Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

9. To ask the Minister for Finance if he is satisfied with the pace and manner in which the banks are implementing the mortgage arrears resolution targets; and if he will make a statement on the matter. [1629/14]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

This relates to the issue that Deputy Doherty raised in respect of the handling by the banks of the mortgage arrears crisis and, in particular, the mortgage arrears resolution targets programme. Following its audit of the arrears targets programme, the Central Bank confirmed that in the first quarter, 60% of the proposed solutions were in the surrender or repossession category. The figure fell to 55% in the second quarter. The bank did not state that it does not regard the threat of legal repossession as not constituting a sustainable solution. It did not go as far as the Minister in that regard. Is the Minister on the one page with the Central Bank on whether the threat of legal repossession does not constitute a sustainable solution? If we can get clarity on that much at least, it would be a good day's work.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As I have indicated, the Government is aware of the significant difficulties some home owners are facing in meeting their mortgage obligations. A comprehensive strategy to tackle the problem is in place and its implementation throughout Government and by lenders is the priority. In that context, the Central Bank mortgage arrears resolution targets, MART, framework is key. Under this rolling process, quarterly performance targets are set to the end of June 2014 to require the banks to propose and put in place durable long-term solutions to address individual cases of mortgage arrears.

The Central Bank has indicated that all six mortgage lenders covered by the MART process have reported that they met the 20% proposed sustainable solutions target for the second quarter of 2013 and the 30% target for the third quarter in 2013. In particular, with respect to the 2013 third quarter target, which is the latest available data, the lenders have reported to the Central Bank that they have issued proposals to 43% of mortgage accounts in arrears as against the 30% target.

The new monthly mortgage restructures and arrears data published by my Department will also provide an impetus for the MART banks to increase the pace of provision of mortgage restructures. That data show that some progress has been made in putting permanent mortgage restructures in place. For example, the number of permanent restructures of permanent dwelling mortgages more than 90 days in arrears has risen from approximately 41,200 in August to approximately 49,300 in November 2013, an increase of almost 20%. The number of permanent restructures of mortgages more than 90 days in arrears has also increased.

The ongoing roll-out of the MART process, in particular the incremental targets to put in place sustainable mortgage restructures, will be important for this end. Of course, the MART process can only work to the benefit of borrowers in circumstances where the borrower works with the lender and engages with the process. Likewise, lenders should communicate and engage with a borrower in difficulty in line with the requirements of the code of conduct on mortgage arrears. Early and effective engagement with borrowers and lenders is, therefore, key to resolving cases of mortgage difficulty. Where there is effective and meaningful engagement regarding a mortgage difficulty, the data show that an increasing number of durable long-term mortgage restructures is emerging.

It will be necessary to build on this in 2014. The issue of mortgage arrears is a major problem that needs to be resolved not only for individual borrowers and lenders but also for the long-term economic and social health of the country. A comprehensive strategy to do this is in place and the Government will ensure it is fully implemented by all the parties involved in the process.

Deputy McGrath raised another question in his introductory remarks. From a statistical point of view the data must be recorded or noted somewhere. The Central Bank is bringing out a report on these issues. The Department of Finance is bringing out a separate report. They are somewhat different in their approach. A high percentage of the repossessions are voluntary surrenders and it is legitimate to take note of these. Obviously, if someone goes to Australia and surrenders his house on the way, it is a permanent solution. It may not be the most satisfactory solution but it is a permanent one. I do not want the banks to include these in some kind of hidden fashion in a general set of statistics. I want the banks to show the data separately. Then we can decide whether they are validly included. It needs to be transparent in order that we know what we are dealing with. To purport to substitute repossessions for restructuring offers was never the intention. The work of Deputy McGrath and the committee illustrated that much clearly and I believe the banks have learned their lesson.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

It is important the letters threatening repossession and the cases resulting in voluntary surrender are recorded in a separate category. They are not sustainable solutions. They result in the ending of the mortgage. One could regard them as a permanent solution from the point of view of the banks. However, the Department of Finance and the Central Bank should be adopting the same methodology. We can table written questions on the matter but I hope the presentation of the data of the Minister and the Central Bank will be uniform in terms of the bundles into which they are putting the different cases. Perhaps there are presentation issues, but either way it is important.

The Central Bank should not allow any threat of legal repossession to count as an instance of a sustainable solution. That is what happened, however, in its audits of quarters 1 and 2. In fact, in quarter 1, 60% of the sustainable solutions put forward by banks were in the repossession category, some of them being voluntary surrenders, while the figure for the second quarter was 55%. Moves to repossess should be recorded separately so that we have a clearer view of the genuinely sustainable solutions being offered. We are seeing increased activity levels within the banks, including on the split mortgage side and in terms of the economic concession by Ulster Bank, but it is still difficult to get a final decision from the banks when it comes to individual cases.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

My officials have noted what the Deputy said. His approach is the correct one and we will make sure the information is conveyed to the six banks involved and to the Central Bank. There should be no misunderstanding of what the House requires.