Brian Hayes (Dublin South West, Fine Gael)

It is good to be back in the House to address this very important issue to which I know colleagues have referred continuously, and correctly so, given the importance of the issue to the country. Senators will be aware of the significant increase in mortgage arrears and the difficulties that excessive personal debt poses for a growing number of individuals and families. At the end of last year approximately 71,000 mortgage accounts were more than 90 days behind with their payments. At the end of 2009, the year in which the Central Bank commenced collecting these statistics, only 29,000 accounts were in a similar arrears position.

The problem of mortgage arrears, therefore, has grown significantly over recent years and is now an issue that requires and is receiving urgent attention by the Government. First and foremost, of course, it is a very real and immediate problem for the mortgage holder. Many people in difficulty with their mortgage could never have envisaged the scale of the economic downturn which has left them unemployed or on much reduced incomes. This shock has severely impacted on their desired ability to meet their mortgage commitments. There is a cost to mortgage distress that goes well beyond the mere financial. The desire to own a home is a deeply rooted and valued characteristic of Irish people. It can also provide a wider utility to people, such as security and a sense of community. An inability to meet mortgage payments, therefore, can also cause people and their families to be very concerned about their ability to remain in their home and about the negative impact such an eventuality could have on the wider aspects of their lives.

The Government is fully conscious of the increasing stress - both financial and more generally - that some households face arising from difficulties in meeting their mortgage payments. A number of important measures are already in place to protect mortgage holders who experience difficulty with their mortgage repayments. These include the Central Bank code of conduct on mortgage arrears about which I have previously spoken in the House. Among other measures, it provides for the following: each lender to put in place a mortgage arrears resolution process; a lender must make every reasonable effort to agree an alternative payment arrangement with a co-operating borrower who is experiencing mortgage difficulty; and places a moratorium on legal action by banks against co-operating borrowers. As the Central Bank statistics on mortgage arrears show, these measures are being deployed. A significant number of mortgages, more than 74,000 at the end of last year, have been restructured, while the level of repossessions remains very low in relative terms.

Forbearance, therefore, is a very worthwhile and appropriate response to most people experiencing mortgage difficulty. The approaches set out in the code of conduct on mortgage arrears can provide a household experiencing temporary mortgage difficulty with the necessary and important breathing space to allow that household to get back on its feet and resume meeting its full mortgage commitments at a future time. However, the Government has also recognised that other more structural approaches, beyond initial forbearance, will also be required in some cases. This was confirmed when the report of the interdepartmental group on mortgage arrears was published last autumn. The group came to the conclusion that the mortgage problem is complex and in some cases a response other than forbearance will be required. In particular, it stated a range of practical solutions tailored to individual circumstances will need to be developed and deployed for people in most difficulty with their mortgage.

The Government's overall approach to this issue is clear. First, we should not create incentives that would encourage people who can pay their mortgage to stop doing so. Most mortgage holders are fully up to date in their mortgage payments and this practice should be supported. Any risk to this strong compliance culture would rekindle problems for the banking system and by extension for all of us as taxpayers. It would also give rise to serious concerns about the supply and cost of future mortgages. However, the second and equally important consideration for Government is the recognition that some people, through no fault of their own, will not be able to fully meet their mortgage obligations and every effort should be made by banks and public authorities to allow people in such circumstances to remain in their family home where appropriate and possible.

The Government has accepted the Keane report recommendations and has put in place an implementation framework to advance this agenda. The Government attaches a very high importance to this work. Since last March, a special Government committee focused on this issue has been meeting on a regular basis to ensure that a high priority is assigned to the delivery of the implementation of the Keane report recommendations across relevant Departments and Government agencies. The committee is chaired by the Taoiseach and includes all the Ministers with a role in this broad area. In addition, a high-level steering group, chaired by the current Secretary General of the Department of Finance, has been in place since the end of last year with a clear mandate to drive this process at official level. The Central Bank is also a key player on this group. Specialist expertise - legal, banking, policy analysis and project planning - has also been assigned to the Department of Finance to assist this group and also to support the relevant Departments to progress the items that fall within their remit.

