Rónán Mullen (Independent) | Oireachtas source

I welcome the Minister. I always listen with particular interest and respect to Senator Hayden's contributions, especially on this issue in which she has considerable expertise and about which she has concern and passion. Having read the legislation, I take the view that it is not about letting banks have any kind of free rein to repossess homes and I think Senator Hayden would acknowledge that. As has been acknowledged, it is about remedying a loophole caused by the repeal of other legislation, which restricts lending institutions from exercising their right to repossess properties in the event of default in certain particular instances.

We have an extremely low number of repossessions in this country, which is positive, and this legislation could help, to some degree, the normalisation of relations between banks and customers. It could also help lessen the problem of so-called strategic defaults, where people who can afford to repay their debts opt not to do so in the hope of a debt write-off some time in the future. If such people could be cut off, we could have a better overall picture of people who really cannot pay and who need help in some way.

Like most other people in this country, I have little sympathy for the banks but it is worth noting in passing some commentary from Reuters which said that totally avoiding repossessions could delay Ireland's exit from its EU-IMF bailout programme and make the eventual write-downs more costly for banks, as has happened in Spain. I would like, in principle, to support measures to ensure the country regains its economic independence as soon as possible in this area. Mr. Karl Deeter of Irish Mortgage Brokers argues that the reduced repossession time, as contained in the code of conduct on mortgage arrears, is probably a good thing because, as he put it, it might provide a faster solution for people going into deep arrears and help them to crystalise losses earlier. I certainly hope that is the case.

The fact this legislation provides for a debt arrangement or an examination of the possibilities under the personal insolvency legislation during the adjournment of the case for repossession for two months is very welcome. This situation of negotiation is very much the norm in business where one business negotiates with another where one cannot pay. However, a bank can vote against a personal insolvency proposal if it believes it is an inappropriate solution. I echo what has been said in that I would like to see a more equitable balance in this situation and seek more power for the customer to negotiate. We have to bear in mind that, as in any business, it must be based on trust but banks have lost that trust.

This situation has been exacerbated by the most recent revelations from the Anglo Irish Bank tapes.

Can we really trust banks to do a fair deal with the customer? On top of this, it is very concerning to hear reports that distressed homeowners with equity in their homes who talked to their banks are more likely to be targeted for repossessions. However, those in negative equity are more likely to be given a debt deal, according to New Beginning. It says responsible mortgage holders are being targeted and homes which have a market value greater than the loan amount owed are usually considered to be the low hanging fruit for banks on a repossession campaign.

People who have equity in their homes, often as a result of sustained payments over years, might find themselves facing repossession by banks eager to reclaim their value. New Beginning says, "We are in danger of creating a system in which those who are behaving themselves get the worst treatment and those are behaving badly are apparently rewarded". This claim was substantiated by Bank Check, a firm which checks mortgage records on behalf of Irish borrowers who have found themselves in difficulty. If this situation is true it is very worrying, especially for people who have made such an effort and have been very responsible in their repayment of debt. We must bear in mind the views of other organisations assisting people in trouble with their mortgages. The Free Legal Advice Centre's director general, Ms Noeline Blackwell, says of the new code of conduct on mortgage arrears, "Lenders will control how they deal with arrears more than they ever did before. It is likely to result in borrowers in arrears coming under considerable pressure to accept whatever alternative offer is made to them by the lender, if one is made to them at all".

The revised code reconfirms that the lender is the sole arbiter of whether a mortgage is sustainable. The bank will decide whether a borrower is co-operative or what solution might be sustainable. There is no proper appeal process and there is no provision for advice and support for a borrower going through the negotiation with the lender. I would like the Minister to reassure mortgage holders that they will not be under more pressure as a result of the code and that there will be a chance of fair deals with lenders. I acknowledge much of what Senator Hayden has said.

I would also like Minister to comment on the idea that mortgage holders could be given a legal right to change their mortgage temporarily to a rent agreement for a certain number of years. Instead of repossession homeowners would be given the option to stay in a house for seven or ten years while paying a fair market rent determined by an independent appraiser. Mr. Dean Baker of the Centre for Economic Policy in the US who came up with the policy said, "The own to rent plan is a simple and low cost way to help moderate income homebuyers. It does not require money. It does not set up a new government bureaucracy to manage the housing market". Mr. Andrew Samwick, a former economic adviser to the US Presidency, put it as follows, "If the Government is going to intervene in the aftermath of this meltdown I haven't seen a better proposal than this one". It is an idea that has been endorsed by The New York Times, although I would not endorse everything coming from it, and supported by Mr. Simon Johnson, a former chief economist in the IMF and a professor at Massachusetts Institute of Technology. Has consideration been given to the possibility of a variation of this policy? Is it something which should be taken into our discussions with the IMF?

A major factor in the mortgage crisis is that we have to put in place everything we can, especially in light of recent moves in the area, to prevent people from losing their homes and to guarantee them that right. The right to rent solution would be an innovative part of the solution and merits attention. Legislation to this effect has been sponsored in the US and perhaps we should consider such a move, which would allow people to stay in their homes. It also has the ability to release cash into the economy as people would not be as constrained as they otherwise would be because they would have smaller repayments.

If banks are getting more power in the area of mortgages, as some argue is the case, could we at least give the consumer an opportunity to transfer mortgages to fair rents for a number of years, determined independently? If a mortgage holder was guaranteed this right through law we would have a better knowledge of those who are in trouble with their mortgages. It would be a fair deal for the customer to give them the right, through law and not influenced by banks, to restructure his or her mortgage if he or she wants to do so. It is a proposal that should be considered and I would like to hear the comments of the Minister. I ask him to let us know whether the Government has considered this option as one of the tools to help us solve the mortgage crisis.