Dessie Ellis (Dublin North West, Sinn Fein)
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As the Minister of State knows, we are in the middle of a major housing and homelessness crisis which the Government is failing to address. In the midst of all of this, the Government is complicit in the sale of mortgages by Permanent TSB. The state is a major shareholder, owning 75% of the bank. The bank was bailed out by taxpayers’ money to the tune of €4 billion. Permanent TSB recently sold its Project Glas loan portfolio to Start Mortgages, an affiliate of the vulture fund, Lone Star. This portfolio contains 10,700 home loans that were originally considered by the bank to be non-performing. Of these 10,700 home loans, 7,400 are owner-occupier mortgages and 3,300 are buy-to-let properties. However, it has since emerged that the portfolio also includes performing loans. We are not talking about people who have mortgages and have not paid them in ten years; we are talking about people who are genuinely paying their mortgages and have painstakingly made prior arrangements with Permanent TSB which they have adhered to.

Sinn Féin was opposed to this sale and we called on the Government and Permanent TSB to stop it. The bank, being 75% State owned as well as having been bailed out by the State, should not use vulture funds to evade its responsibility to these people and nor should the Government, as its primary shareholder. A typical example of these cases, which came to the attention of my constituency office recently, is that of a husband and wife who have resided in their house in Finglas for more than 20 years and who have their four children and a grandchild living with them. One child is disabled. The husband is in full-time secure employment, he has a mortgage of just over €100,000, and he has an agreed amount to pay per month and is currently up to date with his repayments. In fact, the husband has offered to increase his payment from the agreed amount to pay off what he still owes in a shorter time.

If their house is repossessed, a family of seven, including a disabled person, will be made homeless. This individual has had his mortgage sold to this vulture fund and it is causing him and his family great uncertainty and distress. Based on the cases I have received representations on in my constituency office, Permanent TSB has been duplicitous in not adhering to these arrangements by agreeing to sell the mortgages to these vulture funds. The bank said that if a borrower has agreed a restructure or an alternative payment arrangement and that they have consistently made payments in line with the terms of the restructure, then these terms will be honoured by Start Mortgages. What guarantee do we have that Start Mortgages will honour these arrangements made with borrowers and that no one will lose their homes? Additionally, another solution is that Permanent TSB could have looked to the local authorities to put in place a buy-to-rent scheme.

We need answers on this. There is a responsibility on the Minister of State and the Government to address this issue. What has the Minister of State done to address this issue?

Michael D'Arcy (Wexford, Fine Gael)
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Since the onset of the financial crisis, progress has been made by the banks in reducing non-performing loans, NPLs, from their peak. NPLs at the banks in which the State has invested have reduced by approximately 70% from €54 billion in 2013 to €16 billion at the end of June 2018. This reduction includes the recently announced sale of a portfolio of NPLs by Permanent TSB, namely Project Glas. A major contributor to this progress has been the number of mortgage restructures the banks have agreed with their customers. At the end of June 2018, almost 136,000 mortgage restructures were in place throughout the system covering private dwelling homes and buy-to-let facilities.

Despite this progress, the NPL ratios of the banks remain at an elevated level and are well above the European average of 4%. Permanent TSB is a particular outlier in this regard with a ratio of 25% before the Project Glas loan sale. Given this position, the banking regulatory authorities have tasked the management and board of each institution with developing and implementing a strategy with the expectation that they will reduce their ratio towards the European average. Given the scale of the reduction required, it is unfortunate but inevitable that the recently announced loan sale was a necessary action taken by Permanent TSB. The consequences of the failure of this loan sale process would have been exceptionally serious for Permanent TSB.

It is important that I highlight the strong protections in place for borrowers following a sale of their loans to a non-bank. The Minister for Finance has stated on a number of occasions that the protections for borrowers in place before the sale remain unchanged after that sale. In this regard, it is important to note that there are no changes to the rights of a borrower whose loan is sold by a bank. All terms and conditions attached to their mortgage contract remain in place, including the terms of a restructure agreed with the bank before a sale. Permanent TSB has further reinforced this important point and has confirmed that, if a borrower has agreed a restructure or an alternative payment arrangement and they have consistently made payments in line with the terms of the restructure, then these terms will be honoured by Start Mortgages.

In addition, it should be noted that Start Mortgages is a retail credit firm regulated by the Central Bank of Ireland since 2008. When dealing with borrowers, retail credit firms are bound by the same regulations that currently apply to Permanent TSB. Like Permanent TSB, they are required to comply with the consumer protection code and the code of conduct for mortgage arrears when dealing with borrowers who are in arrears. The Minister for Finance has demonstrated his own commitment to strengthening these protections further, including his support for the Bill introduced by Deputy Michael McGrath, which seeks to regulate the purchasers of mortgage loans. In addition, earlier this year, the Minister asked the Central Bank to carry out a review of the code of conduct for mortgage arrears to ensure that it remains effective. He has asked for the report to be completed as soon as possible and the Central Bank has stated that the report will be ready at the end of this month. If, as a result of this review, the code requires amendment, a full public consultation process will be required in line with normal guidelines.

I wish to highlight the recent comments of Mr. Ed Sibley, the deputy governor of the Central Bank of Ireland. He said that there is no evidence that non-banks are being more aggressive in seeking a resolution than banks. In addition, he said that loans sales are a legitimate and necessary approach for banks to address non-performing mortgage loans and, to date, there has been no material difference in the number of legal proceedings issued between banks and non-banks as a percentage of the total number of accounts in arrears.

