Dáil debates

Tuesday, 16 December 2014

Family Home Mortgage Settlement Arrangement Bill 2014: First Stage

 

5:35 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I move:

That leave be granted to introduced a Bill entitled an Act to provide for the enactment of a Family Home Mortgage Settlement Arrangement by the Insolvency Service of Ireland to assist mortgage holders in arrears.
I am pleased to introduce the Bill on behalf of the Fianna Fáil Party. The issue of mortgage arrears has slipped down the political agenda in recent months and listening to Government spokespersons, one would think the issues involved had been resolved. In reality, the number of people in serious mortgage arrears continues to soar. A total of 37,484 owner occupiers are more than two years behind in their mortgage payments. This category constitutes 32% of all accounts in arrears and account for 73% of the arrears outstanding.

Nearly 50,000 legal actions, which may result in repossession notices, have been issued on behalf of the banks. This is a problem that will come into sharp focus again in 2015.

Our intention with this legislation is to help families and individuals who have fallen behind on their mortgages to put in place an arrangement with their bank which will allow them to stay in their homes with a sustainable monthly mortgage repayment. Central Bank data shows that two-thirds of those in arrears are in employment, indicating that it should in most cases be possible to put in place a payment arrangement that is sustainable and manageable for the individual concerned. It is important that we examine carefully the data relating to mortgage arrears. A total of 109,000 mortgages have been restructured to date and 82% are meeting the terms of their arrangements. However, this should not be interpreted as a measure of sustainability, as not all restructurings represent genuine long-term solutions.

On foot of a suggestion I made earlier this year, the Central Bank is now publishing quarterly data on which restructuring arrangements are working best. The variation in performance across the different restructuring options is quite stark. It shows clearly that the split mortgage arrangement is likely to be the best means of dealing with a mortgage that has fallen into arrears. It is significant that, according to the data supplied by the Central Bank, split mortgages are working in 94% of cases. The most common arrangement - arrears capitalisation, where the arrears are simply added to the overall balance and spread throughout the remainder of the mortgage term - has a 32% failure rate. This is not surprising, given that it does not tackle the underlying reason why the mortgage fell behind in the first place.

This piece of legislation seeks to tackle the current haphazard and inconsistent manner in which arrears are tackled. At the moment, the Insolvency Service of Ireland, which was set up under the Government's personal insolvency legislation, is being completely under-utilised. Only 800 cases were processed in the first year, when the number was expected to be 15,000. We would utilise the insolvency structure that is already in place in order to allow people who have fallen into arrears to get an order specifically relating to the family home. This is very important, as it ensures that there are no additional costs imposed on the State from the setting up of a new structure. Under our proposal, the mortgage holder would be represented by a personal insolvency practitioner, who will bring a proposal before the courts. There is a range of orders that the court can make, including a split mortgage or debt-for-equity arrangement. In parallel, we are suggesting that a system of State- and creditor-funded insolvency practitioners be established. These practitioners would take on cases in which the debtor's repayment capacity is so impaired that existing personal insolvency practitioners are unwilling or unable to do so. Our legislation would allow a judge to take a range of information into account when considering a proposal put before a court by a personal insolvency practitioner.

The family home mortgage settlement arrangement would have the effect of diluting the power of the banks to dictate the nature of arrangements for mortgages in arrears, allowing the making of an order for the best possible restructuring arrangement to be put in place. We have built safeguards into our proposals to strike a balance between the reasonable interests of borrowers and lenders, including the mortgager. They may enter a family home mortgage settlement arrangement only once, must have exhausted the appeals process as set out in the code of conduct on mortgage arrears, must have completed a prescribed financial statement and must have made a statutory declaration confirming that the statement is a complete and accurate statement of the borrower's assets, liabilities, income and expenditure.

I am confident that if our proposals are adopted there will be a considerable improvement in the current situation, with a much higher proportion of successful restructuring arrangements being implemented. It would put the interests of the mortgage holder at the centre of the process and act to dilute the control that banks currently have over the process. I look forward to debating the Bill on Second Stage at the earliest opportunity.

5:45 pm

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Is the Bill opposed?

Question put and agreed to.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Since this is a Private Members' Bill, Second Stage must, under Standing Orders, be taken in Private Members' time.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I move: "That the Bill be taken in Private Members' time."

Question put and agreed to.