Feargal Quinn (Independent)

I welcome the Minister of State, who seems to be getting fond of the House, as we see him here quite a lot.

The major issue in dealing with mortgage arrears is making exceptions for one group but not for another. It will never be easy to strike a balance. If somebody decides to enjoy himself and have good time while his neighbour balances his budget and pays as much as he can, his neighbour will be envious if he gets off without making repayments. We need to allow people to access their pensions now in order that they can keep up their mortgage repayments or keep their households or businesses above water. Specifically, people should be allowed to access some of their money. Advisers recently have been offering to transfer pensions to the UK and elsewhere in order that people can do this. The Irish Brokers Association says that allowing people early access to their pensions has the potential to unleash €1.5 billion and to get 50,000 distressed borrowers out of financial trouble. It would also allow people to spend, thus stimulating the economy, rather than seeing the cash set aside in savings accounts. That is what we badly need at the moment.

There is also a misconception that people would be worse off in the future. Early withdrawals might reduce other lifetime costs by virtue of them being met earlier. Such a proposal would also mean that people may be more willing to invest in pensions at an early age. We live in a free society and people should be allowed to make that choice, whether it is good or bad. This is not a nanny state and it would be good for the country as a whole. The Government recently dismissed this idea but it cannot maintain its current position forever. South Africa offers access to pension savings and research by Alexander Forbes, a consultancy, found that 70% of members were taking their benefits in cash before retirement. It also said this encourages people to sign up to a pension scheme. Australia's pension system requires compulsory enrolment in a scheme but members are able to take all the benefits as a lump sum at the age of 55 and many people use this money to pay off their debts. Some even spend it all but at least they have a choice. They may eat up their savings and have to fall back on the state's means tested benefit at 65. However, if people have voluntarily paid a pension or have several pensions and badly need to meet their mortgage repayments, why can they not access them now?

With regard to the new bankruptcy and insolvency legislation, I am concerned about the time it will take to implement it. It may be in place by next year but that is too far away. While Greece is having major problems, its debt adjustment legislation has resulted in 12,000 cases being dealt with in the two years since its introduction. Under the scheme, individuals have to prove in court their income is not sufficient to continue paying their debts. Setting said living expenses, equal repayments are made to both secured and unsecured creditors from remaining funds over a period of four years. After that, debts are written off. There might be a problem with our personal insolvency law as it would mean people would have to keep up their repayments. An Athens-based consumer lawyer said and if there is no legal tool to combat the situation, people cannot psychologically cope with the stress and they will abandon payments. That is a crucial issue that we must consider. Has the Government examined this legislation?

It was reported in The Sunday Business Post that mortgage lenders plan to introduce new products later this year aimed at dealing with arrears in the market. The proposals include mortgage to rent, split mortgages and negative equity mortgages and they will be submitted to the Central Bank for approval by the end of this month. I hope the Government will support products such as split mortgages, which would mean that part of the loan would be temporarily frozen. Although the bank would take a hit on some of the interest while the loan is frozen, it can still anticipate full repayment of the loan eventually. It could ease the burden on more than 50,000 homeowners. The point has also been raised regarding guidelines and mortgages. Some couples are paying for cars or holidays but they are not paying their mortgages. This seems unfair to those who are barely scraping by. The editorial in the Irish Independent pointed out:

In most other countries, the authorities publish guidelines which specify quite clearly how families looking to delay mortgage payments can live. In Britain, the guidelines say that private education and private healthcare are out while only one holiday a year is permitted. It is time that we did something similar on this side of the Irish Sea.

Is the Minister of State doing anything on this issue? Could we easily use the UK model as the basis for similar legislation here?

I heard of one woman who is able to pay her current mortgage costs but would like to restructure them over a longer term. The bank made her apply for a new mortgage but she is unlikely to qualify given that the banks have tightened up their criteria. Does the Minister of State aim to change this situation? People are being prevented from exercising common sense.

It is interesting to see how Spain, where the housing bubble was similar to ours, is dealing with the problem of mortgage arrears. One mechanism banks are using to hold down bad loans is through encouraging struggling customers to switch from normal mortgages to interest only repayments. The latest data reveal that terms are being modified on 26,000 mortgages per month. Spanish banks are also consolidating credit card debts and personal loans by adding them to mortgages. We should remember that personal debts such as credit cards, which carry extremely high interest rates, are related to mortgage problems because people do not have the cash for repayments and instead they pay up to 18% interest.

The case of Laura White is very interesting. Ms White was saddled with a mortgage debt she could not repay but was relieved of her burden in a landmark case of debt forgiveness. The personal finance journalist, Jill Kirby, wrote:

The fact that it was Bank of Ireland and not one of the wholly owned Irish banks that came to this mortgage arrears settlement... is significant.

The bank has benefited from recapitalisation by the Irish state and taxpayer, but it is also 80% privately owned with prominent North American investors, who it can be speculated have a more realistic attitude to clearing arrears, writing off debt and giving both the bank and customer the opportunity to move on.

It remains a mystery to everyone why billions of euro that was designated for arrears write-offs have not yet been used for this purpose by the other Irish banks; the White case shows it can be done.

Mr. David Hall has pointed out that up to €10 billion has already been put into the banks to cover expected losses in the residential market. He argues that the money is there but that the banks and the Government simply have to find transparent and fair solutions so that those who can pay will do so and those who cannot are allowed to move on from the fear of losing one's home. Sorting the crisis will also offer a shot in the arm to the wider economy. Perhaps the Minister of State can elaborate on why this is not being done.

An interesting idea which caught my imagination was floated by John Teeling, who recently sold the Cooley Distillery for more than €70 million. Mr. Teeling has proposed establishing a new company which would purchase mortgages from the banks at their current value. The company could then negotiate individual deals with customers based on their circumstances and what they can afford to pay. Losses would need to be distributed between the banks and the State. Such a move to create a sort of NAMA for mortgages would take the decision making process out of the hands of the institutions which made the loans in the first place. Mr. Teeling stated that ongoing price falls meant that home owners were coming home poorer than when they went to work and that the situation was not sustainable. Has the Government considered this idea? It is at least worthy of consideration.

We need more detail on what the Government is planning in regard to mortgages and I would welcome the Minister of State's views. We need to have this debate. It will benefit many people because we can come up with imaginative ideas that may lead to solutions.