Kathryn Reilly (Sinn Fein)

We are all aware of the problems homeowners face. Young couples and families are in distress having bought homes at highly inflated prices during the boom. People not much older than me were saddled with vast mortgages they have no hope of paying now as a result of the economic recession and job losses. We know these people were given mortgages almost without question. The banks were eager to lend at the time and it became the norm for young people to be saddled with vast debts. After the 2007 credit crunch and when the end of the boom arrived, many young families found themselves in drastically reduced circumstances. Job losses and the subsequent reductions in the standard of living resulted in a deep recession. Many people are trying to hand back the keys to the white elephants they own and are trying to emigrate in search of work. Others, struggling to hold on to these houses, must make daily choices between food, medical and utility bills.

As the Minister of State noted, at the end of June 2011 there were 777,321 private residential mortgage accounts held in Ireland to a value of €115 billion. Of these, more than 55,000 accounts were in arrears for more than 90 days. This compares with 49,000 accounts in arrears for more than 90 days at the end of March this year, only a few months ago. Worse, the Dublin Simon Community has reported a continuing increase in demand for its services and it estimates that up to 2,000 people in greater Dublin are homeless.

As previous speakers have noted, the banks have not offered many constructive ideas but they continue to empty our citizens' pockets with coolly detached efficiency. They argue that they did not indemnify themselves against potential losses when they were handing out loans left, right and centre. We call for full disclosure from the banks on indemnifications around potential losses. If the banks did not hedge against bad debt we want to know why. This bad judgment means it is only fair that the lenders shoulder their share of the losses incurred by reckless lending. The fact that the banks are escaping scot-free became apparent with the release of the Keane report. It left the burden firmly at the door of distressed borrowers and it did not offer any practical solution involving burden-sharing with the lender, nor did it criticise the lenders. The report has been widely disparaged and much has been made of the narrow spectrum of the report's parameters. For example, the team was made up mainly of civil servants and it was headed by a partner of one of the big-four accountancy firms. These firms worked hand-in-hand with the banks and they have been criticised in the past for their lack of fault reporting when auditing the lending practices of the banks. As suggested earlier, the Keane team did not consult MABS or other firms, a foolish omission to say the least given that MABS is at the front line in assisting those who cannot cope with their crippling debts.

The Government must address this crisis urgently and it cannot be left to the banks. More and more homeowners are reporting aggressive debt collection tactics and a refusal to communicate from lenders. Any practical alternative must be based on four people-centred principles. We must maintain the family home. We must ensure the banks engage actively with distressed borrowers in the first instance to come up with positive and manageable solutions, such as reducing the value of the mortgage in exchange for an equity stake in the property, which could be bought back at a later date. The lender should have no property management functions and receive no rent for its share of the property. However, if the house is sold at a later date the bank should recoup its share of the sale price of the property. In this way the burden of loss could be shared by both parties. Proper housing alternatives must be provided if the family home cannot be maintained. Borrowers should have the option of trading down to a smaller property or seeking the help of local housing associations. However, funding must not be depleted further in the crucial area of social housing, given the disarming rise in homelessness, as I have remarked already, and the travesty of ghost estates. We must consider debt sustainability and sharing the debt burden fairly. This is crucial. To illustrate this point we should consider the commitment to pay off bondholders to the tune of €13 billion when €12.5 billion could write off all distressed mortgage debt in the country.

A sustainable solution to the debt crisis facing our communities must be found. We all agree as much and no one would deny it. As Senator Zappone suggested, we should consider personal debt, not just housing debt. Central to this is getting people back to work. This will heavily revolve around budget measures, growing the economy and regulating credit and the banking sectors. With regard to housing debt, the priorities must be: to maintain families in their homes; to deliver social housing for those in need; debt sustainability; and debt burden sharing. This must be at the core of any Government-driven response.