Tuesday, 15 May 2012
Mortgage Arrears: Statements, Questions and Answers
Aideen Hayden (Labour)
I welcome the Minister of State. I was disappointed in the speech of the Minister of State. When talking about the Government approach, the Minister of State said "First, we should not create incentives that would encourage people who can pay their mortgage to stop doing so", and "the second and equally important consideration [but it was second] for Government is the recognition that some people, through no fault of their own, will not be able to fully meet their mortgage obligations". We are all aware of significant numbers of people who cannot meet their mortgage obligations through no fault of their own. That should be the first recognition by the Government, not the second.
I am concerned by a number of other comments in the statement of the Minister of State. There is another agenda in the public domain, which is motivated by the banking sector. It is the idea that significant numbers of people are engaging in what is termed delinquency. I find the language objectionable. The idea is that mortgage delinquency has risen since last year. I refer Senators to an article in The Sunday Times which suggested that people are choosing strategic delinquency in anticipation of new legislation, not because of severe economic distress but on the basis of negative equity only. The sources behind the story are unnamed and not one shred of evidence has been produced of a single borrower deliberately not making a mortgage payment. On the other hand, we are all aware of statistics provided by the credit unions that people are leaving themselves with an insufficient amount to live on because they are paying their bills.
There has been an imbalance over the past number of years in terms of how people engage with financial institutions. The Minister of State cited one of the points of significant progress arising from the Keane report as the fact that there is a cohort of advisers to stand up for people in trouble in order to put them on an equal footing with the lending institutions. The evidence before us remains that lenders are not engaging with organisations on behalf of distressed borrowers on a level playing field. They are agreeing to repayment schedules that they cannot, under any circumstances, hope to maintain. It is like a crash diet that promises weight loss within 14 days. One one can do it within 14 days but cannot do it for 14 months or 14 years.
The Government has rowed back somewhat on the mortgage arrears resolution process, MARP. In his statement the Minister of State said "This communication and engagement is a two way process and it is important that neither side is handicapped in making effective contact." We had a situation where people were being hounded by lenders, driven to suicide and this led to protocols preventing lenders from over-engaging with borrowers. It is a rowing back if we are redefining communication to allow people to be hassled to an even greater extent than at present.
There is far too much emphasis on personal insolvency reform as a way of resolving the problem. I refer to the heads of the proposed legislation on personal insolvency as currently drafted, assuming those on the outside have their way and secured debt is included under personal insolvency legislation. A certain cohort does not want mortgage debt to be included in the personal insolvency legislation. The Government should resist that under any circumstances because if we are to have any resolution of debt, it must include secured debt.
There is a view that putting this on the table will bring the banks kicking and screaming into a resolution of mortgage situations in a non-judicial, out of court settlement process. This will happen under the Act or, as I have been assured on many occasions, the fact that the legislation exists will bring the banks into some sort of resolution environment. As proposed, the heads of the Bill indicate that there will be such a level of veto for the secured creditors that it will not be possible to bring them kicking and screaming into anything and that in reality, there will be a further veto for the banking and financial institutions sector that will not result in any progress. I ask the Minister of State to ensure that the veto of borrowers over any agreement needs to be reduced significantly and perhaps removed, as is the case in other jurisdictions, so that a settlement can be imposed by the courts if necessary.
I am concerned that the real question is not being addressed. For the past number of years, lending institutions in particular and this and the previous Government have kicked this can forward. The financial institutions seem to be the centre of our attention but the issue of housing should be the main focus. A significant number of people will not be able to continue to afford to pay for the homes in which they live, even under a debt write-down scenario.
With the best will in the world, the mortgage to rent system will only be dealing with a very limited number of people in a very limited circumstance. It will not be an option for the vast majority of people who find themselves in mortgage distress. On the other hand, 100,000 families are on the housing waiting list and the private rented sector has grown from 11% to 19%, and rents are beginning to rise. It has been noted already that pressure is being brought to bear in this sector. The mortgage market is moribund and the housing market is almost completely zombie. The Government must ask itself what it will need to do in housing terms for the people who will be impacted by this debt.
A previous speaker mentioned that leaving it all to the lending institutions is not the best policy and I agree. The Government needs to consider solutions that lie outside of the lending institutions other than the mortgage to rent system. The option of the State taking responsibility away from the banking sector needs to be considered. I ask the Minister of State to reconsider this option as it has been proposed previously. We should consider a mortgage to debt equity approach, which would include transferring some of this debt out of the banks into an arm's length institution, rather than pouring this money into the banks and getting nothing out at the other end. We should create a wholly owned State subsidiary than can acquire these mortgages at a haircut price and move forward by taking some of the equity from distressed homeowners where it is possible for people with a reduced level of debt to continue on into the future. We are a society of homeowners and it is not possible to change overnight the way this society works. It is not possible to take 10% plus of every mortgage-holder in this State and create a solution to this dreadful situation by pushing it into the housing market. We do not have a housing market that is capable of coping with it and nor is the social rented sector capable of doing so.
Any solution in Ireland will have to require people to remain in their own homes. We need to move away from the financial perspective, away from the banks' balance sheets, and start considering where people in this country are going to live.