Friday, 11 April 2014
Land and Conveyancing Law Reform (Amendment) Bill 2013: Second Stage [Private Members]
I move: "That the Bill be now read a Second Time."
Last July the President signed into law one of the most shameful measures taken by the Government. The Land and Conveyancing Law Reform Act 2013 was a brutal and cynical move with one purpose - to facilitate the repossession of family homes by lenders. The Dunne judgment was not a sustainable solution; it was a loophole found by those on the front line dealing with those in mortgage distress. Nevertheless, it was a safeguard at a time of great distress for thousands of families whose homes were likely to be repossessed by their lenders. Last summer Fine Gael and Labour Party Deputies intentionally removed that safeguard, knowing well that they were not replacing it with any real protection for struggling families. This week we learned of the consequences when the Joint Committee on Finance, Public Expenditure and Reform heard from AIB, Bank of Ireland, Permanent TSB and Ulster Bank. Together, these banks have issued 30,034 letters relating to repossessions and the voluntary surrender of homes, including family homes.
The removal of the Dunne judgment was not an isolated action. This is a Government which has overseen the revision of the code of conduct on mortgage arrears to favour banks over borrowers and insisted on a personal insolvency regime which gives the banks a veto in cases in which the main debt is a mortgage on a family home. I hope the Minister for Justice and Equality, Deputy Alan Shatter, is keeping the Personal Insolvency Act under ongoing review. I hope he was listening to the CEOs of Ulster Bank and Bank of Ireland this week at the committee. They told him and anyone else who was listening very clearly that they would veto every single personal insolvency arrangement that required them to write down mortgage debt. He must step up and do what he said he was going to do at the time the legislation was introduced. He said he would remove the veto from the banks if they intended to use it in all instances where write-downs were proposed on mortgage debt. The waiting lists for MABS and civil legal aid are appalling. When one looks at all of the measures in place, one sees that the Government has stacked the cards in favour of the banks at every opportunity.
Sinn Féin consulted and worked with groups working with those in mortgage distress last year when the Act we are seeking to amend was proposed. They were unanimous in expressing alarm. While some positive results were achieved in the original personal insolvency legislation, the Act has let the banks off the hook. The setting of targets for resolution, coupled with the introduction of the Land and Conveyancing Law Reform Act, facilitated repossessions and sent a clear message to the banks and, by God, they took the hint, but it is not too late to wind them back in. By passing the Bill, Members can rebalance the rules to favour the protection of the family home. The Bill consists of two sections, both of which are about making repossession of the family home an option in only the most extreme cases. What it is not is a free ride for anybody. People who can pay their mortgages will still have to do so.
The main section of the Bill contains a number of measures. These are designed respectively to ensure a repossession process would never be rushed, all personal insolvency processes would be exhausted fully and that the initial costs of an insolvency process would be borne by the bank. As we have seen from the scant uptake evident in the figures released by the Insolvency Service of Ireland earlier this week, the Personal Insolvency Act 2012 is by no means perfect. While it is a project in need of major overhaul, it offers a potential means to find a compromise for people in debt to allow them to keep their family homes. By extending the adjournment period in relevant litigation to six months, the Bill would provide greater time for the insolvency process to develop and PIPs to do their jobs. The effect of the proposed provision would be to prevent banks simply ignoring the personal insolvency process. By extending the period of adjournments, the Bill would incentivise banks to conclude and accept arrangements rather than simply to go through the motions.
Sinn Féin has argued and shown how we would fund public insolvency practitioners in order that clients seeking a PIP would not be subject to cherry-picking by PIPs. We have also argued for a greater role for MABS at all stages of the process. It is unfortunate that this has not happened.
The crux of the Bill is about empowering the court to take in a broader understanding of a repossession and, ultimately, put the burden of proof on the lender. Section 3 maps out in a detailed way the hurdles a lender would have to clear in order that a court could be fully sure repossession was the only option. Section 3(1)(a) would put the code of conduct on mortgage arrears, CCMA, on a legal footing. FLAC which works with people in need of legal aid has identified the potential lack of enforceability of the code of conduct as a problem that could cause great difficulties for co-operating borrowers in distress. The Bill would remove some of that doubt and make every bank, not just the regulated entities, subject to the code. I was disappointed last year that, despite submissions from many groups and individuals concerned about the dilution of the CCMA, the Central Bank, with a nod from the Minister, proceeded to weaken it substantially. It remains, however, a code that affords some protection to borrowers and at least sets a threshold of decency by which lenders must abide. All lenders should have to abide by it. The legislation provides that if an institution wants to repossess somebody’s home in the State, it must at least meet this threshold. The court would take into this account when considering any application. This is of significant importance, given the developments of recent weeks where IBRC's mortgage loan books were sold to unregulated entities which might not have to comply with the CCMA. There is no statutory provision for them to do so and this legislation would deal with that issue.
Section 3(1)(b) would introduce a reasonableness test. The repossession of a family home resonates because of our history as a people attached to the land but often deprived of any right to it. If an institution wants to remove a family from its home, the laws of the State should not make this something that could be done lightly. This subsection would give the court the power to decide whether the bank or lender had acted reasonably and, if not, deny the application. Members who have worked with constituents to help them to stay in their homes will know that reasonableness and banks can often be separate. The reasonableness test should take into account what the PIP or homeowner has put on the table and what offer he or she has made. Families that believe they are doing their best and have made a reasonable offer would have their day to express that opinion and the court would have to take it into account. The homeowner would also have to be given adequate time and opportunity to appeal a rejection of a proposal by the banks. Crucially, the court would take into account what would happen in the aftermath of any proposed repossession. The residual debt and the bank’s intention to deal with it would also be considered by the court at that time. The bank would have to produce a full solution, not a partial one. Unfortunately, every financial institution, bar one in these cases, currently repossesses homes before dealing with the residual debt at a later stage. Bank of Ireland will chase people for the rest of their lives over that debt, which is not acceptable. There must be an agreement at the time of repossession on what happens to the residual debt. If the worse comes to worst, the vulnerable must be protected. The Bill would provide that families would be given at least six months to prepare to leave their home. If there are children, they would be given at least nine months. Tenants in a repossessed property should have their contracts fully respected. Tenancy agreements would have to be fulfilled by the lender taking possession of the property.
Everyone agrees that we are not living in normal times. The normal market rules and rules of property have been distorted by a reckless few. Families who saved for years to buy their homes witnessed their value plummet in a short period. In addition, a surge in the numbers who cannot find a job and billions of euro worth of cuts and taxes in budget after budget have produced a staggering crisis among people who cannot pay their mortgages. The economic collapse and the dragging of the sovereign into the mess created by banks is a well known story. The banks and other vulture funds cannot be allowed to pick off families in mortgage distress one by one. We must readjust the rules and restore the protection of the family home. We must provide leadership for those demanding it. The Bill would go some of the way to restoring a level playing field; dispelling the arrogance of bankers on obscene wages who only see numbers on a page, not families in homes; and reversing the appalling policy of the Government of permitting the banks do what they want to whom they want.
I have discussed the legislation with the leading groups fighting for the rights of mortgage holders. Mr. David Hall of the Irish Mortgage Holders Organisation stated:
This takes a humane and practical approach by attempting to rebalance the current imbalance that exists when banks move to repossess family homes. The proposed Bill reflects our policies and its adoption would be a significantly positive move to protect homeowners who are facing repossession.Mr. Ross Maguire of New Beginning stated:
This Bill gives the courts extra power and responsibility in home repossession cases. In particular, it does two things. It mandates the court to be satisfied that all efforts have been made at resolution through the MARP process or the personal insolvency process before agreeing to repossession. This would constitute a substantial safeguard for families struggling with debt. Secondly, it forces the banks before repossession is granted to deal with the negative equity through debt write-off. Again this would constitute a great improvement on the current system and would allow people to move on with their lives free of debt.I urge all Members to support the Bill as a step in keeping the thousands of families under the threat of the banks a little safer in their homes tonight and tomorrow. I understand the Government parties will vote down this legislation. I reiterate the figure of 30,034. It is not a Sinn Féin figure. It came from the chief executive officers of the four main banks in the State and is not complete because the other institutions that have not appeared before the Joint Committee on Finance, Public Expenditure and Reform are also seeking repossessions and voluntary surrender. However, we also know that 30,000 homes will not be repossessed, but the banks told the committee they expected the number to be in the thousands. Families will be put out of their homes and while the Bill would not prevent repossessions, it would make sure the courts had the power to consider all proposals put forward by a PIP or the mortgage holder and the bank seeking repossession had complied in a humane way with the Central Bank's code of conduct.
If the Minister for Finance has issues with the Bill, I urge that they be dealt with on Committee Stage. People need protection and a rebalancing of the law. Lenders who appeared before the joint committee told us they would torpedo personal insolvency agreements. Ulster Bank and Mr. Richie Boucher, the chief executive officer of Bank of Ireland, said they would veto every proposal that involved a write-down of secured debt held by their banks. This is not in keeping with the spirit of the legislation the Government enacted, nor are the 30,000 letters sent to homeowners in distress. It is time we stepped up to the mark and rebalanced the scales in favour of the citizens we are elected to represent.
