Tuesday, 15 May 2012
Mortgage Arrears: Statements, Questions and Answers
Darragh O'Brien (Fianna Fail)
I welcome the Minister of State. I recognise the work he is doing in this regard and in the many areas of his portfolio and wish him continued success because he has been to the forefront of a number of difficult issues with which the Government has had to deal. I was pleased he recognised the frustration the public and Members feel at the slowness of this. It is a complex issue which cannot be resolved overnight but I am incredibly disappointed it has taken until 15 May. The Keane report was given to Cabinet at the end of September last year. I disagree that significant progress has been made in this area and I will tell the Minister of State why, although I wish him the best of luck in this regard because I do not see this as a political issue in that we need to address the issue of mortgage arrears.
Unfortunately, the situation is getting worse as each month goes by. The Minister of State was correct to say the vast majority of mortgages are being paid but fewer mortgages are being paid in full. In every quarterly report since December 2010, the percentage of mortgages in arrears was 7.4% but the percentage of mortgages in arrears as of last December was 12.1%. The figures for the first quarter of 2012 will be available next week but I would bet my house that we will see another increase. These figures only take into account mortgages in arrears of 90 days or more. A sizeable portion of restructured mortgages continue to fall into arrears. If we look at the percentage of mortgages between 30 days and 90 days in arrears, the situation is even worse than 12% of the overall mortgage book, which is almost 770,000 residential mortgages.
The Minister of State mentioned that forbearance can deal with some of the issues, which is correct, but the reason the situation is not getting any better is that we have not grappled with the banks on areas such as "zeroising" of interest. I refer to the banks which we have formally recapitalised, the covered institutions, the other banks which avail of ECB funding to keep themselves afloat and to Ulster Bank, which is guaranteed by the British Government. When someone is in arrears, the interest keeps piling up, so the situation never gets any better. Will the Minister of State look at that, although not necessarily as part of the personal insolvency Bill because I do not really believe it will be the game changer he expects it to be? I hope I am wrong and I will say so if that turns out to be the case later on this year. Much very good work has been done by the committee on the Bill and I commend all colleagues who have been involved in it. I have seen the final report from it. The final arbiter in the Personal Insolvency Bill is the bank. That is a fundamental flaw given the manner in which this Government is dealing with this. We should look at a separate debt settlement and resolution office - an independent arbiter. We cannot have a situation where the bank still makes the final decision.
As the Minister of State mentioned, more than 74,000 mortgages were restructured last year but they are restructured on the basis of the banks' agreement. I am sure many people have said to the Minister of State and to colleagues that the financial needs form, although required to some degree, is extremely invasive. Everything else must go bar the mortgage repayment. Citizens are effectively going to banks cap in hand hoping they will do them a deal. I have heard anecdotally that some of the institutions are dealing with people in a much more proactive fashion and I commend them. I refer to Bank of Ireland in particular. Where banks are operating well they should be commended and therefore I am pleased the Minister for Finance has accepted my colleague, Deputy Michael McGrath's Private Members' Bill, the financial institutions transparency Bill. If an institution is doing well, is abiding by the law and dealing in a proper manner with its customers then such an institution should be commended and held up as an example of good practice. On the other hand, the Financial Regulator cannot even name any institutions which are not up to the required standard. It leaves us with very little teeth. My colleague, Senator Marc MacSharry asked specifically that I convey his apologies to the House as he is unable to be present. The Minister of State will know that Senator MacSharry has been very involved in this area but due to unforeseen circumstances he is unable to attend today.
I ask the Minister of State to watch carefully the initiatives taken by the banks on new products. The initiatives on the negative equity mortgages are all very well and I agree this is a step in the right direction but I ask that the Department of Finance - if possible through the Financial Regulator - compile statistical information on the number of people who were able to avail of such mortgages. I do not believe these mortgages will work well and in my view the scheme will not deal with as many people as will need this assistance. Young couples, in particular, are in one-bedroom apartments all across the city and country and they cannot move on. They may have a family or else they cannot start having a family because they cannot see a way out of this situation. I am aware that the Minister of State has a particular interest in and commitment to this issue. I must underline the urgency with which the mortgage arrears situation needs to be dealt with does not seem to be present. The Minister of State referred to the code of conduct on mortgage arrears. I asked him about this last December and I will ask him again to consider the policy of local authorities with regard to people in arrears who are in affordable and shared ownership. These are not governed by the code of conduct. I have much evidence from the Dublin local authorities as to how they are dealing with people and they are not covered under the code of conduct. I welcome the increase of 30% in mortgage interest relief for first-time buyers who bought between 2004 and 2008 but this has left out a significant number of people. In my view, that relief should also apply to people who purchased a principal private residence in those years; such people may have sold an apartment and bought a house which is their principal private residence. I have made a number of inquiries to the Department of Finance but these people are not covered by the scheme announced in the budget because they were not first-time buyers. However, this may be their only home. They may have traded up from an apartment as a result of family circumstances and they cannot avail of the increased mortgage interest relief.
The Citizens Advice Bureau will be the body providing the mortgage support and advice which is a new function but I am flabbergasted at the delay. Last year, the Minister for Social Protection, Deputy Joan Burton, welcomed this initiative and she stated 100 advisers with financial and legal expertise would be available to help borrowers in mortgage arrears in the discussions and negotiations with their bank. It is proposed the service will operate in a similar manner to MABS which is funded by her Department. I ask where is this service. MABS does its level best to provide a service but the proposed service does not yet exist. It is now May and nothing has happened. The situation will get worse. I appreciate that the issue of debt write-down is a significant problem and there are many risks associated with it. The Government has issued conflicting messages over the past months as to the capacity of the banks to take those hits and the possible effect on the market.
I refer to the recent report of the Irish League of Credit Unions which shows that more than 50% of people in this country have less than €100 left after all bills are paid. It is a question of how to free up money to give those people a breathing space. These are people who are at this moment will fall into arrears as additional costs become apparent. At present 87.5% of them are paying their mortgage. They lie awake at night and, like most people, live from one pay cheque to another. I have not heard of one bank that will approach people with an extension on their mortgage terms.
The Government has not dealt with the issue properly. I am not asking the banks to write down debt. If someone with a 25 year mortgage is crippled paying €1,500 per month then the Government should instruct the banks, as part of a code of conduct, to please give people a bit of space. They can base a new agreement on their age profile, re-underwrite them, provide new life assurance policies and everything that is required to ensure that the mortgage is secured and allow an extension of a mortgage. For example, they could agree an extension from a 25 year mortgage to 30 or 35 years. I know from talking to people and groups that the measure would immediately release a lot of the pressure that is on those individuals and will free up a few hundred euro for them each month. It is not a write-down of bank debt. I agree that future bank provisions must be put forward. There are practical things that we can do. I ask that the Minister of State examines the measure and expedites the Personal Insolvency Bill as soon as possible.
The first quarter, Q1, figures for 2012 will be published next week. If they reveal that more than 12.1% of mortgages are in arrears, which I expect them to be, then we will be dealing with a crisis. The Government needs to step up to the plate and accept that this is a crisis and that there are things that it can do now and quickly. It is not just the responsibility of the Government but of our Oireachtas. We cannot keep waiting for reports or services to be established or codes of conduct for banks. We cannot expect the banks to do the devil and all for us because, in the main, they are not.
I wish the Minister of State the best of luck with this measure and to which he is very committed. I would like to see that commitment clearly stated by the Government by setting out a timeframe now when it will provide some relief. I am not necessarily talking about debt write-downs. I am interested to hear his response to my few points and I thank the Acting Chairman for her indulgence.