John Crown (Independent) | Oireachtas source

I welcome the Minister of State, Deputy Kathleen Lynch, to the House. I have always found it a great pleasure to deal with her as she is helpful, co-operative and respectful to us here. I will say a few words about the Bill and ask the Minister of State to go on the record with her opinions in this House as to whether in her various visits here, she has felt that legislation, motions and statements have been strengthened by the input of Senators and if she believes there will be any loss to our legislative process if the Seanad is abolished.

This is, indirectly, yet another piece of legislation and regulation dealing with the fall-out of the economic collapse. My research team has put together some figures, although I know many numbers have been plucked from rather strange places in the national debate over the past couple of weeks. The figures I have come from verifiable sources. Some 80,000 households, or approximately one in 12 families, have mortgages in our Republic that are more than six months behind in repayments. These mortgage holders now owe approximately €1.7 billion in mortgage arrears on top of their existing mortgages. The underpayment is likely to expand to €3 billion by the end of the 2014 calendar year. Nearly a third of these houses, or almost 26,000 households, are now more than two years behind in repayments.

I would argue that the market will remain bad. In 2012, only 17,000 homes were sold and should banks attempt to repossess the homes they have with the aim of reselling them, they will precipitate a further massive decline in house prices, which are already down 50% nationally from a peak value in September 2007.

Is the Government simply enacting this legislation knowing that the banks cannot afford to use these powers in order to fulfil some requirement placed on it by the troika?

Let us say the 25,000 homes sitting on more than €5 billion worth of defaulting mortgages are seized by the banks. Who will the banks sell them to? Who will provide the mortgages to the people who are going to buy these homes? How will the banks, which must mark their mortgage book to market and will, therefore, require a fresh inflow of capital to meet their Basel II requirements, never mind their Basel III capital requirements, fund these mortgages? Does the Minister have a plan that will paper over the €100 billion hole in the banks' balance sheets, which will open if they are stupid enough to move in on these homes? What about next year when about 28,000 new people will be more than two years in arrears? What will happen to them and their €5.3 billion worth of mortgages? What about the 20,000 who hold almost €6 billion of buy-to-let mortgages? There are certain aspects to the financial underpinning of the implications of this Bill which, to say the least, are phantasmagorical.

In support of what my colleague Senator Byrne said, it is really important to look at what is going on here. There is a certain amount of the rub of reproach on the Irish people for the allegation that we partied, an allegation we heard made by Angela Merkel and the Taoiseach and recently by the former deputy head of the IMF. Most people did not party. They did exactly the same thing their parents, grandparents and, in most cases, great-grandparents did. They bought a house. The difference was that the house, which was often the same kind of house their ancestors would have bought, was sold at a grossly inflated price due to the bizarre market forces of which we are aware and which were wrapped in cheap credit. Sober people, not necessarily party animals, working people and young parents went out and made what they were told was the responsible decision to get on the property ladder. These were not, by and large, wild cowboy and cowgirl speculators. They were people who, rather than spending their money on short-term expenses, made what they thought would be a long-term investment that would underpin their future and that of their families. I can recall how people who made the decision to live in rented accommodation because they wanted to have more disposable income were looked at as being somehow irresponsible as if they were the partiers.

What changed? What changed was the banks. In a previous generation, banks would not have given people on a limited income a mortgage to buy a house they could not afford. Trusted banks which were a near priestly caste in this society gave people prudent advice as to what would be in their interest knowing it was also in the banks' interest. Instead, what happened was a culture in which the banks as entities, their senior executives and people all the way down to branch level who were on huge bonuses to advise people in a colossal conflict of interest to take out mortgages they could not afford suddenly found themselves peddling mortgages that would never have been admissible before.

I put it to the Minister that in attempting to redress the situation, and it has been mentioned by the Minister for Justice and Equality in this House before in another context, he cannot give a chancer's charter with Bills. There was another lot who were definitely chancers in this and I do not believe that everybody in the banks knew or believed they were in error. I believe many of them made these decisions because they knew there was a short-term bonus gain in it for them. If we are making redress, the least we can do is look at things like non-recourse mortgages. This is a situation which applies in many parts of the world where if somebody has bought a house, is in colossal negative equity and wants to make a fresh start in life, he or she can go to the bank and say "Here, take it, it's yours." That is the way it should be. It would not deal with people who would become homeless but it would deal with many people who would be in that situation. I speak as somebody who found himself in substantial negative equity and has worked hard to pay it down to equity at this point in time so it probably would not help me too much. It would help the average person who wants to make a fresh start, even people who want to change jobs such as those who, God forbid, may get a good job abroad but who cannot go because they cannot walk away from the mortgage they have. Could we not look at some means of redressing that imbalance and acknowledging in the system we have that much, if not most, of the responsibility for these business decisions was not that of ordinary working people who had no financial background but that of skilled professionals who deliberately manipulated them? When we are seeking some kind of redress, we should at least look at splitting the difference in this sort of situation.