Separate to a loan sale, I draw the Deputy's attention to the publication of two recent financial stability reports in September by the Central Bank that highlight some key findings in terms of NPL resolution and long-term mortgage arrears. With regard to principal private dwelling houses, the term, "loan cure", is used to describe the return of previously defaulted loan balances to performing loan status, and the research shows that this is the biggest driver of NPL reduction. This reflects the success of the Government’s supports that have been put in place over the past number of years to assist those who find themselves in mortgage arrears. Furthermore, the paper shows that loans that go through the mortgage arrears resolution process framework are twice as likely to end up in a lower arrears state six months later, which is a positive indicator of how well this process is working and how important it is for borrowers who find themselves in difficulty to continue to engage with their bank.

The Minister for Finance cannot stop loan sales, even by the banks in which the State has a shareholding. These decisions, including the composition of loans included in any loan sale, are the responsibility of the board and management of the banks, which must run on an independent and commercial basis.

Dessie Ellis (Dublin North West, Sinn Fein)
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I do not know if the Minister of State heard that this sale included performing loans and Permanent TSB has admitted that. The Minister of State did not give an explanation regarding how these ended up in this portfolio. Why were local authorities and others not given an opportunity to bid on these units?

6 o’clock

What contact was there with the Minister? The Minister of State is saying the Minister will not interfere. Surely the Minister must give an opinion. He must call people in and tell them he does not agree with what they are doing, not necessarily to interfere with what has been agreed but to make his point clear that this involves ordinary people. Some of the loans are performing and people could end up homeless or out on the streets as a result of this deal. We have no guarantee that will not happen. We saw this with NAMA when all the properties were sold off. It was another tragedy. It could have helped solve the housing crisis but rental properties and private houses were sold off in large numbers. PTSB is 75% owned by the State. It is absolutely calamitous. It is wrong and the Minister of State and anyone with a bit of sense knows that this does not make sense. From the sound of it, this is a done deal. It is done and dusted and we are now picking up the pieces. In the future, we will pick up the pieces of some of these people who will be left on the streets. That is what will happen. These vulture funds are not buying these for the good of their health. They are out to make a killing. That is what they are doing. They are getting reduced rates instead of offering it to the people who have these mortgages. The same deal should be offered to them.

Michael D'Arcy (Wexford, Fine Gael)
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The Minister for Finance cannot stop loan sales even by the banks in which the State has a shareholding.

Dessie Ellis (Dublin North West, Sinn Fein)
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Does he not talk to them?

Michael D'Arcy (Wexford, Fine Gael)
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No, he cannot. These decisions, including the composition of the loans included in any loan sale, are the responsibility of the board and management of the banks which must run on an independent and commercial basis. The banks' independence is protected by the relationship frameworks, which are legally binding documents that the Minister cannot change unilaterally. I am aware that some performing loans were transferred but there was cross-compliance issues with some of the loans. Unfortunately, if a performing loan is cross-securitised with another loan for another property, those loans have to go across or else there would be no security.

The Deputy asked why local authorities did not purchase the loans. The State provides the money for local authorities. Where will we get the billions of euro that are not accounted for? Will we just make the money up? Sinn Féin has Harry Potter-style economics.

Dessie Ellis (Dublin North West, Sinn Fein)
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We own 75% of it.

Michael D'Arcy (Wexford, Fine Gael)
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It has Harry Potter-style economics. Are we just going to pretend we have the money to purchase all of that loan book from-----

Dessie Ellis (Dublin North West, Sinn Fein)
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So we do not own 75% of the company.

Michael D'Arcy (Wexford, Fine Gael)
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Are we going to pretend we are going to make the money up? Is Sinn Féin just going to vanish the money? Sinn Féin has a history-----

Dessie Ellis (Dublin North West, Sinn Fein)
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The Minister is saying there is any amount of money for housing-----

Michael D'Arcy (Wexford, Fine Gael)
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Sinn Féin has a long history of just grabbing money out of nowhere----

Dessie Ellis (Dublin North West, Sinn Fein)
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-----and now the Minister of State is saying he cannot make it up.

Michael D'Arcy (Wexford, Fine Gael)
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-----but there is no prospect-----

Dessie Ellis (Dublin North West, Sinn Fein)
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Which is it?

Michael D'Arcy (Wexford, Fine Gael)
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There is no prospect-----

Dessie Ellis (Dublin North West, Sinn Fein)
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The Minister is telling us he has no problem with money.

Michael D'Arcy (Wexford, Fine Gael)
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We cannot just magic the money. We have a budgetary process that will culminate on this day two weeks. The Deputy just wants to click his fingers and make €2 billion, €3 billion or €5 billion appear like magic.

Dessie Ellis (Dublin North West, Sinn Fein)
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The Minister is telling us he has any amount of money for housing. Which is it?

Michael D'Arcy (Wexford, Fine Gael)
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It is Sinn Féin Harry Potter-style economics.

Dessie Ellis (Dublin North West, Sinn Fein)
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Is the Minister of State denying that?

Michael D'Arcy (Wexford, Fine Gael)
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It is Harry Potter-style economics of just pretending it is going to appear out of nowhere. The Deputy will then be complaining that the State is not building.

Dessie Ellis (Dublin North West, Sinn Fein)
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Harry Potter-style economics. The Government is selling off these loans with NAMA and with the banks-----

Michael D'Arcy (Wexford, Fine Gael)
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It is Harry Potter-style economics.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Please, it is not Hogwarts we are in. Can we contain ourselves?