Michael McGrath (Cork South Central, Fianna Fail)
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1. To ask the Minister for Finance the action he will take to safeguard the interests of residential mortgage holders whose loans are sold to unregulated third parties, including the customers of Irish Bank Resolution Corporation in special liquidation; and if he will make a statement on the matter. [8564/14]

Joe Higgins (Dublin West, Socialist Party)
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5. To ask the Minister for Finance if he will devise a scheme to provide a solution to protect the home ownership of the 13,000 Irish Bank Resolution Corporation mortgage holders whose accounts are being offered for sale to venture capitalists; if he will prevent that sale. [8480/14]

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister is well aware of this question by now. It relates to the sale of mortgages to entities not regulated by the Irish Central Bank. The issue has come into sharp focus because of the imminent sale by the special liquidator of IBRC mortgages, but it could also apply to mortgage holders of any other bank. What would the Minister do if AIB, Bank of Ireland, Permanent TSB or Ulster Bank informed the Department today that it intended to sell its mortgage book? Would the Minister allow it to go ahead in the same way that the sale of the IBRC mortgages is currently proceeding? I doubt it very much, so I am hoping we can make some progress on this issue today.

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 1 and 5 together.

I am fully aware of the concerns raised by residential mortgage holders of IBRC whose loans are currently being sold by the special liquidators. The issue around the continued applicability of the various protections afforded to mortgage customers is legally very complex and requires careful consideration. As indicated previously, my officials are currently examining the issue closely with their colleagues in the Central Bank and in the Office of the Attorney General.

It is important to note that the sales process for the residential mortgage book is ongoing. The valuation process for this portfolio was completed on 11 September 2013 and the sales process began on 14 October 2013. Following receipt of indicative bids, a reduced number of bidders were progressed to the second phase of the sales process, which was launched on 29 November 2013 and is expected to be completed next month. Like all of the IBRC loan sales, the residential mortgage book is being sold in an open and transparent process, and should bids not be received in excess of the valuation they have obtained, then the portfolio will be sold to NAMA.

The ultimate purchasers of these books, be it NAMA or any other unregulated entity, will be required to honour in full the legal terms of the loan agreements entered into between IBRC, or INBS, and its customers. It must be stressed that the contractual terms and conditions of all customer mortgages will not change as a result of the ultimate sale of these obligations to a third party.

While it is too early to speculate as to the identity of the ultimate purchaser of these loans, I have been advised that in the event that NAMA acquires the loans, it will be mindful of its legal obligations and is likely to apply best practice in respect of the code of conduct on mortgage arrears, or CCMA. Furthermore, it has confirmed that no borrower will be in any worse a position. 

Following two recent portfolio sales of residential mortgages to institutions not covered by CCMA in Ireland, in both cases the acquirers of those books have chosen to implement the CCMA voluntarily, as they believe it is in the best interests of both the institution and its customers. I have no reason to believe that this will not also be the case in respect of the sale of the IBRC residential mortgage book.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister makes the point that the unregulated entities that have bought mortgage books thus far have complied with the code voluntarily. What if one of those mortgage holders disputes that? What if they believe that those companies, vulture funds, or whatever the Minister wants to call them, are not complying with the code? Who adjudicates on that? Do they go to Dame Street and knock on the door of the Central Bank? They will be told it has nothing to do with the Central Bank. Do they go to Merrion Square and knock on the door of the Department of Finance? They will be told that it has nothing to do with the Department. They have nowhere to turn, and that is the point. The owners of these funds can claim that they are voluntarily complying with the code of conduct, but who decides that? Who adjudicates when an issue arises if somebody gets into difficulty with their mortgage and the fund is moving in on them immediately? Nobody adjudicates, and that is the bottom line.

