Stephen Donnelly (Wicklow, Independent)
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3. To ask the Minister for Finance his views that bank profit on individual restructured mortgages, including those where banks are seeking possession, should be capped at the expected level under normal payment of the mortgage; if so, if he will legislate accordingly; and if he will make a statement on the matter. [13255/15]

Stephen Donnelly (Wicklow, Independent)
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This question concerns the fact that in many restructurings of distressed mortgages, banks are making more money than they would have had the mortgage not been restructured. For example, the Committee on Finance, Public Expenditure and Reform went through the Bank of Ireland's restructures. The bank's chief executive admitted that in at least 90%, and probably a lot more, of the mortgages the total amount being paid back by the borrowers was more. Therefore, term extensions and capitalisation of arrears led to more. It is particularly depressing right now with the courts becoming filled up with orders for repossession from banks. We are aware that in many cases the banks are making more money out of these mortgages than they would have had they been functioning normally. Does the Minister agree that this should not be happening and, if so, can he legislate accordingly?

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for his question.

The Consumer Protection Code and the Code of Conduct on Mortgage Arrears, CCMA, have in place a number of measures to protect financial consumers. On a general level, regulated lenders are required, in their interaction with their customers, to act honestly, fairly and professionally in the best interests of their customers. Utilising the mortgage arrears resolution process, there is a requirement on the lender to assess each case of mortgage difficulty on its own merits and also to proactively work with the borrower in order to address a case of genuine mortgage difficulty.

If a borrower is dissatisfied with the decision of the lender in this area, the appeals framework as set out in the CCMA will be available. Also, where appropriate, independent financial advice will be available to the borrower under the protocol for independent advice to borrowers availing of long-term mortgage forbearance.

Specific provisions in the CCMA, which are designed to protect borrowers in genuine mortgage difficulty, include that except in the very limited circumstance set out in the CCMA, a lender must not require a borrower, as part of an alternative repayment arrangement, to change from an existing tracker mortgage to another mortgage type; and lenders are restricted from imposing charges and-or surcharge interest on arrears arising on a relevant mortgage in arrears unless the borrower is not co-operating. While it is unfortunate that there are cases of mortgage difficulty and that this gives rise to certain difficulties and costs for the parties involved, it is nevertheless a very welcome development that many parties are in a position to agree and put in place sustainable alternative arrangements in order to address such a difficulty. The latest data from the Central Bank and my Department indicate that an increasing number of mortgage restructures are being put in place in order to deal with mortgage difficulty with almost 115,000 principal dwelling house, PDH, accounts being classified as restructured at the end of December. It is also encouraging to note that 85% of such accounts are deemed to meet the terms of their current restructure arrangement. I would encourage lenders and borrowers in difficulty to continue to build on this and to reach acceptable and sustainable solutions to mortgage difficulty.

Stephen Donnelly (Wicklow, Independent)
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I hope the Minister will agree that the answer which was scripted is boilerplate stuff and does not address the question I raised, which relates to the fact that the majority of restructures increase the level of profitability to the bank from the restructures, although not in all cases. As an example, the chief executive of Bank of Ireland has admitted to the committee on the record that more than 90% of Bank of Ireland restructures result in higher overall payments to the bank. For a great many restructures, including repossessions, the banks are making more money than had the loan been discharged. Let us ignore the CCMA and other such considerations, but, as a principle, does the Minister agree that in those cases the banks should not end up with a higher profit than had the loan been discharged normally? If the Minister agrees with that, would he be open to exploring legislation with the committee to that effect?

Michael Noonan (Limerick City, Fine Gael)
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I will outline the remainder of the reply which I did not have time to read. In relation to the proposal suggested by the Deputy, I am not convinced how workable a solution it may be, but it appears to be the case that many of the properties that banks are moving to repossess have been carrying arrears for some significant period and would be sold for a lower valuation than the original mortgage.

Mortgage arrears is, however, an area that remains under continual review. More and concerted action can be undertaken by the banks to assist customers in arrears and as the Taoiseach has previously announced, my Department is considering a range of options to support the existing framework and to improve the uptake of personal insolvency solutions.

Stephen Donnelly (Wicklow, Independent)
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Perhaps I could ask the Minister to stop reading out the prepared stuff from the civil servants because it does not address the question I asked, which is whether he as Minister for Finance believes that, as a principle, the banks should not make additional profits on restructured mortgages. If he agrees with that as a principle, would he be open to working with the committee to draft legislation to that effect? This is something Government Deputies and people within the banks have raised. It is a principle that says the banking sector is partly responsible for what happened and it should not make excess profits on irresponsible lending. They are making profits on the arrears, recapitalisation and term extensions. They are making additional profits over and above the expected net present value of the loans. Should we, as elected representatives, say it is fine for the banks to make the money they would ordinarily have made but they cannot make additional profit on the behaviour that caused the problem in the first place?

Michael Noonan (Limerick City, Fine Gael)
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The Deputy is expressing a very narrow view of profitability. It seems to me that if a lending institution has a mortgage in arrears, for the period of the arrears it is losing a lot of money from the original contract position. I am not sure what Deputy Donnelly is saying about profits. The restructuring should help both parties, the borrower and the lender, and it should arrive at a new position which is sustainable. I cannot see where the argument arises that this leads to extra profits for the bank, unless the Deputy is arguing that when the mortgage is in arrears, its saleable value is so low that only that amount should be realised by the bank-----

Stephen Donnelly (Wicklow, Independent)
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No.

Michael Noonan (Limerick City, Fine Gael)
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-----not the nominal value of the mortgage.