I thank Deputy Pearse Doherty for giving me the opportunity to discuss this issue. I wish to focus on three areas. First, I shall respond to the Deputy's claims on what the Government has and has not done. Second, I shall examine the progress achieved, while being very conscious of how much more needs to be done. Third, I shall comment on the Bill and its provisions and outline the rationale for the Government's opposition thereto. I will begin, however, in the spirit in which the Deputy concluded his contribution. I refer to the spirit in which we seek to tackle this issue and the experience he has had in his constituency in dealing with people who face difficulties. I encounter them daily in my constituency work. Considerable pressure and stress have been experienced by people through no or little fault of their own in the aftermath of the crisis. Unfortunately, what most defines the crisis for me is my meeting families who are either dealing with the stress of not being able to pay their mortgages, which is emphasised by the fact that they all want to pay them, or worried about their ability to service their mortgages in the future and facing the terror of losing the family home, in which they might have lived for some time and their children might have grown up. Such families may live in a community in which they want to continue living. As a constituency representative, I have first-hand experience of the strain, stress and misery experienced in these circumstances.
Contrary to what Deputy Pearse Doherty stated, the Government has taken many measures to respond to the scale of the personal debt crisis and the vast strain it is exerting on society. It is in this spirit that I wish to comment on the committee hearings held in recent days and which I followed. There are two areas in which there has been significant Government intervention. I am conscious of the strain on people and shall point to the revised measures put in place by the Central Bank. It made very clear the quarterly targets that needed to be met in terms of the offers of sustainable mortgages and the terms on which and periods in which agreement needed to be reached. I shall point to the measures the Central Bank stated it would implement in regard to banks if the objectives were not met. I shall point to the progress made in putting in place personal insolvency legislation and the Insolvency Service of Ireland. The measures implemented, organisations established and legislation enacted were not in place when we began our response to the crisis that is causing significant strain.
We put our response in place conscious of two factors. First, we need to be able to differentiate between the considerable number of people who genuinely cannot pay because of all of the horrific changes that have taken place in the economy and the group who, for whatever reason, do not pay. Another group about whom we must be conscious comprise the huge number of taxpayers who have put in place measures to support the banking system. We have a duty to them to be conscious of their investment and do all we can to recognise it and ensure the taxpayer is in a position to benefit overall from what has taken place. I am absolutely conscious of the difficulties and strain experienced by individuals and families who are unable to make mortgage repayments and worried about losing their homes.
I have emphasised the measures the Government has put in place. We started from a position where there was next to nothing in place. It is not true to state the measures we have taken have had no effect. We have seen strong signs of their having had an impact, but because we realise we need to fix the problem, we are all conscious of the progress that must still be made.
I refer Deputy Pearse Doherty to the figures that have emerged on the mortgage restructuring that has taken place. I am sure he is aware of them. I am not referring to the engagement that has taken place up to the point of restructuring but to restructuring agreed to by the debtor and the creditor. A total of 59,668 restructurings have taken place, representing an increase of 8,480 on the figure for the last quarter of 2013. It represents an increase of 5,669 accounts since the end of January 2014.
The number of mortgage accounts in arrears for more than 90 days has fallen from 79,420 at the end of January to 78,210, a decrease of 1,210. The number of temporary restructurings fell between the end of January and the end of February, indicating what we believe to be a move towards greater utilisation of the resources available and the permanent restructuring to which I have referred.
With regard to the buy-to-let sector, engagement between consumers and lenders has led to 12,484 permanent restructurings, representing an increase of 2,336 accounts at the end of the fourth quarter of 2013 and an increase on the figure from the end of January.
I wish to contextualise the measures that have been put in place and their effect, while remaining conscious all the time of the strain being placed on people and also our determination to deal with the crisis in a sustainable manner. Deputy Pearse Doherty referred to the hearings of the Joint Committee on Finance, Public Expenditure and Reform in recent days, at which hearings he was present. The Minister will be examining very carefully the contributions made by the various banks and Members of the Oireachtas at the hearings.
The Minister has stated that the policy and way it will be implemented will be kept under continual review. Changes, if necessary, will be made to ensure the considerable crisis we are facing will be marked by signs of improvement and that the measurers put in place will have a beneficial impact. While the Government and I are absolutely clear that while there are welcome signs of job creation and growth in the national income, depending on its various measurements, we must make progress considering the magnitude of personal debt in the economy, its structure and impact on people and their ability to contribute to the economy and society.
I will now comment in detail on some of the specific measures contained in the Bill. I will do so in the order in which they arise in the Bill and Deputy Pearse Doherty has referred to them, beginning with his proposed amendment to section 2 of the 2013 Act. He proposes that, in considering an application for possession of a principal private residence, a court would be required to adjourn proceedings for a period of at least six months.
This proposal does not take account of the additional safeguards the Minister included in the 2013 Act and which he considers already provide the court with a very broad margin of discretion when dealing with repossession applications. The Act already allows the court to take full account of the circumstances of each individual when considering an application for repossession.
In particular, the Act contains two safeguards which are intended to strengthen protection for borrowers in arrears. First, section 2 provides that in repossession proceedings in respect of a borrower's principal private residence, in other words, their home, the court may adjourn proceedings so that a proposal for a personal insolvency arrangement under the Personal Insolvency Act 2012 may be fully explored as an alternative to repossession. The Act provides for an initial adjournment period not exceeding two months with the possibility of further adjournments where it considers that progress has been made on preparing a personal insolvency arrangement. Second, section 3 of the Act provides that repossession actions in respect of principal private residences in cases where the mortgage was created prior to 1 December 2009 must now be commenced in the Circuit Court. Of course, what this does is to put such mortgages on the same footing as housing loan mortgages created after 1 December 2009 under the Land and Conveyancing Law Reform Act 2009. This will help reduce costs and delays for the party. That section in the original Bill is a recognition by the Government of the value people place on their home and a recognition that where possible, everything that needs to be done to allow them to stay in their home will be done while dealing with the level of debt and potential insolvency they could face. Section 2 of the 2013 Act allows a court of its own motion or request to adjourn proceedings to allow a personal insolvency arrangement, PIA, to be considered where none have previously been attempted.
In respect of Deputy Doherty's amendments, which would require the court to issue a series of instructions to the parties involved in the application, the point I want to emphasise is that the effect of this would be to fetter or reduce the discretion of the court in this manner. This runs contrary to the objective that the courts be permitted to recognise and take into account the circumstances of each case in front of them. A further aspect of this proposal is that it fails to recognise that a PIA can only be proposed through a practitioner where a debtor meets the eligibility requirements for such an arrangement and that there are sufficient funds available to make some payments to ground a proposal.
The Deputy seeks to amend section 2(7) of the Act by inserting a definition of "court" to meet the Circuit Court, but that is already provided for in section 3 of the 2013 Act.
I will conclude with observations about section 3A, which Deputy Doherty wishes to insert into the 2013 Act. Subsection 1 seeks to instruct the court to consider a number of issues when it is considering an application for an order of possession. However, in the view of the Minister, such a proposal would seek to put limitations on the courts in dealing with such applications, which could be open to legal challenge. In any event, section 2(3) of the 2013 already provides that when dealing with a repossession application, a court shall have regard to the conduct of the parties in any attempt to reach a solution to a mortgage arrears problem. The Minister believes this provision provides the court with the necessary level of discretion.
I am conscious that I am reaching the end of my time. I will refer to some of the subsections and changes the Deputy wishes to make. I also want to deal with a provision that would require the court to consider, where necessary, a PIA that has been rejected by creditors where the borrower has been given adequate opportunity to appeal the lender's decision to reject the proposal. This proposal misunderstands the way in which the process operates. It is a voluntary process and where the necessary approval of creditors cannot be obtained regarding the proposal, the process ends. There is no appeal to the court in this regard. However, the borrower could through his or her personal insolvency practitioner and where time permits under the protected certificate period propose a new arrangement which could meet with the approval of creditors.
Deputy Doherty would also require the court to instruct a lending institution to respect the terms of any tenancy agreement in place and to assume the responsibility of the landlord in that tenancy agreement. This issue has already been raised during discussions on the 2013 Act, to which I have already made reference. The Minister indicated that he would bring the matter to the attention of the Minister for the Environment, Community and Local Government, who has responsibility in respect of residential tenancies. My understanding is that this matter is now being considered by the Minister and the Office of the Attorney General in the context of the Residential Tenancies Bill 2012. That Bill is awaiting Second Stage in the Seanad having passed through this House. It is expected that any amendment on this issue would be tabled on Committee or Report Stages in the other House.
