Dáil debates

Thursday, 2 October 2014

Ceisteanna - Questions - Priority Questions

Mortgage Arrears Proposals

9:45 am

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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3. To ask the Minister for Finance the recommendations from the July report of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform on the mortgage crisis that he intends to enact; and when he will enact same. [37397/14]

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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The Oireachtas Joint Committee on Finance, Public Expenditure and Reform held a long session earlier this year on the mortgage crisis. We met the chief executives of the banks, the Insolvency Service of Ireland, the official assignee, the Governor of the Central Bank and various organisations working with people in mortgage distress. The committee produced an all-party report in July of this year. The committee has 28 members and the report received unanimous support. One member declined to vote, not because he objected to the recommendations but on other ideological grounds. It is a strong all-party report. There are 47 recommendations in the report, which deal with sustainability, consistency, administrative and legal issues, communication and transparency issues, specific types of restructure, some that are not working, changes that should be made to some, new ones that should be brought in, the mortgage-to-rent scheme, the appeals process, the insolvency service and so forth. It made some serious recommendations about things that needed to change. Has the Minister read the report? I would very much like to engage with him at length in committee about this. Is he considering the recommendations with a view to implementing them and, if so, could he give us an idea of when we might start to see the changes take place?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I note the recommendations contained in the report of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform on mortgage arrears. I understand that the Governor of the Central Bank will write to the committee shortly regarding the recommendations contained in the report.

I have informed this House previously that the Government has developed a comprehensive cross-departmental strategy in this area in line with the main recommendations of the 2011 Keane report. The implementation of this strategy is overseen at Government level by a special sub-committee which is chaired by the Taoiseach and at official level by a mortgage arrears steering group which is chaired by the Department of Finance. A number of key measures have been advanced in this regard. The first is an intensification by the Central Bank of its engagement with mortgage lenders to require them, under the mortgage arrears resolution targets, MART, process, to propose and conclude sustainable and durable alternative arrangements with their customers in mortgage arrears. Targets have been set to the end of 2014 and by this date the relevant banks covered by the MART process will be required to have proposed sustainable solutions for 85% of mortgages which are more than 90 days in arrears and to have concluded solutions with 45% of such mortgages. Other measures include: significant reforms to personal insolvency and the establishment of the Insolvency Service of Ireland to provide more accessible and flexible statutory frameworks for people with unsustainable personal and mortgage debt; updating the code of conduct on mortgage arrears to provide additional safeguards for co-operating borrowers while also promoting and encouraging efforts by both lenders and borrowers to meaningfully address mortgage arrears or pre-arrears; the application of mortgage-to-rent schemes, which are now available as a social housing response to allow people to remain in their houses where possible; and the provision of an independent mortgage information and advice service.

The Central Bank's latest publication in this regard, Residential Mortgage Arrears and Repossessions Statistics, for the end of quarter 2, 2014, shows that the number of mortgage accounts for principal dwelling houses, PDHs, in arrears fell for the fourth consecutive quarter. At the end of June 2014, a total of 90,343 PDH mortgage accounts, or 11.8% in total, were more than 90 days in arrears. This represented a decline of 3% over the quarter. The data also shows that almost 102,000 PDH mortgage accounts were classified as restructured and, of these, 81.2 % were deemed to be meeting the terms of their current restructuring arrangement.

Additional information not given on the floor of the House

Separately from Central Bank quarterly reports, a monthly reporting regime on mortgage restructures and arrears for the six main banks covered by the Central Bank's MART process has been put in place by my Department. The latest publication, with data for the end of July 2014, shows that the number of PDH mortgage accounts in arrears of greater than 90 days has fallen by over 7,100 when compared to the end of the first quarter, while the total number of PDH accounts in mortgage arrears has fallen by 8,845 in the same period.

Taken together, the overall strategy and framework is in place to enable banks to work with distressed homeowners to reach sustainable solutions for dealing with their personal indebtedness situations. Nevertheless, relevant Departments and agencies will continue to keep the position under review and can make any further adaptions to the overall framework as considered appropriate. However, early and effective engagement between borrowers and lenders remains key to resolving most cases of mortgage difficulty. Where there is effective and meaningful engagement by all parties regarding a mortgage in difficulty, the data shows that an increasing number of durable, long-term mortgage restructures can be and are being put in place.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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I do not think I heard a single word in that reply that answered the question I asked. I asked what measures from the report of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform the Minister intends to enact.

