John Kelly (Labour)

I welcome the Minister of State. I am eagerly awaiting the outcome of the referendum on Thursday to see whether Oireachtas Members will be given powers of investigation. The sub-prime lenders must be investigated to determine how they operated their businesses. I fully accept there was reckless borrowing throughout the Celtic tiger years, mainly driven by a political belief that the good times would never end. Serious, reckless lending was being engaged in by lenders, particularly sub-prime lenders. I have always believed lenders should have a duty of care towards their borrowers, but this was not evident in the period in question.

Having been a community welfare officer in recent years, I can give an example of what I am trying to explain. It concerns a young man who had a 25-year mortgage of €168,000 with an Irish mortgage provider. All was fine until he decided to pay off his van and car loans and the debts on three credit cards. As he was getting married and needed money for his wedding, the loan was extended to €250,000. In his application to the lender he clearly stated what he was earning per month, namely, €2,500. His repayment, however, was €2,600 over a period of 40 years. He clearly demonstrated to the lender that he was not able to pay the mortgage for 40 years, but it gave him the money nonetheless. It put a noose around his neck for the rest of his life and that noose is tightening as the days go by.

The mortgage interest supplement will work in the case of a realistic mortgage, but not for an unsustainable one. We need to consider this issue because most of the unsustainable mortgages are held by people on social welfare in receipt of help from the State. MABS believes there should be some debt settlement because too many will never get to the bottom of their debt problems. I totally agree. Sub-prime lenders, rather than the taxpayer, should be made to endure the losses incurred.

I am encouraged by the Minister of State's very clear and strong statements. I totally agree that the banks cannot slither away from their responsibilities. They have been provided with public capital to allow for a debt write-down in the case of persons with unsustainable mortgages. As they are manifestly unsustainable, it is time they were written down.

The Minister of State has said that in any restructuring plan ability to pay and having a reasonable disposable income are essential ingredients. The report proposes the creation of a new independent mortgage advisory agency to act as an advocate on behalf of mortgage holders during discussions and negotiations with lenders. When will this agency be set up? It is urgent. Will it be an arm of MABS or a totally new agency?

With regard to third-party guarantees, I feel sorry for elderly persons who guaranteed loans on very expensive homes for younger people. I have stated before the not widely known fact that where one guaranteed a loan for a borrower 20 years ago, that guarantee is still in place if that borrower gets into financial trouble, even if the original loan has been paid off.

That guarantee is still in place if someone finds themselves in financial trouble today. The banks can go back to that person and put it to them that they guaranteed a loan for another person and unless one has informed the banks that the loan has been paid off and one wishes to withdraw it, the guarantee is still in place. That is a fact but many people are getting caught out. It is important that such anomalies are taken out of the equation because too many people are being sucked in.