In the response I have given, I have looked to respond to many of the main legislative proposals contained in the Deputy's Bill. I know this is something other colleagues will be commenting on, as will the Deputy later on in the morning and I will respond to further points that will be made. I emphasise that many of the measures in this Bill were already discussed in the context of the 2013 Act. Some of these measures would reduce the ability of courts to take account of the specific circumstances of the families and individuals in front of them. We believe this would be counterproductive in terms of the objectives of the Bill in the first place. I would put all of this in the context of all of the measures that have already been put in place by the Governments in terms of the new targets and provisions for the banks and the way it is being overseen by the Central Bank and the setting up and implementing of the Insolvency Service of Ireland while making clear that these arrangements will be under continual review to ensure that the crisis of personal debt is dealt with in a sustainable manner.
We have a bit of flexibility because of the time situation. Ten minutes is the order but if speakers are a few minutes over that, it is allowable. Deputy Dooley is next to speak followed by Deputies Donnelly, Crowe and Mathews.
The spiralling mortgage crisis across Ireland has consumed countless families. While struggling to make ends meet and keep their heads above water, they must now confront the real possibility that their family home might be repossessed. This is thanks to last year's legislation from the Government dealing with the Dunne judgement. The continued crisis represents a personal tragedy for those families caught in the mire of debt and a grave economic challenge for the country.
Fianna Fáil supports the Bill, which will afford a greater degree of protection to homeowners against what is in effect a home repossessions Act introduced by the Government last year. This Bill makes a number of changes to the land conveyancing legislation introduced by the Government in 2013 to enable banks to repossess the homes of struggling homeowners across the country. The Government's original legislation compounded the impact of a deeply flawed personal insolvency process that tilts the balance of power completely in favour of the banks at the expense of the ordinary mortgage holder. We now need to address the impact of the Act on struggling homeowners.
If there was any doubt about the need to legislate, those of us who had the opportunity to hear the responses from the financial institutions in recent days at the finance committee were painted the stark financial picture facing many mortgage holders and homeowners, mainly through no fault of their own. It is right and appropriate that this legislation be given the consideration it deserves. Given the Minister of State's response, however, it seems unlikely that the Government is of a mind to address in a real way the struggles of the families in question.
This debate over home repossessions is taking place at a time when some banks that are partially owned by the taxpayer are paying their chief executives in excess of €500,000, while Government legislation removes the protection homeowners expect in order to keep the roof over their heads, which one would have thought was a basic principle. This issue is not without complications. Many of those whose homes will be repossessed by financial institutions will need the State to house them. It is not as if there will not be a cost to the State in addition to the cost already borne by the taxpayer. The Minister for Finance was somewhat disingenuous during Leaders' Questions this week when he seemed to suggest that, if the Opposition spoke out on behalf of those who were burdened by debt and whose homes were repossessed, we would be ignoring the role of the general taxpayer. He referred to his obligation to look after the general taxpayer. The fact of the matter is that the taxpayer has already provided the financial institutions with the capacity to meet their losses. In doing so everyone's expectation was that the banks would be in a position to sustain a certain level of write-downs. Deputy Pearse Doherty was right in that Bank of Ireland made it clear at a meeting of the finance committee this week that, regardless of the difference between what was owed and what would be realised in a forced sale, it would follow these families and individuals for the rest of their lives.
That is an intolerable burden to place on anyone's shoulders, given the fact that, to use the Minister's analogy on the generality of the approach taken by the State on behalf of the taxpayer, the financial institutions were provided with funds to shore up their capital and allow them to continue trading. I accept that Bank of Ireland is largely a private company and that the State only holds a 14% stake in it, but the State held a considerably greater portion of the bank's share capital at a time when, like other financial institutions, it was in dire straits and unable to move bonds in the international markets. This fact seems to have been wiped from the minds of the institution's board. That is deeply disappointing and the Minister would be well advised to address this issue in the course of his discussions with the bank which could have been in a perilous state were it not for the decision of the then Government to take a significant shareholding in it. The bank has been able to tidy up its balance sheet more quickly than other institutions, which is welcome and in everyone's interests, but to place an intolerable burden on the shoulders of homeowners who must vacate their homes for one reason or another is not acceptable. There must be some repayment capacity beyond which the individuals concerned would not be expected to continue paying. There must be light at the end of the tunnel for people who will no longer be homeowners but will still be burdened by that debt for a significant time. There must be a watershed, be it five or six years. Through general bankruptcy, larger individuals and companies are able to get out of debt after a set period. We must re-examine the issue.
In previous debates on the annual salary of Bank of Ireland's CEO, a matter that arose again this week, the Minister had an opportunity to show some solidarity with and understanding of the position of beleaguered homeowners. When asked about the State's voting position on the CEO's remuneration at Bank of Ireland's forthcoming AGM, he simply replied: "The State has 14% of Bank of Ireland. How we vote on this issue at the AGM does not matter. It is going to go through anyway...". This laissez-faire approach encompasses the Government's dismissive attitude towards struggling homeowners.
What are struggling homeowners supposed to think when they hear these words from a Minister? How can they possibly believe the State is looking our for their best interests and how are they expected to place any faith in or avail of the mechanisms being put in place by the State to address this crisis? Often, the tone can be set by a Government comment or position, even though it may not be in a position to force a particular outcome. It is a little like being in opposition with a relatively small number of Deputies, in that one could take the attitude that because of the size of the Government's majority, one could walk away and let it do what it wishes. However, that is not the approach generally taken by Opposition parties. I want the Minister for Finance to do likewise and at least set out a Government viewpoint, instead of taking the view that it can do nothing about something. Often, a sentiment expressed can deliver a message in a way that is far greater than one's voting rights.
Statistics published by the Central Bank on 4 March indicated that, of the 764,000 mortgages on primary residences, approximately 136,500 were in arrears on 31 December 2013, with in excess of 96,000, some 12%, in arrears for more than 90 days. Almost 31,000 mortgages secured on buy-to-let properties were also in arrears more than 90 days, representing approximately 21% of all residential mortgage loans secured on buy-to-let properties. Of most concern is the number of accounts in arrears for more than 720 days, which increased by approximately 1,700 in the last quarter of 2013, pushing more homeowners closer to eventual repossession. These statistics are exacerbated by the mortgage restructuring arrangements agreed to by banks to date with distressed borrowers. They have largely been of a short-term nature, with almost half being interest-only or less than interest-only. Put simply, these problems have been temporarily brushed under the carpet.
In their evidence this week the financial institutions have claimed that the current phase of restructuring is not contemplating these temporary proposals but more sustainable solutions involving capital repayments, the extension of mortgages life cycles, etc. What is not clear is the capacity of borrowers to meet these commitments, given the effect of any slight increase in interest rates, individual shocks or, particularly on the buy-to-let side, a continuation of the current level of rental income. There is no doubt that, as the property sector starts to show some confidence again and the banks start to lend in the more traditional way, a greater number of housing units will appear on the market, which will affect rental returns. Although arrangements are being made, I am not aware of any exercise that has extrapolated how they will perform in the future. I accept that the banks are trying to get deals in place, but I am concerned about their long-term viability.
The crisis has entered a new phase, one of repossessions, untold misery and a complete abandonment by the State of its citizens in their hour of need. No amount of half-hearted measures or spinning of figures will distract struggling homeowners from their daily reality. The much-lauded personal insolvency regime has failed to attract sufficient numbers to inspire any confidence in its ability to act as a remedy for the crisis being experienced by thousands of householders. This is against a backdrop of despair for struggling families who are simply asking for a working mechanism to relieve them of financial hardship and an economy that needs a real solution to the never-ending cycle of unsustainable debt.
The process has been fatally undermined by the fact that banks have an effective veto in the debt negotiations. The entire process is fundamentally flawed as, at its heart, it has no commitment to be independent and impartial. Instead of being an independent arbiter, the appeals mechanism the Government has created gives the banks a veto in making progress in tackling debt. The very institutions which brought the country and its people to the brink are now judge and jury over families' prospects of staying in their homes. The very people the personal insolvency regime professes to help have recognised its folly and voted with their feet.
The Land and Conveyancing Law Reform Act which the Bill aims to amend is yet another step in the direction of placing additional power in the hands of the banks. If they wield their powerful veto over any arrangement, homeowners will be left with only the final desperate option of filing for bankruptcy to save themselves. They will also face the very real prospect of losing the family home. The Land and Conveyancing Law Reform Act 2009 was sweeping legislation, reforming many aspects of land law, including ownership trusts, co-ownership, conveyancing and - this is relevant to the Bill - mortgages. The purpose in doing so was to simplify existing land law which stretched back to feudal times and to enable the introduction of e-conveyancing. The legislation was the result of a detailed Law Reform Commission project under Mrs. Justice Catherine McGuinness and Professor John Wyle. The project began in 2003, with the Bill being introduced in the Oireachtas in 2006, with all party support. Mortgages were not part of the major overhaul of a complex set of laws.