Significant progress has recently been achieved in some of the key areas. The provision of mortgage advice was identified as an important measure in the Keane report. In particular, it indicated that an independent mortgage support and advice service be established to advise mortgage holders in arrears or pre-arrears in assessing their options. The report stated that the need for this service would be time-limited to approximately three years.

As part of the overall implementation process, a special group was established to work on the advisory function element of the Keane report recommendations. In particular, it was asked to consider the following: the most effective and efficient way of delivering this service; the deficit or gaps, if any, an independent mortgage advice service should or could address; the type of service required; and the body that should provide this service. The role envisaged for personal insolvency trustees in the Department of Justice and Equality's draft general scheme of a personal insolvency Bill, as published in January, had to be considered to ensure that there would be no duplication or overlap of service.

Some decisions have now been made on this. The Minister for Social Protection and the steering group are satisfied that the mortgage advice service should be a separate service from MABS but with close ties to ensure access and cross-referral. It has been decided that the statutory Citizens Information Board, CIB, will assume an overall co-ordinating role in the mortgage advice area owing to its remit for the provision of information, advice and advocacy to citizens seeking to access public services. The CIB is the most appropriate agency to lead this important task and provide the strong management for its delivery on a nationwide basis.

MABS, as Senators are aware, assists people who are over-indebted, and need help and advice in coping with debt or budgeting problems at a local level. There are 53 MABS companies, with voluntary boards of management employing 277 money advice staff, operating nationwide. The role of money advisers is to help clients to assess their financial situation, make a budget plan and deal with creditors. In 2011, some 22,400 new clients were seen by MABS and the MABS national helpline received approximately 29,600 calls.

This compares with 19,000 new clients and 24,700 calls to the helpline during 2009. The need for this important service continues and unfortunately has increased due to our economic situation. It is necessary to ensure that MABS can continue to focus and deliver its core services and that the CIB, linking from MABS where appropriate, can better focus on the growing and more specialised task that will be required to assist on mortgages. More work is being carried out on this issue, in particular on the mechanism regarding the provision of one-to-one advice to mortgage holders where necessary, and it is intended to finalise the framework for this shortly.

Regarding the involvement of the Department of Social Protection in the broad mortgage arrears area, Senators will also be aware that the recent Social Welfare and Pensions Act made some changes to the social welfare mortgage interest supplement scheme to link it better with the provisions of the code of conduct on mortgage arrears and, in particular, the operation of the forbearance options available under the code.

Progress has also been made on the Central Bank work stream. The bank continues to engage with all mortgage lenders to ensure that they will shortly be in a position to provide a broad range of loan modification and resolution options to mortgage holders in significant arrears. In this regard, the Central Bank has reviewed the operational capacity of some banks to effectively manage their arrears. This is part of the process where all lenders must submit their board approved loan modification and resolution options and a segmentation of their mortgage portfolio by the end of May. The intention will be that banks will propose solutions for each category and develop them into products for activation during the second half of this year.

It is important to state that one of the ambitions of the Government, in its discussion with the banks and in the banks' discussions with the Central Bank, is that a broad range of specific options would be available for people in this position. The Government's position is that this will come to an end at the end of May and it is anticipated that the roll out of those options across the banking sector will be a reality in the second half of this year. There has been frustration on all sides of both this House and the Dáil about the progress so far but the meat of this issue is the banks themselves, in co-operation with the Central Bank, the Department of Finance and others, providing those realistic options for people with distressed mortgages. I believe there will be significant progress in the second half of this year as a result of the negotiations that have occurred up to this point.

The Central Bank has also recently issued revised guidance on the code of conduct on mortgage arrears and the 2012 consumer protection code. The intention is to clarify the protections and limits on contact that banks can make with consumers in arrears. It is important that mortgage holders in difficulty, or who feel they may experience difficulty in the near future, should approach and discuss the situation with their lender as early as possible. It is also important that banks can effectively contact their customers as soon as a repayment difficulty emerges and, indeed, at other stages of the mortgage arrears resolution process, MARP. Good and effective engagement between borrower and lender will be essential to address and reach a satisfactory outcome to a repayment difficulty, and for the proper maintenance of such a satisfactory outcome.

