Thursday, 22 November 2018
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
Mortgage Arrears Proposals
2. To ask the Minister for Finance the reason the commitment in A Programme for Partnership Government to amend the code of conduct on mortgage arrears has been broken in view of the widespread existence of vulture funds as owners of credit. [48683/18]
Last week the Cabinet announced a major climbdown when it said it would not be amending the code of conduct on mortgage arrears. This was a promise in the programme for Government and it was a commitment given by the Minister's predecessor to me which has now been abandoned. Will the Minister explain to this House why he has abandoned or broken this promise given by his predecessor to amend the code of conduct to deal with the issue that vultures are now holding on to more and more loans of family homes and buy to lets?
A Programme for a Partnership Government made a number of commitments in the area of “Protecting & Promoting Tenancy Rights and Home Ownership”. Specifically in respect of the code of conduct on mortgage arrears to which Deputy Doherty refers, there is a commitment to "work with the Central Bank to amend the Code of Conduct on Mortgage Arrears to include an obligation on providers of mortgage credit to provide a range of sustainable arrears solutions". As Deputy Doherty will be aware, in March this year I requested the Central Bank of Ireland to carry out a review of the code of conduct on mortgage arrears, otherwise known as the CCMA, to ensure it remains as effective as possible.
I published a very detailed and comprehensive report last week. In carrying out the review, the Central Bank sought the views of consumer representatives and advocates who are working to assist borrowers in financial difficulty. They engaged with statutory bodies and industry stakeholders. The bank conducted inspections of one retail credit firm, two credit servicing firms that represented 79% of principal dwelling home loans serviced by credit servicing firms, and one bank. Finally, the Central Bank gathered and analysed data relating to arrangements being considered and being put in place by banks and other entities.
As the Deputy can see, the report was specifically examining the treatment of mortgage loans by banks and non-banks to which the Deputy refers. No evidence was found that borrowers whose circumstances have not changed are being moved off existing arrangements by credit servicing firms who act on behalf of so-called unregulated loan owners during the term of the arrangement. Furthermore, there is evidence that such entities are considering more arrangements within their suite of arrangements under the CCMA compared with banks and retail credit firms but the report does observe that banks and retail credit firms are putting in place a more diverse range of such arrangements. It is important to note that retail credit firms and unregulated loan owners account for a significantly higher proportion of accounts in arrears in the 720 days past due category, so this could account for differences in the range of arrangements that unregulated loan owners are putting in place.
The whole point of the commitment given was that the code of conduct had to be changed because of the new environment where vulture funds owned loan books including family home loans. It was the bare minimum change required and it has been spectacularly dropped by the Government.
This week in a reply to a parliamentary question to me the Minister confirmed that no firm has been sanctioned to date for a breach of the CCMA. There have been tens of thousands of mortgage cases over recent years and not one firm has been sanctioned. Perhaps the Minister believes that is evidence that the code works. My take on it is that it is evidence that the code is not robust enough and is not fit for purpose.
It is two and a half years since the former Minister, Deputy Noonan, stood exactly where the Minister stands today and told me: "I am willing to review it again to make it mandatory on lenders to provide the more effective of the range of options that are now in the system to their borrowers." He went on to say: "I can confirm that in conversations around the time of the negotiation of the programme for Government there was an agreement that we would continue to have the code of conduct on a statutory basis and that it would be extended to cover certain options that borrowers are not statutorily bound to offer." That is a Fine Gael promise to make it compulsory for vultures to offer split mortgages and mortgage-to-rent that has been abandoned. That is wrong because people are very concerned that the suite of options available is not being implemented. We still see today the thousands of people in mortgage arrears. In my home county there are 1,200 people in arrears for a quite a long time, yet these vultures do not offer split mortgages or mortgage to rent. That was promised and has been abandoned. Will the Minister explain why he is letting vultures off the hook in this regard?
As I explained to the Deputy, this was a matter for the Central Bank to review. I asked that it review it, which it did. It came back with a very comprehensive assessment of how this issue is being dealt with inside the Irish mortgage market. I understand the anxiety and the concerns that people have when dealing with their mortgages on their homes. It is important to state the figures on how this issue has been dealt with in Ireland to date. At the end of 2012, the number of mortgages and loan accounts in arrears was 143,851. At the end of June of this year, it was 66,479. The number of mortgages in arrears has halved from 18% to 9%, from just under 38,000 to just over 21,000. It has come down by a third. Every repossession is one that I wish was not happening. That is why we have a code of conduct for mortgage arrears. In 2015, the figure for repossession stood at 113, and then it went to 166. In 2017, it was 77, and for the first half of this year it stood at 18. They are the figures for non-bank entities. The figures for banks also show a trend where the number of repossessions is lower than expected, showing that we have a system that offers protection to people in great difficulty.
The Minister likes to give the impression that he has rolled up the red carpet after his predecessor Deputy Noonan rolled it out for the vultures. A clear commitment was given, however, on ensuring that the code of conduct would extend to vultures mandatorily requiring them to provide a suite of options which included mortgage-to-rent and split mortgages. Of course they have to fulfil the terms of the agreement made on any loan that is sold to the vultures, but they do not offer that as a rule. They do not offer that to people who are in trouble. As we see more and more loans being sold while the Minister sits on his hands and allows State banks to sell their loans to the vultures, we will see more legal routes taken. That is without doubt.
AIB has announced that it will sell another €1 billion worth of loans which will end up in the hands of vultures. The Minister should do the right thing. He should not sit idly by. He should say very clearly that the State-owned banks should not be selling loans to vultures but that they should be doing the heavy lifting themselves, working through these loans on a loan-by-loan, case-by-case, basis, offering split mortgages and mortgage-to-rent and the full suite of solutions that the banks do not offer on what is allowed under the Central Bank's rules.
This is a commitment and much was said about this at the time of the negotiations for the partnership Government, which the Minister has completely abandoned. In abandoning it, he has abandoned homeowners whose loans are now in the hands of vultures.
The Deputy should let me speak about the commitments we have to the homeowners and deal with the figures for what has happened to restructured accounts in our economy and society since we began dealing with this great difficulty.
The Deputy says I am sitting on my hands in dealing with this issue. Each year since the end of 2012, we have seen over 20,000 buy-to-let mortgages alone restructured. Over 100,000 mortgages for principal dwelling homes, PDHs, particularly family homes, have been restructured in the period. These are the figures and that is what has happened. It has happened because of the operation of the code of conduct on mortgage arrears. It has also happened because of the work of the Insolvency Service of Ireland which is engaging in an extensive advertising campaign to make clear to people who are in difficulty the support that can be offered to them. The Deputy well knows that, under the legal arrangement in place between the Government and the banks, I am not able to direct banks, even those in which the State has a shareholding, on the commercial decisions they make. He knows that is the nature of the arrangement in place with the banks. He knows that going down the path of political involvement in the operation of banks opens up further difficulty for them and those who depend on them for employment and investment, as well as in getting our money back from them. The figures for restructured accounts are clear. Accounts for over 100,000 homes, family homes in particular, have been restructured in recent years.