A wave of unjustifiable home repossessions across the country cannot be tolerated in any shape or form. Legislation from Dáil Éireann which facilitated such an outcome would be to the eternal shame of legislators in this House. Home ownership is of intrinsic importance to the well-being of the individual and the family. Struggling homeowners need help. To ask a large proportion of the population to participate in economic recovery when their primary concern is to stay in their homes does not make sense. The social and economic fall-out from repossession is simply unimaginable. Government indifference on this matter has prolonged the pain for struggling homeowners. Behind every single mortgage statistic is an individual or a family blighted by worry and uncertainty. Plain and simple, the people concerned need protection; they should not be left at the mercy of banks which the Government is allowing to act as they please.
I commend Deputy Pearse Doherty for introducing this Bill which seeks to amend the Land and Conveyancing Law Reform Act which was passed last year and Part 1 of which reversed the Dunne judgment. That was the judgment that meant no bank could take possession of any house. It is regrettable that the judgment needed to be reversed, but the harsh reality is that if banks were not able to take possession of a property on which money was secured, there would be no future mortgage market in this country or it would be treated as unsecured lending, in which case mortgages would have 10%, 12% or 13% interest rates attached. Unfortunately, Part 1 of the Act is a necessary evil. However, it needs to be balanced with an obligation on behalf of the State and the banks on how and when possession is taken.
Part 2 of the Land and Conveyancing Law Reform Act is essentially a version of the Family Home Protection (Miscellaneous Provisions) Bill which I introduced in 2011. It allows a judge, for the first time in the history of the State, when dealing with an appeal from a bank for possession, to consider a wide range of new criteria never before considered. The judge may adjourn proceedings, if that is considered appropriate, to allow for consultation with a personal insolvency practitioner and may instruct the personal insolvency practitioner to make a proposal. Further, the judge may consider whether the mortgager, that is, the bank, has participated in any process relating to mortgage arrears and whether the borrower has made any payment to the bank. Critically, the judge may consider the conduct of all parties before the court. The Master of the High Court, Mr. Edmund Honohan, described this change as significant. I developed that legislation with Mr. Ross Maguire, senior counsel, and I am very happy that it passed into law.
Deputy Pearse Doherty's Bill would add several criteria to the Land and Conveyancing Law Reform Act. It would allow a judge to adjourn proceedings for six months rather than the current period of three months; to insist on parties engaging in an insolvency process; to insist on the code of conduct on mortgage arrears being adhered to; and, critically, to refuse to grant permission unless the bank, the vulture fund or whoever owns the mortgage, had exhausted every reasonable option other than possession. The Bill would further allow the judge to insist on the residual debt being dealt with as part of the possession order and direct that evicted families be given sufficient time to find a new home. In the context of what is going on in this country, every single one of these proposals would be a fair and reasonable change to the Land and Conveyancing Law Reform Act.
The Government has set targets for the banks. It has told them that if they do not make a certain number of offers of sustainable restructures by certain dates, they will be penalised financially. At the time, with others, I said these targets were not only misplaced but would also be very damaging and that they were only one part of the solution. The Government has focused on the quantity of offers made, but it has done nothing about the quality of these offers or the consistency, or rather the complete lack of consistency, of these offers not only between banks but within individual banks. What is the reality of a Government that is insisting on banks hitting targets on quantity, targets they can define? Let us remember, the banks are allowed to define what is deemed to be a sustainable offer. What has happened? We heard really shocking testimony this week. The four banks that appeared before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform estimated that there would be around 6,500 evictions, based on the mortgages under consideration thus far. This estimate does not include any of the other unsustainable mortgages which they still have to examine. It does not include any of the mortgages which are unsustainable but still not in arrears and does not consider any institution beyond the four banks that appeared before the committee. As we know, there are many other banks and funds in the country, with a further two from America which are debt specialists.
What else do we know? We now know that the banks are vetoing insolvency service proposals. The insolvency legislation had promise, but it was neutered by giving the banks a veto. About 50 protective certificates have been issued to date, in the context of 175,000 mortgages in arrears. Mr. Richie Boucher, the chief executive of Bank of Ireland, told the committee yesterday that it would veto any proposal that involved any write-down of secured debt.
He is one of two chief executives who told us that.
Let us look at the offers that have been made. Four out of every ten of these so-called offers actually represent legal proceedings, while another 10% are so-called assisted voluntary sales. Let us remember that some of these assisted voluntary sales may be exactly that, but I will tell the House what a lot of the others are. They involve the bank giving customers two options, the first of which is to agree to leave the house and the bank will sell it or else it will evict the mortgage holder and charge an additional €10,000 in legal fees. Let us not forget that these so-called assisted voluntary sales are not always such. Therefore, 40% represent legal proceedings, while 10% are so-called assisted voluntary sales, representing half of the offers made so far. A further 35% of the offers made so far actually increase the total payments that borrowers will make to banks over the life time of the loan. These include interest-only arrangements, term extensions and recapitalisation of arrears. All of these propose to solve the problem of unsustainable debt by increasing that debt. About 15% or three in every 20 offers made to date by the banks that appeared before the Oireachtas committee this week involve reducing the payment burden on the family. That is the reality in not insisting on quality. That is the reality of a Government which has stated, "We will set targets, but you know best. You go off and deal with your borrowers on a case by case basis."
What could possibly go wrong with allowing a few banks in Ireland to determine what should happen in a mortgage market?
We are seeing complete inconsistency in terms of how the different banks are engaging with their customers. Bank of Ireland deserves special mention in this regard. The legal proceeding numbers its representatives brought before the committee this week were twice as high as those of some of the other banks and four times as high as the figure for Permanent TSB. Bank of Ireland's split mortgage product is a joke. It involves breaking the mortgage in two and charging the same interest rate on both halves. One half of the loan will reduce as the customer pays the capital down, but the other half will increase because the capital on that portion is not being serviced. The Bank of Ireland delegates had straight faces as they told us yesterday that splitting a loan in half and charging the same interest rate on both pieces is actually a solution to an unsustainable mortgage. The reason those four men could look us in the face and make that claim is because this Government is letting them away with it. They are being allowed to come in here and laugh at all of us. I assure the Minister of State that after the past three days of committee hearings, that is exactly what they are doing. It is what they did six months ago and six months before that.
In fairness to some of the banks and some of the people working there, real efforts are being made to address this issue. It certainly is not a case of a curse on all their houses, but Bank of Ireland stands out in all of this. When its delegates told the committee yesterday that they were willing to write down unsecured debt, I asked them about situations where there is residual debt after a sale. Say, for example, a family which owes the bank €300,000 is evicted and their home is sold for €200,000. I pointed out that the remaining €100,000 is, by definition, unsecured debt and must be accounted for as such on Bank of Ireland's books. Was the bank saying that it is prepared to write down debt in those situations? The delegates responded that because the outstanding amount used to be attached to a security, it would continue to be treated as such. They basically acknowledged that if they are so inclined, they will follow people to the grave for that money. We should bear in mind too that the outstanding debt of €100,000 will be liable for interest at 5% per year. In other words, it will cost a family in that situation €5,000 per year just to keep its debt to Bank of Ireland at €100,000.
We know that mortgages are being sold to vulture funds and it seems those funds are being allowed to pick and choose which loans they take. When a special liquidator told me and members of the media that Lone Star and Oak Tree were not being allowed to pick any performing mortgages, we asked for confirmation in writing that this was the case. That produced a change in the story. The written confirmation I have is that Lone Star and Oak Tree did buy all the non-performing loans but also some performing loans. Moreover, the anecdotal evidence we have from mortgage holders is that performing loans that are in equity have been taken by Lone Star and Oak Tree, while performing loans in negative equity are going to the National Asset Management Agency. We have a situation, therefore, where United States-based debt specialists are apparently choosing performing loans with equity and charging variable rates on those loans. I am not referring here to a single variable rate; I am saying that these entities are operating on a loan-by-loan, family-by-family basis, ratcheting up the interest rate as they see fit. If and when a family says it simply has no more money to give, that is not a problem because there is equity in the house and the family can simply be evicted.
These entities are completely unregulated. The Minister has said that if, in his view, these vulture funds are not obeying the code of conduct for mortgage arrears, he will introduce legislation to regulate them. That is an extraordinary position to take. It is like saying it is illegal to burgle all of these houses but not illegal to burgle those houses over there, but if we find that a lot of burglars are breaking into the second set of houses we will make it illegal to do so. What an absolutely preposterous position to take.
There are 175,000 mortgages in arrears in this country. Let us assume there is approximately that number again in pre-arrears, that is, people who are doing everything they can to avoid joining the 175,000 already in arrears. That combined figure equates to some 1 million men, women and children who are directly affected by this situation. It does not take account of the impact on parents or siblings who are helping their loved ones out or the impact on workplaces where, inevitably, people cannot bring their very best to their job because they are worried about whether or not they will have a home to go to at the end of the day.