This communication and engagement is a two way process and it is important that neither side is handicapped in making effective contact. Some lenders were unsure of the precise nature of contacts that were possible and in its recent change the Central Bank has, for example, clarified that a "communication" means a successful communication, that is, a conversation held with the consumer, a letter sent, a text or an e-mail. However, the code of conduct on mortgage arrears has not changed. It will continue to protect consumers from undue pressure by emphasising the requirement for all lenders to be proportionate and not excessive in their communications and engagement. However, the guidance has removed an uncertainty about what does and does not constitute a contact.

Personal insolvency reform is also a key measure in the mortgage arrears resolution process. As Members are aware, the Minister for Justice and Equality published the draft heads of a personal insolvency Bill earlier this year. This draft Bill was submitted to the Oireachtas Joint Committee on Justice, Defence and Equality and its findings were published on 6 March 2012. Its views and those of other interested parties are now being considered by the Government in the further drafting and finalisation of the Bill. This will be radical and complex legislation. Significant detailed policy development and drafting work is being carried out at present by the relevant Departments in consultation with the Office of the Attorney General. It is accepted that the preference would have been to have produced a final Bill at this stage. However, the drafting of such a complex Bill gives rise to significant legal and drafting considerations that must be teased out fully and worked through in detail before publication. While this work will take longer than originally envisaged, it is necessary and will be to the benefit of the final Bill when it is published and accepted by both Houses of the Oireachtas. The troika is aware of the detailed work under way and has accepted the publication of a Bill will take a little longer than originally envisaged. The Minister for Justice and Equality has indicated the draft legislation will be published before the summer recess and Members of the Oireachtas then will have the opportunity to consider the full details of the Government's proposals on this crucial proposed legislation.

It is fair to state the reform of the personal insolvency legislation will be the ultimate game-changer in respect of the resolution process. There is acceptance, from the troika to the Government and all parties in this House and elsewhere, that the real change which must occur to resolve the position of those who are in acute mortgage distress can only happen on foot of necessary changes in the personal insolvency legislation. That is, as I have described it, the game-changer because it provides the legal context within which the banks then will be able to resolve all these matters. I made the point earlier all this is notwithstanding the schemes the banks will bring forward. While some banks already have brought forward novel schemes in respect of negative equity loans, shared loans and so on, there must be further engagement with them. However, the crucial change must be the personal insolvency legislation, in that it tips the balance in favour of resolving many such outstanding mortgage problems, which ultimately is where one will discern fundamental change in this area.

In addition, work is advancing on the Department of the Environment, Community and Local Government's mortgage-to-rent scheme. A pilot scheme involving Allied Irish Bank has now been established and up to 50 cases are being progressed by the Clúid housing association and various banks. While the primary focus of the Government has been on mortgage arrears, it has not forgotten it also is necessary to provide assistance to other mortgageholders. The recent implementation of the programme for Government commitment to increase the rate of mortgage interest relief to 30% for first-time buyers who took out their first mortgage in the period 2004 to 2008, at the height of the market, is important in that regard. Moreover, it will be of some general assistance to those who are most likely to have the greatest affordability challenge on their mortgage.

Everyone recognises this mortgage arrears problem is complex and will not be solved by a single solution or in a very short period. It will take a range of responses from a number of different bodies and will take time to fully implement and have effect. However, the Government is fully committed to making the sustained effort and already has seen significant progress across a broad range of areas. The Government will build on this over the next couple of months and further significant steps will be taken in the implementation of its plan to address the mortgage arrears problem. Ultimately, however, it is the regeneration of the economy, the restoration of employment levels and income growth that will address the real social and economic problems associated with high levels of personal indebtedness. That is why Government is focused, through its many new initiatives, on fostering and generating economic growth. The successful achievement of this objective will restore consumer confidence and bring the tangible and sustainable recovery that the country needs.