Brian Hayes (Dublin South West, Fine Gael)

I am a sort of invisible man here. I will give the Government's viewpoint but it is a matter for Senators to decide what position they will take. It is also important to recall that no Bill becomes a law until it is passed by both Houses of the Oireachtas and both have the power to initiate Bills.

Home repossession is an issue that involves many Departments, including Finance, Social Protection, Justice and Equality and Environment, Community and Local Government. Sometimes, that may have an advantage in that various people have to be brought together to work out a solution. Other times, it is like early 1990s governmental babble for getting nothing done. The programme for Government has given a firm commitment to address home repossessions but it requires the buy-in and support of all Departments. This Private Members' Bill will help ultimately in framing a solution that can work for people.

Senator Hayden's point on whether a judicial response to this matter is required is valid. I believe it is not. What is ultimately required is a solution outside of the courts. That does not mitigate the right at some point for legislation.

The Government does not support the Family Home Bill 2011 as it is unnecessary. Measures are already in place to reduce the risk that families in genuine difficulties with mortgage repayments could be evicted from their homes. The Central Bank code of practice on mortgage arrears is a more flexible way of dealing with mortgage arrears cases than an Act of the Oireachtas. Non-judicial resolution procedures are more appropriate to deal with cases of people in genuine difficulties in meeting their mortgage repayments.

The Bill, as drafted, could also risk serious legal uncertainty and may raise constitutional issues. Article 15 of the Constitution unequivocally prohibits both Houses of the Oireachtas from proposing a law or a resolution which may be deemed unconstitutional. While I accept that the Opposition does not have the benefit of the advice of the Attorney General and other law officers of the State, the Government believes this Bill, as drafted, is unconstitutional.

The Central Bank's code of conduct on mortgage arrears applies to mortgage lenders in their dealings with borrowers in respect of the principal private residence in the State. Adherence to the code is mandatory for all mortgage lenders registered with the Central Bank. It sets out the framework that lenders must adhere to when dealing with borrowers in mortgage arrears or pre-arrears. For the purposes of the code, pre-arrears arise when the borrower contacts the lender stating that he or she is in danger of getting into repayment difficulties.

The code contains two safeguards to prevent the repossession of family homes. First, the lender must make every reasonable effort to agree an alternative arrangement with the borrower, or his or her nominated representative, before applying to the courts to commence legal action for repossession of the borrower's primary residence. These alternative arrangements are considered as a mortgage arrears resolution process, MARP. It sets out a procedure that lenders must apply to mortgage accounts where arrears have arisen and remain outstanding for 31 days from the date the arrears first arose. A lender must explore all options for alternative repayment arrangements when considering the case.

The second safeguard provides that where a borrower co-operates with the lender, the lender must wait at least 12 months from the date the borrower is classified as a MARP case before applying to the courts to commence legal action for repossession. When determining the 12 month period the lender must wait before applying to the courts to commence legal action and any time period during which the borrower complies with an alternative payment arrangement, makes an internal appeal or makes a complaint to the financial services Ombudsman must be excluded.

The Government believes detailed customer rights in mortgage products must be set out in a code of practice rather than specified in an Act of the Oireachtas. The reasons people may be unable to meet their mortgage repayments varies considerably. So too do their prospects of being able to meet their repayments in the future. It is important, therefore, that resolution measures be flexible and are able to respond quickly to changing circumstances.

The code of practice is a more effective mechanism to protect home owners. It sets out rules to address a wider set of circumstances and can be quickly altered to address changing circumstances. If we set this out in primary legislation and there were difficulties with it - or, alternatively, the primary legislation was shown to be non-operable - it would require a fundamental change in the legislation to change it quickly. There are many court cases in which precedents are established through the courts which alter the Government's view on regulation or legislation. The view is that it is easier to do this by way of a code than through primary legislation.