The mortgage crisis in Ireland has been going on for six years. We are the only country in the world to have allowed it to continue on such a scale for so long. No other country has so spectacularly cocked up its mortgage market. The situation continues as it is because of Government inaction and because the Government is in thrall to the banks and the markets. We need a strategy to deal with the tens and thousands of men, women and children, according to the banks' own figures, who will be kicked out of their homes. We need legislation that mandates a range of solutions for borrowers. The question of whether one gets kicked out of one's home and whether one has money to invest in one's future and that of one's children must not come down to whether it is Bank of Ireland, Allied Irish Banks, Permanent TSB , Oak Tree, Pepper, Apollo or Danske Bank knocking on one's door. It is about ensuring there is equal and fair treatment under law.
The Government should accept this excellent Bill, which goes right to the heart of the power imbalance between citizens in distress and the banks they bailed out. I commend Deputy Pearse Doherty on bringing forward a timely, thoughtful and targeted legislative proposal.
I do not pretend to be an expert in this field. I am fortunate to have no personal experience of having to go through this awful process. The Minister of State referred to his constituency workload and the number of people who have sought his advice on this matter. For every elected representative, it is an issue that is continually arising. Indeed, housing is probably the greatest single source of difficulty for people at this time. This Bill represents a fair and reasonable compromise for addressing some of these issues. There is a responsibility on everybody elected to this House to legislate for the positive changes we undertook to introduce.
The finance committee heard this week that the four main banks have issued 30,034 letters relating to repossessions and voluntary surrenders. It is a frightening figure. Deputy Stephen S. Donnelly pointed out that 175,000 mortgages are already in distress. Moreover, as he pointed out, the actual figure is probably significantly higher. Deputy Timmy Dooley would probably say that a lot has been done and a lot more needs to be done. The Minister of State is saying that his Government has brought forward legislation to try to fix the problem.
However, the number of families who are coming to us seeking help shows the problem is not fixed and there is very little clarity. At a public meeting in Rathfarnham which I organised with one of our local candidates, Sarah Holland, people waited until the end of the meeting to speak to us privately about the difficulties they are experiencing. Many of them referred to a lack of support, clarity and a pathway to resolution. The lack of equality in the system as between lender and borrower and the lack of engagement by the former were a source of concern. Other people at the meeting were not in a mortgage arrears situation but were asking how they might secure social housing or get on the rental accommodation scheme. That was the picture of the housing situation that emerged from the meeting.
In St. Dominic's in Tallaght the local candidate in the European Parliament elections, Lynn Boylan, was present. Those present who had been through the system spoke about their experiences. Deputy Pearse Doherty was also present and outlined what was included in the Bill. People revealed intimate details of the mountain they had to climb. Options were outlined and reference was made to various groups that could help in dealing with the situation. Others said they had gone to the groups but they had not been of any help either and asked to whom they could turn. They go to meetings hoping to pick up information that might shine a light, indicate some way to help them to get away from the mountain of debt or find a mechanism by which they could solve the problem.
We are not living in normal times. The housing market is not normal. There is a shortage of houses in Dublin. The worry is that more and more houses will be put up for sale and that the only ones who will come out on top again are the banks that originally gave the mortgages. Many perceive the banks as having created a significant part of the crisis. There is no comfort in the Bill for borrowers who do not make an attempt to pay back their loans or engage in the process. The priority of the Bill is to keep people in their homes and protect the family home. Let us consider the options for those who lose their homes. From experience we know that social housing is not an option in Dublin. The waiting time for such housing in the Dublin City Council area is nine years and probably longer. In South Dublin County Council it is probably eight years.
Rents are increasing and there is great difficulty in the rental market. The rent supplement scheme is not fit for purpose in the Dublin area as it does not meet existing demands. The rental accommodation scheme, RAS, also has many problems, especially in the case of large families. I recently dealt with a family with five children who are not allowed to rent a three-bedroom house as it would be considered to be overcrowded. They are being put out of their home on that basis. Their options are to move into a hostel, bed and breakfast accommodation or a hotel. They are currently in a three-bedroom house but require a four-bedroom house because of their size. However, the option offered by the State is to force them into one bedroom or, possibly, avail of the dormitory option in a hostel, a hotel room or one bedroom in bed and breakfast accommodation. The system cannot adapt to meet the need and no compromise appears to be available.
The Government signed the Land and Conveyancing Law Reform Act into law which removed legal protection for the family home. We all accept that the protection offered was not ideal. It was blanket protection based on a legal loophole. Nevertheless, by removing it without a sufficient legal replacement the Government was consciously – or perhaps unconsciously - opening the door to more repossessions. That has been the result of the legislation. The Minister of State, Deputy Paschal Donohoe, is more than familiar with the figures for the letters sent by the banks. The family home requires extra protection and that is the direction in which the Bill points us. We must level the playing field between the banks and homeowners by making repossession of the family home a less attractive option for the banks. We must equalise the situation and ensure greater equality between homeowners and the banks.
Deputy Pearse Doherty’s aim is that the banks should take certain information into account on a statutory basis. The Minister of State, Deputy Paschal Donohoe, said this would fetter the courts in some way in adjudicating on the matter. The aim of the Bill is to set parameters and send a signal to the courts about what we want to happen. We want the courts to consider all options. From the information we have received, we are aware this might happen in some cases but not in others. That is the difficulty. The Bill would set parameters for the courts, but it would also create a balance. It would make it compulsory for the courts to consider whether the lender had complied with the code of conduct on mortgage arrears which had been put on a clear legal basis for the first time. The Bill would empower the courts to perform a reasonableness test on whether the banks had exhausted all possible options, including whether it had declined any proposal from a personal insolvency practitioner and complied with the code of conduct on mortgage arrears.
Before a repossession is ordered, the court must be satisfied that an arrangement is in force to deal with the residue of debt. In the event of repossession a family must be given a six-month period to arrange their affairs or nine months if they have children. We are trying to be family friendly and pro the borrower who is in the situation through no fault of his or her own. The people affected did not create the crisis. Many of them were in sustainable jobs which they thought would be for life, but, unfortunately, we are aware of what happened. It is important to make the vulture funds that have taken over some of the loan books comply with the code of conduct on mortgage arrears.
In addition to support from politicians, support is available for the Bill from some of the groups dealing with the issue on a day-to-day basis. New Beginnings welcomed the Bill. Mr. Ross Maguire said it would give the courts extra powers of responsibility in home repossession cases. He said it would two things: it would mandate the court to be satisfied that all efforts had been made to find a resolution through the MAR process or the personal insolvency process before agreeing to repossession. He said this would constitute a substantial safeguard for families struggling with debt. Second, it would force the banks to deal with the issue of negative equity through a debt write-off before repossession was granted.
The Bill contains many positives. It is disappointing that the Government cannot agree to move it forward. There is a problem, regardless of whether the Minister of State, Deputy Paschal Donohoe, accepts it. I believe he does accept that there is a problem, but he said the Bill would not solve it. Let us see the Government’s proposals. It is clear that the law, as it stands, is not working for everyone and that we need to broaden it. If the Government does not accept the Bill, surely it must bring an amendment before the House to put something else in place. Perhaps the Minister of State might give an indication of what the Government is planning to do to help families and safeguard the family home.
I thank Deputy Pearse Doherty for bringing forward the Bill. It was alluded to by Deputy Stephen S. Donnelly and a few other Members that, as elected representatives, we owed it to people to be concerned about the crisis. I am shocked that there is not one other person from the Government parties present, except the Minister of State, Deputy Paschal Donohoe. It is shocking. A total of 175,000 people across the country are in deep mortgage distress and just over 30,000 face legal action and dispossession, not repossession. The people who borrowed the money own the houses.
I ask the Minister of State if he appreciates the shame of this. I did something I should not have done, and I apologise through you, a Leas-Cheann Comhairle, to the protocols of the House. I wanted to be helpful to the Minister for Finance, Deputy Noonan, when he was taking Leaders' Questions and the Order of Business yesterday. I have here a paper that shows - from the balance sheets of all Irish-owned banks and building societies back in 2008, combined with the mathematics of limitation through fractional reserve banking and carrying that through the process of the creation of money - that the credit crisis that occurred may have been caused by the boards of directors of the banks, and probably to a lesser extent by the regulators. That is the reality. The boards of banks have a fiduciary duty to carry out a fractional reserve policy with the funds that they are licensed to take from depositors. The question is why. If one does not keep the creation of loans to within 100% of the deposits one takes in, with the addition of derivatives and other financial instruments, one creates limitless credit - a Ponzi scheme. Directors who participate, knowingly or unknowingly, in that are guilty of it. Asset price bubbles cannot occur without credit bubbles. It is physically impossible. One cannot make bread without flour, and one cannot make an asset price bubble without credit or cash. If one goes to the printing presses one gets the Weimar Republic. That is why this paper is so important. There are four pages in it, and I am glad they are in the hands of the Minister for Finance, Deputy Noonan. The Minister quips about a lot of things. The newspapers quipped that he had passed the paper over to one of his officials, saying "Put that in the bottom drawer." I suggest that he change that instruction and get it right on top of his desk. I will also present the Minister of State, Deputy Donohoe, with a copy of the paper afterwards.
