Fidelma Healy Eames (Fine Gael)

The Minister of State is very welcome. I thank him for a strong and sound speech. I am delighted he has acknowledged that the Keane report is just a starting point. Everything that is being done by the Minister of State, the Minister for Finance and their Government colleagues in response to this problem will define how an entire generation views politics. That is it in a nutshell. I cannot imagine anything worse in our lives as a family than losing our family home. As the Minister of State rightly said, this serious issue has personal, social, family and economic repercussions for society as a whole. We are speaking against the backdrop of the continued unemployment of 442,000 people. As 185,000 of them have been unemployed for more than a year, they may be classified as long-term unemployed.

There is no easy solution to the mortgage crisis. A complex crisis of this nature needs to be considered ethically. I would like to make a few points. I will mention an option that I would like the Minister of State and the Minister for Finance to consider. The Minister, Deputy Noonan, has given me a commitment that he will examine it. It is important that this matter be dealt with urgently. I welcome the local authority pilot schemes even if I am not excited about them. Such schemes will be of use to very distressed people only. I suggest that a maximum of 10% of home owners fall into that category. In all other cases, we need to take a serious look at how we can help people to own their homes and meet their repayments.

This is a big problem. As the Minister of State said, some 45,000 households are in arrears of 90 days or more. Of the 70,000 accounts that have already been restructured, some 30,000 are failing to meet the terms of the restructuring. I agree with him that we must help those who cannot pay, as opposed to those who will not pay. I am not in favour of debt forgiveness. Everything we are proposing must be understood against the backdrop of the fact that the banks have already been recapitalised to the tune of €9.5 billion on the personal debt issue. I understand that a further €5 billion is available. Those moneys would cover losses of between €25 billion and €35 billion in mortgages. That is a lot.

I would like to comment briefly on a few of the new proposals in the Keane report. I will outline my criticisms or otherwise of them. The proposal regarding trade-down mortgages would allow the owners of higher-value or larger properties to trade down to a more affordable mortgage and carry the negative equity with them. Will the Minister of State clarify that? If mortgagees trade down to properties of less value and carry the negative equity with them, how will this work for them? Will an amount that is separate from the new reduced mortgage continue to be outstanding? How could that be achievable or payable?

I see great merit in the proposal regarding split mortgages. It is one of the best solutions, but it needs to be thought through line by line. It is in this context that I intend to refer to the proposed equity option plan. As I have said, the mortgage-to-rent proposal relates to very distressed mortgages only. The sale by agreement proposal really suits the banks. The banks have been recapitalised, as we said. It is a win-win for the banks. They have been careful to ring home owners about this rather than writing to them about it. The only person this proposal will suit is the foreign buyer who intends to go home. It is not good enough for the Irish buyer.

A positive proposal, which can be described as a split mortgage based on an equity option plan, was shared with Members in the audio-visual room the other evening. It gives the Government and the banks an opportunity to put solid structures in place to allow people to plan their way out of this situation. It gives home owners back their spirit and restores their dignity. I will give a precise example that relates to a family home with a current market value of €280,000 and a current mortgage amount of €317,000. The original term of the mortgage was 25 years. The current monthly repayment on the remaining €317,000 is €763. As this is an interest-only payment, it is never-never land. It is not much good. It is not getting the family closer to ownership. If they were to make repayments on an annuity mortgage, including the capital, they would be paying €1,800 a month over 25 years, which they cannot afford. If they switch to an equity option plan, the current interest-only repayment of €763 per month would now finance an annuity mortgage, including the capital, of €128,000.

Basically, I am proposing that such a mortgage should be split. Families would qualify on the basis of what they can afford. The family in this case can afford to make repayments on €128,000, which is 40% of the overall mortgage. The bank would take 60% of the equity. It is now split in two, between what the family can and cannot afford. The 60% is parked but it does not become a non-performing loan on the bank's books if a small percentage - less than 1% - of simple interest is charged on it. Each year, the owner would be sent a valuation certificate stating that he or she owns a certain amount and has an option to buy back a certain amount. If they were able to buy back an extra €5,000 in year one, that would give them 42.25% equity and the bank would be down to 57.75% equity. This is a long proposal. More details about this equity option incentive plan can be found on eoip.ie. It would enable the home owner to maintain ownership of his or her home.