10 o’clock

In response, the Minister said the Governor of the Central Bank will write to the finance committee and then he spoke about the Keane report and mortgage arrears data. The committee report was written in light of the Keane report and it concludes that the current process, including the points listed by the Minister arising from the Keane report, is not working. A total of 47 separate recommendations are made for what needs to happen above and beyond the Keane report. Specific to the question I asked on the 47 recommendations from the cross-party finance committee report from July, which of the recommendations does the Minister intend to enact and when will that happen?

9:55 am

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Some of the recommendations are applicable to the Department of Finance and others are applicable to the Central Bank and the banks themselves. Of those that are applicable to the Department of Finance, recommendation 2, for example, states that the committee rejects the Central Bank’s general acceptance of legal solutions as “sustainable” and requests the Minister for Finance to intervene. The strong view of the Government is that in respect of co-operating borrowers under the mortgage arrears resolution process, repossession of a person’s primary home should only be considered as a last resort. Every effort should be made to agree an acceptable arrangement as an alternative to repossession. I assure the Deputy that both my Department and I have expressed that view to lenders and keep in regular contact with them on this important issue.

Recommendation 20 is another one that applies to the Department of Finance. It calls for promised legislation on the code of conduct on mortgage arrears to be progressed with the utmost urgency. I am committed to bringing forward legislation that protects consumers where mortgages are sold to unregulated entities. The Government has reiterated the commitment on several occasions. In July and August of this year my Department ran a public consultation seeking views on its proposed legislation to protect consumers whose loans are sold to unregulated entities. We got 18 submissions from a range of respondents across the interest groups. Officials in my Department are carefully considering the submissions. It is anticipated that the legislation will be published before the end of the year.

Recommendation 35 also applies to the Department of Finance. The committee notes the success of the pilot initiatives financed by AIB whereby independent advisers to customers in arrears facilitate re-engagement into the resolution process. There was a recommendation from the committee to expand on the process. The Government has provided an enhanced range of information and guidance services for mortgage holders, including a dedicated information website, a mortgage arrears information and advice helpline and the provision of independent financial advice for mortgage holders who are presented with long-term mortgage resolution proposals by lenders. The advice is provided by a panel of accountants drawn from members of the main accountancy institutions in Ireland who have agreed to participate and support their independent service.

Recommendation 37 is another one that is applicable to the Department of Finance. The committee welcomed the publication, monthly by the Department of Finance, and quarterly by the Central Bank, of mortgage arrears figures but noted the differences between the figures and recommended that both parties would liaise to produce an agreed uniform set of data.

The Department has requested the six main lenders operating in Ireland that fall within the Central Bank mortgage arrears resolution target process to provide data on the restructuring situation. The process is separate from the Central Bank and the two sets of figures will not always match. A number of recommendations are applicable to intervention by the Central Bank and the Governor has committed to writing to the committee, which can discuss the range of recommendations with him.

If the implication of the question is that we did not take the report seriously, that is not the case, as we did. I did read the report and thought it was very good. There is much material in it that will assist the situation.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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There was no implication that the report was not being taken seriously. The question that was asked in good faith was about the provision of an update.

I accept the Insolvency Service of Ireland, ISI, comes under the remit of the Department of Justice and Equality but is a key component of what is happening under the remit of finance, namely, the mortgage crisis. Four of the recommendations in the report relate to the Insolvency Service. We have compelling data, and we saw during the investigation, that the Insolvency Service is not working. It has processed approximately 27 or 47 personal insolvency arrangements, PIAs, but relative to the scale of the problem it is as good as zero. I appreciate that the review of the service will be conducted by the Minister for Justice and Equality, Deputy Fitzgerald, but would the Minister be happy for a review to take place? The previous Minister for Justice and Equality, Deputy Shatter, said that if the system did not work then it would be reviewed straight away. In his remit as Minister for Finance looking at the impact the service is having or not on the mortgage crisis, would he like to see a review of the insolvency legislation to get the ISI and the insolvency process working better?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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It is not working as well as we had hoped but it is working. The number of cases being processed is accelerating. There are blockages within the system. A review is incorporated in the insolvency legislation but that is about two years’ down the line. Provision has been made for it in the Act but we need a more immediate review to see whether we can remove blockages. That work is proceeding, and I have come across recommendations from the director of the Insolvency Service of Ireland. There will be changes in processes, protocol and regulation but they will not require legislation. That should remove some of the perceived blockages from the system. If legislation is necessary it would come about as a result of the later review which is provided for under statute.