It can be shown that the weighted average loan-to-deposit ratio of Irish-owned banks in 2008, when the music stopped, was 173%. The two big banks were, respectively, Bank of Ireland, at 158%, and AIB, at 155%. They provide most of the weighting in the 173% figure. One does not get to that position in the click of a finger; it takes a few years. Given the result, the boards of banks must not have had any fractional reserve policy. The loan-to-deposit ratio of 158% in the case of Bank of Ireland exceeded 90%, which is the time-honoured and time-tested anchor - the healthy position - by 68 percentage points. Sixty-eight percent as a proportion of 90% - the anchor - is 75%. Therefore, it is mathematically evident from the balance sheet that Bank of Ireland had 75% responsibility for creating the asset price bubble.
The credit that was advanced to the 175,000 customers with mortgages from the banks, including Bank of Ireland, went into a pyramid or Ponzi scheme - a credit bubble and an asset bubble. It was not their fault when the music stopped and the asset price collapsed by 50%. Seventy-five percent of that 50% collapse is for the account of Bank of Ireland. In the case of AIB, on the same basis, it is 72%. That is not my opinion; it is a fact. This paper was handed to the previous Government on 17 September 2009, the day after the NAMA listings for the different banks were produced in this House. I know that because I provided them and had been working on an analysis of the six banks' balance sheets at that stage.
One may ask how this is relevant to the 175,000 people hurting or the 30,000 facing letters from their banks. The problem is that, to use an analogy, they are like the leaves on the trees. They are scorched, distressed, in pain and in some cases taking their own lives. In addition, their children are taking their own lives. We read about the problem of bullying on Facebook, which happens when there is stress in households. It does not occur in healthy, stress-free households. I am not talking about privileged people with advantages and middle-class existences. When that healthy situation disappears because of the destruction of asset prices with the residual debt still there, one has distress in households which may once have been calm and composed. It is often those children who are doing the Internet bullying who take their lives. It is all part of a societal atmosphere.
I am mentioning these matters because I was not afforded time to do so at the hearing of the Joint Committee on Finance, Public Expenditure and Reform yesterday with Bank of Ireland. I put this to the bank's representatives and gave them this paper to consider. In light of this truth, what would their parents think of some of the decisions they are making on a case-by-case basis? I am helping out some people and I know that in some cases the banks are entirely incompetent in dealing with what they call a sustainable solution. I have 20 years' working experience in recoveries and restructuring, so I know what is involved. In each case, as with a sickness or disease, there is really only one answer. At the committee hearings the bank representatives said they had several options for each individual case, but there was only one correct option. In the case of a sick person, there is usually one - or maybe two - antibiotics that will address the situation.
The Government took this the wrong way around and did not measure the scale of the problem. Back in September 2009, I warned everybody to watch out. I said there would be losses of €65 billion on commercial land bank and development property investment holding loans. I also said there would be another €35 billion of losses in mortgage loans. That is a total of €100 billion. Yet they laughed at me and a few others. Because I had been doing this sort of work, I knew it was discernible that there was a credit bubble building up if turbo-charged lending in six Irish banks rose from a level of €200 billion in loans, which is what they had had three and a half to four years earlier, to €400 billion in 2008. That was €200 billion of turbo-charged lending in a credit and asset price bubble, so it was a certainty that €100 billion would need to be written off. That is when the grown-ups should have said "We must get a handle on this."
I will cite an example that I mentioned to Mr. Richie Boucher yesterday. At the joint committee yesterday I was given five minutes out of four hours because I voted according to my conscience on a different Bill, so I lost my position on the committee. I ask the Minister of State to please get me reinstated on that committee, because there is too much stuff that needs to be contributed in a meaningful way. To be given five minutes at the end of four hours is nothing short of absurd. The previous day, I got five minutes at the end of three hours.
I know all the witnesses who attended yesterday's meeting, including Mr. Richie Boucher, Mr. Fergus Murphy and Mr. David Duffy, from my professional background. They wondered why I was only given a five-minute contribution at the end of four hours, so I explained why that was the position. They would have expected me to have at least an equal amount of time to others on the committee. It is just not right.
I will finish quickly with a few things. Bank of Ireland has a provision of 8.8% against its total loan book of €92 billion. Ulster Bank's losses and provisions are 32%, while AIB's are 18.5%. We are led to believe that Bank of Ireland is tickety-boo.
It is public knowledge that on 31 July 2011 Mr. Wilbur Ross and his associates invested, along with others, €1.1 billion into Bank of Ireland for 35% of the bank. Given that it was 10 cent per share this meant every 1% of the bank at the time was worth - I have the figures before me and I will be quick - €31 million. Each 1% that they bought cost them €31 million. Recently, Wilbur Ross and Prem Watsa sold 6.4% of their holding, which cost them €201 million. An amount of €31 million by 6.4% in shares comes to €201 million. The sale proceeds were €690 million, representing a profit of €489 million. They were left with 12.8% of the bank, which cost €402 million. I do not believe the market value but the market price is based on small numbers of transactions. Anyway, the market value is €1.38 billion. The valuation uplift of their remaining shareholding is €978 million or, let us say, €1 billion.
Richie Boucher told us yesterday that the negative equity in the loans in distress with the bank is €2.4 billion. Let us go back to my first example. The bank caused the asset price bubble collapse. In total, 75% of €2.4 billion is €1.8 billion. There are many customers in distress with families sick and disease taking their lives at different age groups. This is their distress yet the bank has the arrogance and temerity to insist on collecting in full with no write-down this €1.8 billion, a figure which, in turn, equals the Wilbur Ross figures. It is unbelievable. One man, remote in America, who comes over here for board meetings can dictate the policy. The policy holds that the bank will not do any write-downs even though the bank caused the asset price bubble and collapse and it insists on taking all the loans back. It is so wrong and unfair it is unbelievable. "But Mr. Mathews..." - I am sorry, I should not do that-----
I am learning as I go. Mr. Boucher maintains the bank has a policy. I asked him about the policy on fractional reserving for the five years leading up to it. We did not hear anything about that. An appropriate policy would have kept everyone's deposits safe. It would have ensured that there were no stupid loans and no asset bubble because we cannot have an asset bubble without a credit bubble. That is why the reports of Watson, Regling, Nyberg and Honohan were irrelevant because they did not identify the real problem and concentrated only on the guarantee. As any honourable banker knows, the only thing that needed to be guaranteed was deposits because bonds have a maturity and cannot be called on until the maturity arises.
In that regard I reminded-----
I will give another example relating to Bank of Ireland. Does the House know what the bank's bonds in issue amounted to on the balance sheet? I am referring to senior secured bonds in 2008. Mr. Boucher could not remember but I reminded him. There was €61 billion, almost half Ireland's national income, waiting for redemption soon after 2008. How did the bank redeem them, because the bank was on a life-support system and no one really understood what was going on? The Government was clueless and the Department of Finance did not have a clue.
This is important. A total of €61 billion was redeemed. Everyone was beginning to recognise that all the Irish banks were as bust as a few of us had been saying. How did they get the money to pay back all these bonds? They got it from the euro system and emergency liquidity assistance. This is why I keep battening on and why I continue to ask the Government to batten on to try to get some credit or loan capitalisation for the banks. Why? If the banks had enough capital they would actually be writing down the loans.
The strange thing is that Wilbur Ross or his associates know that they will have to do it soon and that there will be further provisioning, because the bank is out of line with the others at 8.8% provisioning. When the bank does that, I anticipate, as opposed to speculate, that the share price will drop when they decide they must do it. When the price does drop, the speculators will come in and buy more Bank of Ireland shares but they will be buying into a good bank because it will have made the provisions.
They are throwing bones to everyone in three and four-hour hearings and so on. The real problem is not out on the leaves, although it is for those who are out in the leaves in households, those burning in agony and so on. However, the way to cure the problem is to look at the roots and the nourishment required by the tree. What health is the bank in? The banks need more creditor or euro system capital. I will add to that: the country should-----
The €25 billion in Mr. Honohan's desk of bonds replacing the promissory notes should be cancelled. If I was Taoiseach - an idea as remote as one could ever imagine - I would say "Patrick, tear those up please and I will make the call to Mr. Draghi". A total of €25 billion neutralised across Europe is a very small load for 500 million people. If we told the story truthfully and well to them they would understand that our 4 million citizens should not be carrying that €25 billion.
I commend my colleague, Deputy Pearse Doherty, on bringing the Bill before the House. Ordinarily, when loopholes in law are closed off it is deemed to be a good thing because the presumption is that a loophole in law is a negative and needs to be remedied or addressed. However, last July when the Government signed into law the Land and Conveyancing Law Reform Act, that was far from the case. As we know, the legal loophole from the judgment of Ms Justice Dunne had given, if by default, a level of protection to the family home.
