Thomas Byrne (Fianna Fail)

I hope Senators have had the opportunity to read the e-mail sent to them by Mr. David Hall of the New Beginning group which was very successful this week on behalf of some of its clients and which has adopted a very positive approach to the Bill. Ms Noeline Blackwell from the Free Legal Advice Centres has corresponded with certain Senators on the Bill and is adopting a broad and positive approach.

The purpose of the Bill is set out in the Long Title: a "Bill to prohibit the granting of a court order for the possession of a primary family home except in circumstances where the court has been presented with a verifiable, detailed and independent analysis of the repayment capacity of the family home owner, and where the court has had an opportunity to review the original mortgage application, and consideration is given to a range of alternative actions that will seek to protect the homeowner's possession of the family home". It has been pointed out by numerous people and in academic textbooks, including Lyall's textbook on property law, that currently the courts have no guidance in this area. Part of the purpose of the Bill is to give such guidance to the courts and a range of options they could use when deciding on such issues. Traditionally, the granting of a repossession order has been a discretionary function. I note the Department of Finance's interest in this issue, but the Land and Conveyancing Law Reform Act 2009 is a matter for the Department of Justice and Equality. I hope, therefore, there is cross-departmental co-operation on this matter because there is a range of solutions. We are speaking in the context of the decision handed down in the High Court by Ms Justice Dunne. I do not want this decision to delay the Bill because it could operate independently of it because it covers specifically section 97(2) of the Land and Conveyancing Law Reform Act 2009. It does not refer to other legislation in any great detail.

Section 1 would allow the Minister for Finance to bring this legislation into operation. Section 2 would provide for certain definitions, including a code of conduct in dealing with mortgage arrears. I hope the argument will not be that the Bill is unconstitutional because the code of conduct would interfere with the rights of banks. In a time of economic crisis it is the function of the State to interfere with and regulate the workings of the banks in the interests of consumers and keeping families in their homes.

Section 3 refers to the application of the Bill. Section 3(a) refers to an order for possession of a mortgaged property that is a family home pursuant to section 97(2) of the Land and Conveyancing Law Reform Act 2009. Section 3(b) refers to an order authorising the exercise of the power of sale of a mortgaged property that is a family home pursuant to section 100(3) of the Land and Conveyancing Law Reform Act 2009. Section 3(c) refers to an order seeking possession of any property that is a

family home on foot of a legal mortgage or charge. Section 3(d) refers to an order declaring the amount due on foot of a mortgage to be well charged on a dwelling that is a family home.

Section 4 would put in place certain preconditions in respect of the commencement of proceedings. Subsection (1) would provide that the mortgagee would have to certify in writing to the court that the code of conduct had been complied with, while subsection (2) would disallow the commencement of legal proceedings where mortgage interest supplement was payable. I note FLAC's comments that in the absence of reform of the mortgage interest supplement scheme, this could inhibit the take-up of mortgage interest supplement. In fact, the Fianna Fáil policy attempts to be comprehensive in that we deal with the issue of mortgage interest supplement which is a function of the Department of Social Protection which again emphasises the cross-departmental nature of the issue. It was promised for the spring, but it has not yet happened. It must happen as soon as possible. The concerns of FLAC about the section would be completely eliminated if the mortgage interest supplement scheme was reformed.

Section 5 deals with the preconditions in respect of the grant of an order for possession. It would prohibit the court from granting an order for possession or sale, unless it had reviewed an independent report from the Money Advice and Budgeting Service, MABS. One may argue MABS has insufficient resources, but it has been charged with this task in the Bill and we should give it the resources it needs to carry it out.

Section 5(b) provides that the court would receive and review copies of the original mortgage application and all supporting documentation accompanying the application. That is a very important function of the court in dealing with allegations of fraud and collusion in the financial institutions.

Section 6 lists the options in paragraphs (a) to (f) that the court would have to consider as an alternative to an order of possession. It would be able to make an order "(a) that the mortgagor make interest only payments on the mortgage for a period not exceeding four years; (b) that the mortgage period be extended by a period not exceeding 20 years; (c) that the mortgage payments due be deferred for a period of one year [in other words,there would be a one year payment holiday]; (d) that the terms and conditions of the mortgage be amended so that the interest rate can be changed, taking into account prevailing market conditions [this is an attempt to go after the sub-prime lenders who charge interest rates way above prevailing market conditions]; (e) that the principal sum due on the mortgage be reduced in a fair manner provided the mortgagee be granted a share in the mortgagor's equity in the family home, as the court considers appropriate [that would gives the court the option of looking at a debt for equity arrangement; I acknowledge this is a complicated area, but the court should have this power]; (f) that the deferred interest scheme recommended by the expert group referred to be put in place".

As the Bill would provide options for the court as an alternative to possession, we would be legally forcing the banks to give due consideration to these options in advance of a court hearing. We would be forcing the banks to consider the modification of mortgage terms before they consider repossession. The provisions of section 6 should be considered not only in the context of court action but also as a way of dealing with mortgages. In fact, many banks do some of these things on an ad hoc basis, but we are trying to make it more schematic. We know from the delegation who spoke to the Central Bank, the European Union and the IMF that they are looking at this issue and have put funds in place to facilitate mortgage modification schemes.