The Minister knows there is a problem and that is why he is proposing his own legislation dealing with the sale of loans to unregulated entities, but that is not due to be published until 2015. He acknowledges by his own argument that there is a difficulty here. He claims that it will be a very difficult to get a repossession order in a court unless the entity has complied with the code of conduct, but are we really going to let the bailiff come up the driveway? Are we going to allow people to go through the stress and anxiety of a threat of repossession before that particular provision is invoked?

Michael Noonan (Limerick City, Fine Gael)
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That is not the way I see it. Quite clearly the process is complex, and it is in the hands of an independent liquidator who is operating in accordance with the law. The taxpayer comes into this as well. The job of the liquidator is to get as much value for the taxpayer as he can. While those in the Opposition seem to stress the interests of the mortgage holders, and rightly so, they forget about the interests of the taxpayer, because these are two sides of the same coin. If the mortgage holder gains, the taxpayer loses, according to the case presented by many people here-----

Michael McGrath (Cork South Central, Fianna Fail)
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No.

Michael Noonan (Limerick City, Fine Gael)
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-----although not by the Deputy, who has always handled this responsibly. If I were to attach additional conditions to the mortgage book at the point of sale, there is a possibility that I would be legally challenged on the argument that that might reduce the value of the book. I would be leaving myself open to challenge by other creditors, and there are many other creditors in the bank.

If we do what I have been advised to do, this will work out. I am quite confident it will work out. Two books have been sold already. They gave rise to no difficulties whatsoever and the purchasers are complying fully with the protocols established by the Central Bank. The likelihood here is that if the performing mortgages are not sold they will go to NAMA, which will comply fully.

Michael McGrath (Cork South Central, Fianna Fail)
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That is no problem.

Michael Noonan (Limerick City, Fine Gael)
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If they go to third-party unregulated entities, the Deputy has asked who will take responsibility. We will talk to them. We will tell them we expect them to comply and ask what the story is.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister will have no power.

Michael Noonan (Limerick City, Fine Gael)
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We are not going to let it get to the point at which they are negotiating with individual mortgage holders. We will work in the same way that we worked with the other two entities which bought books previously.

I ask people not to be trying to frighten those who have mortgages with Irish Nationwide Building Society, which is now IBRC. It is very unfair to be hyping this-----

Michael McGrath (Cork South Central, Fianna Fail)
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They are frightened.

Michael Noonan (Limerick City, Fine Gael)
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Of course they are frightened. They are being wound up by a number of Deputies in this House who are stating very exaggerated positions and they are deliberately trying to frighten people so that they can get headlines in the newspapers. That is very unfair.

Joe Higgins (Dublin West, Socialist Party)
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What is frightening people is that the Minister is proposing a process that will put 13,000 mortgage holders into the hands of vulture capitalists. It is the form and the record of those vulture capitalists that leave people in no doubt as to what they might face. It is quite pathetic for the Minister to come in here and say that he will ask these vulture capitalists to be nice to the mortgage holders whom they take in hand, when the Minister knows well that the bottom line for these vultures is profit maximisation.

They are the ones who crashed the international economy, for God's sake. Now, the Minister is proposing to hand over the victims of that crash to them again. It is quite incredible. The Taoiseach said on Tuesday that the code of conduct could not be put in as a condition of the sales process and that it might be legally questionable because it would lead to the erosion of the value of the assets from which the creditors seek proceeds. Why would it lead to the erosion of the value of the assets to have the code of conduct attached? Does this not give the game away that the code of conduct would not be followed and does not need to be followed by the people concerned? Mortgage holders would then be left at the mercy of these vulture capitalists.

Michael Noonan (Limerick City, Fine Gael)
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If one was only selling a patch of ground down the country, one would know that the more conditions that were attached, the greater the potential for a reduction in value. That is the general point. I am not saying we will be sued, I am saying there is a legal risk. Therefore, it is much better not to interfere with the sales process and make sure the purchaser complies with all contractual obligations, as he or she has to under law. We can then take the issue of the procedural protocols subsequently, as we did when the other two tranches were sold, and get them to comply after the sale. There is then no exposure to a legal challenge and everyone is protected. That is where I will go. Of course, we have also indicated that if we have to legislate, we will do so. Deputy Michael McGrath's Bill is very helpful in that respect. We are indicating in advance that we do have power and that we can take legislative power. However, we will be able to solve this problem as we solved it on other occasions.