Other contributors have referred to hearings in recent days in which the banks have come before the Joint Committee on Finance, Public Expenditure and Reform to report and check in with us on the targets set by the Government in respect of distressed loans and mortgage distress. As we have heard already, the four main banks have issued over 30,000 letters relating to repossessions and voluntary surrender. That is shocking, is it not? When they were before the committee previously we heard other figures that were shocking. We have now an established pattern of behaviour by the banks. It is important to state as much for the record.
The Minister of State, Deputy Donohoe, and his colleagues in government often challenge the Opposition to bring forward positive proposals. They tell us repeatedly to bring forward good ideas and maintain they will examine and consider them. Not only that, many colleagues of the Minister of State insist that they will realise them.
In simple terms, what the Minister of State has before him today is a series of good ideas. Let us go through them to clarify the position. It is a good and necessary idea to level the playing field between banks and homeowners and to make home repossession a most unattractive option and one of absolute last resort for the banks. We can all agree that is a good idea. It is a good idea to increase to six months from two months the length of time a court can adjourn a case to allow for the personal insolvency process to proceed. That is simply a matter of common sense and would represent better practice. It is a good idea to empower a judge to force parties to engage in an insolvency process and to force the banks to cover the costs. It is a good idea, in these traumatic circumstances, to insist that a process is undergone and to insist that the bank, given the disparity of wealth and power, will pick up the costs. It is a good idea to make it compulsory for courts to consider whether the lender has complied with the code of conduct on mortgage arrears. It is a very good and necessary idea to put that code on a legal basis.
That, too, makes sense. It is a good idea to empower the courts to perform a reasonableness test to check out, in other words, whether the banks have really exhausted all other options and to examine and to know whether a particular bank has declined any proposal from a personal insolvency practitioner and, as I said earlier, whether the banks have complied with the code of conduct on mortgage arrears. Those are all necessary checks.
In my opinion the best idea of all contained in my colleague's legislation is to ensure that before any repossession is ordered by a court, that an arrangement is in force to deal with the residual debt. That is not just a good idea but it is a great idea and it is very necessary. It is a must-do.
It is a good idea in the very traumatic event of a repossession of the family home to give a six-month period to families or nine months in the case where there are children or minors in the family, to allow families to organise their affairs. That is a matter of the most basic decency that we could legislate for. It is also a good idea and a necessary idea to ensure that vulture funds that have taken over some of the loan books should comply with the code of conduct on mortgage arrears if they are seeking a repossession.
I challenge the Minister of State and any member of the Government, notwithstanding the smart-aleck comment of the Minister, Deputy Rabbitte, this morning, to identify for me which of those is not a good idea. I rather suspect that the Minister of State would recognise all of those as positives. I ask why the Government would not therefore support this legislation. I did not hear the earlier comments but I am advised that a list of all the wonders of this Government in response to the debt crisis and to mortgage distress was yet again read into the record of the House. That is fair enough if the Minister of State wishes to fly the flag and to assert what he sees as the positive progress. What we actually need is a response to the proposals contained in this legislation. People who find themselves in these awful circumstances need to have something that genuinely works. The Minister of State and I share a constituency and we have been elected from the same communities, broadly speaking. He will know as well as I know that families are deeply frustrated. Many of them are at the point of despair that any of this would be dealt with in a meaningful way. For many families it seems that it is a case of, "heads, you lose; tails, you lose". The measures introduced by the Government which were introduced, I believe, in good faith, amid a lot of fanfare, have not delivered the kind of results at the pace required. That is a bald statement of fact. My colleague, Deputy Seán Crowe, referred to public meetings that he and others from Sinn Féin had organised and attended. He spoke of the human stories that are related at those meetings. I am very sure that it is not just Opposition Deputies who are hearing those narratives; I am sure that everybody elected to this place and to the Seanad has heard similar stories. The question arises as to what we as legislators do about it. I do not think on this issue - as with many others - that a Government that simply bats things back or has a sense of holding the fort to protect its own prestige because they are the ones who govern, and would reject legislation like this - that this a good day out for Irish political life nor is it an approach that is appreciated by the citizens who elect us.
I refer to those organisations that deal daily with individuals and families faced with mortgage distress and potential repossession. I instance Ross Maguire of New Beginning who says, "This Bill gives protection to all borrowers regardless of the lender. It will mean that borrowers whose loans have been sold to vulture funds are equally protected and that is to be greatly welcomed." I refer also to David Hall, the director of the Irish Mortgage Holders Association, who calls the Bill a humane and practical approach attempting to rebalance the current imbalance that exists when banks move to repossess family homes. Those are the voices and words from those organisations in the front line who deal with these scenarios every day. Unlike us, their organisations intervene to try to give a level of resolution to families in these circumstances. They support this legislation. The big question for me is why the Government will not support it. If the Government does not support it, I ask it not to aggravate the Opposition further with the constant refrain of: "Ye never come up with anything positive and if you do, we will support it." Here is a series of great ideas and an excellent Bill, a good piece of legislation and I challenge the Minister of State and the Government to give it the support it deserves.
I thank all colleagues for their contributions to the debate and I will respond in the same vein. In reply to Deputy McDonald, I do not know whose contribution she was listening to this morning but she was not listening to mine. I made it very clear that I am acutely aware of the strain this is causing people because I meet them so regularly. I am acutely aware of their difficulties. When I was outlining the Government's actions I did so in the framework that while progress has been made in some areas we are deeply conscious of the magnitude of the crisis and how much remains to be done. We have put in place a framework to respond to this crisis that is showing some important signs of progress but we are conscious of the strain on people. I agree with Deputy Mathews that the consequences for families-----
-----includes strain, sickness and worry. We are conscious of what needs to be done. We have put measures in place and we will continue to evaluate how they are performing and make changes if proved necessary. I do not recite the figures with any sense of looking to take credit for them. I know the great effort being made by people to deliver the figures which have been referred to. We still find ourselves in a situation that out of the 695,000 mortgages in the country, 583,000 are not in arrears and are being serviced by the strain and work of those who are meeting the circumstance and the demands-----
As I said in my contribution this morning, the Government is focusing on those people who find themselves in these situations either through no fault of their own or at least very little fault on their part. I emphasised the figures at the beginning of my contribution and I will emphasise them again. These figures show the engagement and the agreements reached to date. A total of 59,668 agreements have been made which is an increase of just under 8,500 compared to the situation at the end of last year. The people for whom restructuring arrangements have not been agreed who bought properties at a time when neither the property market nor the banks were being regulated, made decisions in very good faith and with the best information available to them. We are doing our best to respond.
I will deal with the points made by various speakers.
Deputy Timmy Dooley highlighted the various things which could cause a further deterioration of the position on mortgages. It is worth pointing out that there are a number of factors which could materialise and improve the position in the context of what might happen in the real economy. Not least among them is people's ability to be paid more for the work they do.
Deputy Stephen S. Donnelly stated we focused on quantity as opposed to quality. If we had not set targets in the context of the response to the crisis, Opposition Deputies would be in a position to pose legitimate questions as to why we had not done so. The targets were set in order that we might respond to the crisis. If they are not met, sanctions can be imposed on the banks.
Deputy Seán Crowe was correct to point out that we were already experiencing huge difficulties in the provision of social housing. He also referred to the position on waiting lists, a matter of which I am aware. He made a further point - I am surprised others did not raise it - about the difficulties people were continuing to experience in identifying a single individual with their bank who had responsibility for dealing with them on an ongoing basis. Some banks are operating well in this regard, while others continue to fail to meet their obligations. This is a matter with which we must deal.
Deputy Peter Mathews made a number of comments to which I would love to be in a position to respond in detail.
Perhaps I might have an opportunity to deal with the points the Deputy raised at some future date. In the context of his analysis to the effect that an asset price bubble can only happen when there is a credit bubble, I must point out that lack of supply, not just what is happening at the demand end of the equation, is also a major factor in driving the development of asset price bubbles.
I am responding to the points the Deputy made and it is up to him to decide whether he wants to listen to what I have to say. In view of his continual requests for dialogue, I would have thought he might be interested in my response.
From my recollection of the contents of the reports compiled by Regling and Watson, Professor Honohan and others, the Deputy is correct to state they place a great deal of focus, as should have been the case, on the banking guarantee. I also recall that some of the reports examine the events leading up to its introduction.
A number of Deputies have asked why we are opposed to the Bill. There are two legislative based reasons for our opposition. I again recognise the work done by Deputy Pearse Doherty and his colleagues in drafting the Bill, but I must highlight the two main reasons for our opposition to it. The first is that the proposed amendment to section 2 of the 2012 Act would undermine the ability of the courts to recognise people's individual circumstances and request that arrangements be put in place for them. We are also of the view that the proposed amendment would place a limitation on the ability of the courts to do the work envisaged for them in the Bill. We are of the view that if the amendment were to be accepted, it would open the arrangements that would be reached to legal challenge. In the light of what the Bill seeks to do, this would prove completely counter-productive.
