Seanad debates

Tuesday, 25 October 2011

Report by Interdepartmental Working Group on Mortgage Arrears: Statements (Resumed)

 

5:00 am

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)

I thank the Minister of State for outlining to the House his ideas on mortgage resolution. I am pleased to hear that the Government considers the Keane report as just that - a report - given that many of its recommendations do not go far enough. I also acknowledge the Government's willingness to listen to other ideas.

Fianna Fáil has published three Bills, namely, the Debt Settlement and Mortgage Resolution Office Bill 2011, the Regulation of Debt Management Advisors Bill 2011 and the Family Home Bill 2011, about which Senator MacSharry will speak further. These Bills make concrete proposals. The Debt Settlement and Mortgage Resolution Office Bill 2011 completed Second Stage in the Dáil last week. I hope it does not die in that House because one of the flaws of the Keane report and, to some degree, in the Minister of State's contribution is that too much power is being vested in lending institutions to come up with solutions. The proposals would give lenders the responsibility for approving financial plans and restructuring mortgages. A mortgage advisory council should be set up on a statutory footing and given decision making powers and the ability to assess the underwriting of the original mortgage proposal and ability to pay. It should be able to hear the arguments from lenders and borrowers before making a decision independently of the banks.

The Minister of State is correct to point out that the banks have not played ball. More than 50% of the mortgages in this country were given by non-Irish institutions. This is why it is crucial that the resolution office be put on a statutory basis with arbitrary decision making powers and the ability to rule on issues arising for mortgagees. That will not be done by employing 100 additional advisers in the Money Advice and Budgeting Service.

I agree that the market is dysfunctional. No new mortgages are being written and first-time buyers are in a quandary in regard to the value of houses. Prior to the Government's announcement of the two pillar bank approach and its rejection of the proposed sale of EBS to a US consortium, that building society was writing one in two first-time buyer mortgages. It is no longer offering mortgages now that it has been joined with AIB. We are thus facing a major problem as a result of creating two large banks in this State. The only other alternatives are Ulster Bank and, to a smaller extent, KBC. We need to maintain competition in the market.

What are we going to do for the tens of thousands of people who cannot repay their mortgages? As the Minister of State noted, more than 30,000 restructured mortgages have already fallen into arrears. This is happening because the banks were required under previous statutory guidelines to enter into 12-month restructuring arrangements. They are not restructuring the full mortgage, however. They are simply agreeing to their customers paying X euro for 12 months before reviewing the arrangement. This is not giving people a clear route out of the debt problem. As we cannot trust the banks to offer the solution, a statutory body is needed to make the decisions.

I noted with interest the proposal on enhanced mortgage interest relief. I have repeatedly asked Fine Gael to honour the commitments made in advance of the general election to increase mortgage interest relief to 30% for those who bought their houses between 2004 and 2008. This would average €166 per month. The Government must pursue that policy.

In regard to variable mortgages, the Financial Regulator was 500% right. We have to tie the banks. The month before last, ICS increased its variable interest rate by 0.5%. The average variable rate with the ICS is just under 5%. I believe it is 4.79%. It is crippling people. The last increase led to an increase of approximately €150 a month in net payments on an average mortgage, at a time when people's salaries are decreasing. These institutions are not living in the real world. The Minister of State must support the regulator on that. I am glad he said that in his statement. It is something we can enforce in the cases of the banks over which we have control. There is no silver bullet in this regard. Time is of the essence. I am sure all Members receive hundreds of e-mails and representations from people in their constituencies who are experiencing difficulties. We cannot wait for another report.

I would like the Minister of State to confirm that firm measures will be included in the upcoming budget, which will be announced in early December, to help people in mortgage arrears. I hope I am right to assume that will be done. The situation is getting worse. I will not even get into the buy-to-let issue. We have produced three Bills that deserve to be considered by the Government. If the Minister of State takes one thing away from here today, it must be that the lenders should not be allowed to make decisions on restructuring on their own. The debt settlement and mortgage resolution office that we have proposed - the Government may wish to call it something else - needs to be established on a statutory basis. Such an office should be in a position to rule on these things. I thank the Minister of State for his time. This is not the last debate we will have. I reiterate that time is of the essence.

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