank is now also requiring banks to conclude sustainable solutions with 15% of their customers by the end of this year and 25% by the end of March 2014.

As the Deputy is aware, the Central Bank publishes quarterly statistics for the levels of mortgage arrears. As of June 2013, some 79,357 PDH mortgages had been restructured, of which over 60,000 were deemed to be meeting the terms of their arrangements. The Central Bank has informed me that updated data for September 2013 are due for publication around the end of November.

Separately from Central Bank quarterly reports, my Department is publishing monthly data for primary home mortgage restructures put in place by the six main lenders covered by the Central Bank's MART process. This will place more timely information in the public domain on the progress made by the main banks to resolve mortgages in difficulty. This should greatly assist the objective of placing more information in the public domain on the progress being made by banks on mortgage restructures. The recently published data from my Department for the end of September show that the number of PDH mortgage accounts in arrears for greater than 90 days had fallen from 82,624 to 81,156, a drop of 1,468 accounts.

Additional information not given on the floor of the House.

I have previously informed the House that letters threatening repossession or legal action could not, in my opinion, be considered a sustainable solution under the mortgage arrears targets process and should only ever be considered after every possible avenue for a solution has been exhausted. The Governor of the Central Bank has stated any bank proceeding lightly to legal recourse with co-operating borrowers without satisfying the protections of the code of conduct on mortgage arrears, or where alternative sustainable arrangements are available, is not acting in a manner consistent with the MART regime.

Regarding the tracker issue, officials from the Irish authorities are in regular dialogue with all of the State supported banks in an effort to enhance stability and facilitate the sector's return to profitability. The long-term profitability of the State supported banks depends on many variables, of which the impact of tracker mortgages is only one. The Irish authorities have also engaged with the troika to discuss possible ways of funding Irish banks' tracker mortgages at an overall lower cost and in a sustainable manner. Discussions to date have mainly focused on examining the tracker books of the domestic banks and the implications that alternative funding costs will have for the loan books and the profitability of the banks in question. Discussions have been exploratory in nature and further analysis is being carried out.

Pearse Doherty (Donegal South West, Sinn Fein)
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The Minister has indicated that the banks have informed the Central Bank that they have met and, in some cases, exceeded the next round of targets which are pitched at 30%. However, they also told the Joint Committee on Finance, Public Expenditure and Reform the same thing. It took a great deal of digging on the part of the members of the joint committee before it emerged that 15,000 legal letters had been issued and that the process in this regard was being regarded by the banks as one of the ways in which they could reach the targets. Has the Minister informed the Central Bank of his analysis which he has highlighted publicly to the effect that the issuing of legal letters is not acceptable under the MART process?

As the Minister stated, his Department is publishing the relevant figures. I welcome this important initiative because it assists us in fully understanding what is happening. However, the figures indicate that 118,000 mortgages remain in arrears and that two thirds of them are in arrears for over 90 days. The really eye-catching aspect is that 77% of them have not been restructured. Worse again, the figures show that the number of mortgages in arrears for over 90 days which have not been restructured actually increased since August last year. Is the process working? It lacked ambition from the outset. After five years of a mortgage crisis is the Minister satisfied that 118,000 mortgages remain in arrears and that three quarters of them have still not been restructured by the banks?

Michael Noonan (Limerick City, Fine Gael)
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I previously informed the House that letters threatening repossession or legal action could not, in my opinion, be considered a sustainable solution under the mortgage arrears targets process and should only ever be considered after every possible avenue for a solution had been exhausted. The Governor of the Central Bank has stated any bank proceeding lightly to legal recourse with co-operating borrowers without satisfying the protections of the code of conduct on mortgage arrears, or where alternative sustainable arrangements are available, is not acting in a manner consistent with the MART regime. It is true that quite a number of mortgages are in arrears. The banks under the direction of the Central Bank are moving through these mortgages systematically in order to ensure proposals will be made to each mortgage holder and that sustainable restructuring will take place. A more important statistic in respect of the people involved is that they continue to live in their own homes, despite the fact that their mortgages are in arrears. Ensuring they remain there is the primary policy objective.

Pearse Doherty (Donegal South West, Sinn Fein)
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As stated on previous occasions, the Minister is treating the banks with kid gloves. He should light a fire under them, as well as the Central Bank. He is in his third year in office and I am sure he finds it unacceptable that 118,000 mortgages remain in arrears and that 77% of them have not been restructured. These are the figures of failure. When he entered office, the Minister was lighting fires or at least he was talking tough with the banks. When the ECB dropped its interest rate, he stated the banks should pass on the reduction to their customers. Would he be willing to reiterate these comments, given that the ECB has reduced its interest rate to an all-time low?

Tracker mortgages constitute a major issue for a number of the banks. Are there proposals on the table or is the Department developing any proposal to ease the burden within financial institutions in respect of these mortgages in order that the costs relating to them will not have to be shouldered by those with variable rate mortgages?

Michael Noonan (Limerick City, Fine Gael)
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Regarding the tracker mortgage issue, officials from the Irish authorities are in regular dialogue with all of the State-supported banks in an effort to enhance stability and facilitate the sector's return to profitability. The long-term profitability of the State-supported banks depends on many variables, of which the impact of tracker mortgages is only one. The Irish authorities have also engaged with the troika to discuss possible ways of funding Irish banks' tracker mortgages at an overall lower cost and in a sustainable manner. Discussions to date have focused mainly on examining the tracker books of the domestic banks and the implications alternative funding costs would have for the loan books and the profitability of the banks in question. Discussions have been exploratory in nature and further analysis is being carried out.

As the Deputy is aware, the Central Bank is independent under law. The Minister for Finance lighting a fire under it would not, therefore, be the appropriate way to proceed. I have regular meetings and telephone conversations with the Governor of the Central Bank and will pass on the Deputy's views to him on the next occasion on which we speak.