The second reason to which I refer is that account is not taken of the fact that the courts already recognise the role played by the CCMA, that they examine the position of lenders seeking to repossess principal private properties and that they ask whether the latter have acted in a way which is in accordance with the code. There are a number of reasons we are opposing the Bill, but I have focused on the two main ones. As the Minister for Justice and Equality, Deputy Alan Shatter, stated, we will continue to evaluate the laws and services in place in order to ensure the crisis relating to personal debt will be dealt with in a way that is fair both to the people unfortunate enough to have been affected by it and the broader interests within society.
I thank the Minister of State, Deputy Paschal Donohoe, and Deputies Timmy Dooley, Stephen S. Donnelly, Seán Crowe, Peter Mathews and Mary Lou McDonald for their contributions.
When I heard that the Government intended to reject the legislation, I was disappointed, as I could have brought forward a much more robust Bill. I could have revisited the personal insolvency legislation and sought to remove the veto of the banks. However, I did not do so because I knew the Government would oppose me. As a result, the legislation before the House would not prevent family homes from being repossessed. That is despite the fact that many Members believe family homes should not be repossessed at this point. We did not bring forward a Bill of the kind to which I refer because we knew the Government would object to it. We decided instead to introduce the Bill before the House which seeks to put in place stronger protections for homeowners and rebalance the scales in favour of homeowners and against the banks. Other contributors have acknowledged the fact that the gladiators on the front line who are taking on the banks on behalf of distressed mortgage holders - the Irish Mortgage Holders Organisation, New Beginning and others - recognise that this needs to be done because the scales have been completely tipped in favour of the banks.
I am not sure whether the Minister of State is aware that repossession does not happen on a voluntary basis. It happens against the homeowner's will. People are having their houses repossessed without being given access to any form of legal representation. They are obliged to go to court and do not know what is going on because they have no legal representation. As stated, there are massive delays in providing free legal aid. Those on the front line have informed us that people are going before the courts without any legal representation whatsoever. It is for this reason that we believe judges must adjourn cases involving people at risk of losing their family homes to their banks, as a result of repossession, and who have not gone through the personal insolvency process. Judges should adjourn such cases and instruct those involved to partake of the process to which I refer. As stated, a bank should not be able to repossess someone's home without all of the other available options being exhausted first.
The Minister of State has indicated that what we are seeking to do would limit the options open to the courts. Perhaps we should limit these options. We are talking about individuals who may be scared out of their wits because they are being brought before the courts - perhaps for the first time in their lives - by the various banks, vulture funds, etc., and their legal teams in order to have their homes repossessed. Perhaps we should legislate to oblige judges to adjourn proceedings in such cases and encourage those involved to consult a personal insolvency practitioner, PIP. The Minister of State did not deal with the second part of the legislation. The 2012 Act makes provision whereby a judge may do as I am suggesting. However, I presume this might be at the request of the individual involved and that he or she might not be in a position to make such a request as a result of a lack of legal representation.
The other point to make in this regard is that the banks would be obliged to cover the costs involved. As a result and in circumstances where someone's family home was being repossessed and the judge adjourned the proceedings and directed him or her to consult a PIP, the bank should cover the fee. That would be fair and practical. If, after all, a judge rules that the person should lose his or her home, he or she will be put out onto the street. The Minister of State did not comment on that aspect, but he did state the possibility of the options open to the courts being limited was one of the main reasons the Government was opposed to the legislation.
The Bill recognises that in the case of repossession of rental properties, tenancy agreements must be upheld. This is something about we have been asking the Government to take action for a number of years and the Minister of State indicated that it might be dealt with in the Seanad in the context of another item of legislation. Regardless of this, what really scares the life out of me is that the Government has not outlined any step it proposes to take in order to deal with the issue under discussion. I reiterate what I said earlier, namely, that 30,034 letters seeking voluntary surrender or legal repossession of people's homes have been issued. That means that there are 30,034 reasons the Minister of State should be indicating that while it has some issues with the Bill, the Government supports it. If it has misgivings, they could be dealt with on Committee Stage.
I do not mind if the Bill is strengthened and improved or if things must be deleted. We will deal with that issue. There are people, however, who face the repossession of their family homes and are scared out of their minds. It is not only their financial but their mental health that is at risk. I have met them. We must stand up and take notice of this. When the banks were last before the Joint Committee on Finance, Public Expenditure and Reform, we were told that 15,000 letters seeking repossession or voluntary surrender had been sent. This figure has increased to 30,000 after only six months. The reason for the increase is the Land and Conveyancing Law Reform Act 2013, which has allowed banks to proceed in this way. I welcomed the Government's setting of targets, but what has happened is that banks have been allowed to issue these letters as a way of reaching them. It is not just me saying that. Ulster Bank told the committee that if the easiest way to reach the target was to issue legal letters, that was what it would do.
The Minister of State has told us, as we have heard before, that the Minister for Justice and Equality, Deputy Alan Shatter, will keep the Personal Insolvency Act under review. The Minister is completely distracted by his personal scandals involving GSOC and the bugging system and has his eye completely off the ball. If we had a Minister reviewing the matter who was on top of his game, we would not have this. It did not take the committee to bring this out. The Minister should have known about it, given that two of the major four lenders intend to veto every single proposal coming from a PIP that involves secured creditor write-down, yet we still hear that the matter will be kept under review. Alarm bells should be ringing loudly in the Departments of Justice and Equality and Finance. Maybe the Government's eye is not completely off the ball. Maybe it is willing to be a spectator in this game where the banks are let off the leash, mortgage holders are put at their mercy and a couple of individuals who have come together in different organisations are there in the middle of the mess trying to represent tens of thousands of people.
The Minister of State said the targets were a great success. I do not deny his figures on concluded solutions. Bank of Ireland said yesterday that of its concluded solutions, 1,000 involved repossession or voluntary surrender. The Minister of State did not mention that. He did not mention that in a large number of cases the parties to these concluded solutions are people who are forced to give up their family homes. He did not mention anywhere in his contribution the fact that 30,000 letters have been issued seeking legal repossession or voluntary surrender, a large number of which relate to family homes. The targets are not working. No bank would have met the targets if it had not been for letters seeking repossession. Bank of Ireland, AIB, Ulster Bank and permanent tsb would have failed miserably if it were not for that. The Minister keeps telling us that banks should not be using these letters to achieve repossession, but he hides behind the Central Bank. It is time to stand up for ordinary people and Irish interests.
The Government heralds the personal insolvency legislation as the other revised measure. The Minister of State said he disputed my claim that it had no effect, which was not true. I did not say it had no effect. Sinn Féin voted for the personal insolvency legislation. It is important to reduce the bankruptcy term to three years and implement a system to deal with multiple creditors. However, we have major issues with the legislation, one of which is the fact that banks retain a veto. A second issue is that there is no public personal insolvency, with the result that many people cannot avail of the provisions of the Act because of the fees. Yet the Minister of State heralds the service as the bee's knees. The Minister, Deputy Alan Shatter, told us last year that he expected 19,000 cases to come before the personal insolvency service in its first 12 months of operation. In the first seven months, there have been 523 cases. The Minister of State heralds this as a way in which the Government is dealing with the mortgage crisis. The insolvency service has resolved four mortgages. I emphasise the number - four. We must pull our heads out of the sand and start to talk about reality.
The Minister of State referred again and again to the stress, strain and misery that people are experiencing. I know he is genuine when he says that. However, he cannot be genuine in those comments and then say "We are going to do nothing about it." The system is broken. The banks have abused the targets and are seeking repossession knowing the Government has adopted a hands-off approach. The personal insolvency system is broken. Richie Boucher, one of the most arrogant CEOs of any bank to have come before the joint committee, is telling us he will veto every single proposal. Ulster Bank says the same. I am sure the vulture funds will follow suit. It is broken and we need to fix it. The House has a responsibility to act in the interests of the people.
Members have spoken about the inconsistency of approach among lenders. There should be certain proposals that all lenders offer. Sinn Féin recognises that repossessions will take place in a normal market. When they take place, the residual debt must be dealt with. It is unacceptable and unforgiving of the Government to allow banks to take family homes from people while leaving them with €100,000 or €200,000 of residual debt. A Deputy mentioned that where there was a residual debt of €200,000, €10,000 a year must be paid to the bank to maintain the debt for the rest of a person's life. There is no home there.
AIB has made it clear that it will deal with the residual debt at the time of agreement. None of the other banks has. If the Minister of State was genuine in relation to his comments on the strain, stress and misery and on resolving this, he would support our genuine attempt to deal with it. Our proposal is supported by those on the front line. The Government should reconsider its position before we vote on this on Tuesday and allow the Bill to go to Committee Stage. The system is broken. This is one way to fix it in the most severe cases in which repossession is being threatened. There are many other issues to be fixed, including mortgage-to-rent arrangements. Sinn Féin will come at this not in an adversarial way but by trying to do what is best on behalf of the Irish people. We wish the Government would meet us halfway.