I will now turn to some of the specific measures in the Bill. I am particularly concerned with sections 5 and 6. Under section 5, the courts would have no power to make an order for repossession if the Money Advice and Budgeting Service, MABS, reports that the borrower has no capacity to repay money due on foot of the mortgage. This would seem to place a significant burden on MABS and give inordinate weight to reports prepared by it. We must remember that MABS is a non-statutory body and is essentially an advisory service.

I can immediately see two difficulties with this approach. First, it does not take into account the value of the family home that the borrower lives in. Public policy should be concerned primarily with supporting families in genuine need. Second, what would happen if MABS were to determine that the borrower did have the capacity to repay the mortgage and the borrower did not agree with that determination? Would MABS, for instance, be indemnified if the borrower decided to pursue legal action? I believe that any commitment to alter the status of MABS at this stage is premature. I agree with Senator Hayden's comments in this regard.

The view of the Government is that we do want to transform the role of MABS; we have a definite view as to its future role. However, to change the legislation in this way, before the primary legislation dealing with MABS has been altered, is really putting the cart before the horse. I ask people to think about that. It would not have the effect that colleagues understandably want it to have. MABS will ultimately be changed, but the effect in the legislation would be ahead of this change.

The Minister for Justice and Equality is taking the lead in introducing non-judicial debt settlement systems. A personal insolvency Bill is in the course of being developed in the Department of Justice and Equality to provide for a new framework for settlement and enforcement of debts and for personal insolvency. While this will encompass reform of traditional bankruptcy law, its primary focus will be on introducing new non-judicial debt settlement mechanisms that both debtors and creditors can use in a fair and workable way.

Section 6 lists six new orders that the courts may issue as an alternative to an order for repossession. One of these proposed alternative orders is that the terms and conditions of the mortgage be amended to change the interest rate to a fixed or variable interest rate, as the court considers appropriate, taking into account prevailing market conditions. If the courts were allowed to make such an order, it would give them the right to retrospectively and unilaterally rewrite valid contracts freely entered into between two competent parties some time in the past. Giving the courts this right would create unnecessary uncertainty in the law. Such uncertainty over mortgage contract arrangements would also make it very difficult to raise much-needed international funding across mortgage books into the future.

Another of the proposed alternative orders is that the court could order that the borrower remained in the family home as a court-approved tenant of the lender for a rent and on terms fixed by the courts. I could not accept this approach as I believe it would be unfair to lenders to force them to become landlords against their will. Furthermore, it takes no account of the scale of the existing family home and the borrower's accommodation needs. The problem is highly complex, as colleagues have said, and a one-size-fits-all solution will not work. I made that point myself in the House when I addressed this issue by way of a Private Members' motion some weeks ago.

The banks have developed, and continue to develop, a range of solutions designed to deal with individuals in an appropriate and fair manner. The expert group on mortgage arrears put forward 62 recommendations which should extend those solutions and also, importantly, ensure fair and consistent treatment of consumers. These recommendations are currently being implemented and need to be given some time to take effect.

Notwithstanding this, the Government is fully committed to ensuring that all possible solutions are fully considered and that appropriate solutions are applied fairly and consistently. In this regard, a new working group is being established under the economic management council to consider the state of implementation of the key expert review group recommendations and develop further necessary actions to alleviate the increasing mortgage over-indebtedness problem. This is an issue of considerable priority for Government. The strength of the economic management council is the fact that the Taoiseach, the Tánaiste, the Minister for Finance and the Minister for Public Expenditure and Reform are key members, and they take on work which cross-cut departmental priorities for the Government.

I ask the House to give us a bit more time to work up a number of solutions to deal with this issue. Even though the rate of repossessions is low so far - even this year alone, it has been low - the problem is not going away. This is a problem that has been stored up, as Senator Barrett said, not just because of the disastrous decisions taken by the banking sector but also because of the appalling regulation by the Financial Regulator and the Central Bank that went on for far too long. We need to get back to traditional banking - banking that is based on common sense and in which the customer is at the centre of the bank's endeavours, rather than the property bubble which was allowed to get way out of control.

I thank both Senators for introducing this Bill. The view of the Government is the view of the Government but, as I said, it is a matter for colleagues to make up their own minds.