There are two sides to this issue. The liquidator has to get maximum value for the taxpayer. I would like to see Deputies standing up for the taxpayer, as well as for mortgage holders because it is reciprocal. The second point is that there is no need for wildly emotive language, frightening people who are already in difficulty with their mortgages, telling them that the sheriff is about to arrive at the door and that there are these corrupt people who are going to close them down. That kind of dialogue is not helping anybody. The Deputy is frightening decent people who are doing their best to deal with their mortgages.

Michael McGrath (Cork South Central, Fianna Fail)
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I am not frightening anyone.

Michael Noonan (Limerick City, Fine Gael)
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Yes, I agree.

Michael McGrath (Cork South Central, Fianna Fail)
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The reality is that if the worst comes to the worst and a person's mortgage is in difficulty and then sold to an unregulated entity - a third party - that entity can move against the mortgage holder virtually immediately. If we look at the standard contractual terms of any mortgage agreement, they are stacked heavily in favour of the lender - the Minister knows this as well as I do. It is simply unfair and unacceptable that there is any prospect that the basic and vital statutory protections that every other mortgage holder in the country possesses would be removed from IBRC mortgage holders or nybody else.

The subtext of what the Minister is saying about the taxpayer is that these funds may well be prepared to pay more if they do not have to comply with the code. Why would they pay more if they do not have to comply with the code, given that they would not intend to comply with it?

Michael Noonan (Limerick City, Fine Gael)
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That is not the point I am making.

Michael McGrath (Cork South Central, Fianna Fail)
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That is the bottom line. The Minister has acknowledged there is a problem which can be solved by legislation or a simple direction order from the Minister to the special liquidator. This is a genuine issue. People are afraid of being exposed, vulnerable and isolated in the face of an unsympathetic fund that is out to make a quick buck. That is a genuine fear. Perhaps some people have stoked up that fear, but it is very real.

Joe Higgins (Dublin West, Socialist Party)
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The Minister challenges Deputies to stand up for the taxpayer. It is a pity this and the previous Government did not stand up for the taxpayer when they allowed themselves to be dragooned by the European Union into taking onto the backs of taxpayers €60 billion of bad gambling debts from the financial markets. Why did they not stand up for the taxpayer then?

Why is it always complex when it comes to the rights of the small person? Why can the Government not write down the loans for the people affected as a model of what should be done with distressed mortgages generally for those left with these unsustainable blackmail mortgages from the time of the property bubble? That is the obvious thing to do - write them down to today's values and the monthly repayments. In that way, we would sort out the problem and free up hundreds of millions of euro for the real economy.

We on the finance committee will be discussing the sale of former Irish Nationwide Building Society mortgages next week. Will the Minister release to us the PricewaterhouseCoopers report, a secret report which was commissioned and given to the Minister on this process, in which we believe different options were outlined for what could be done with these 13,000 mortgages? We need to have sight of it. Will he release it to us?

Michael Noonan (Limerick City, Fine Gael)
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The liquidator's job under law is to recover as much value as he can for the creditors. In this case, 70% of the creditors by value are Irish taxpayers. With regard to the €60 billion or so invested across the banks, what we are trying to do is recover some of the value for the taxpayer and this is one of the key parts. That is the opening position.

The liquidator is independent under law and operates as liquidators operate. He requisitioned PricewaterhouseCoopers to provide him with a report. It is his report, not mine. As I understand he is going before the Deputy's committee, the Deputy can ask him whether he would be prepared to release the report in full or in part. He has already said there is market-sensitive information contained in it, but the Deputy could ask him to redact this information and give him the rest of it. I do not mind. As he will be before the committee, the Deputy can ask him. It is his report and he is independent under law.