Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

There was no provision such as is contained in this Bill that would allow the courts to adjourn proceedings where an application for repossession was made and to afford a period to an indebted individual at risk of losing his or her home to engage with a personal insolvency practitioner with the possibility of concluding a personal insolvency arrangement. Neither had Fianna Fáil enacted personal insolvency legislation.

We must not lose sight of reality. The law, as it had applied for centuries, was that if a person failed to pay his or her mortgage, the financial institution could seek an order for repossession. When the Land and Conveyancing Law Reform Act was introduced, it was the then Fianna Fáil Government’s intention that it would preserve this as the law. The Dunne judgment raised issues about certain mortgages and the type of procedures that could be used to repossess. There have been subsequent judgments which have watered down the impact of the Dunne judgment which is also on appeal to the Supreme Court. It is quite possible that if we did not enact this legislation a Supreme Court appeal could take a different view from the Dunne judgment, resulting in no protection for homeowners and with no possibility of adjourning proceedings to consider a personal insolvency arrangement. In short, the law would revert to what it had been for the previous two centuries.

This legislation is ensuring normal relationships between customers and banks. If one does not make repayments on a loan for the purchase of property from a financial institution, that institution can bring proceedings to seek repossession. The personal insolvency legislation which we introduced will be in operation before this Bill comes into force. The benefit of this is that in a repossession application, if the judge believes a personal insolvency arrangement can be entered into, there will not be an automatic order for repossession.

Several Members raised the issue of financial institutions not co-operating in such arrangements. The new code of conduct, with independent oversight by the Central Bank, requires banks to finally address the plight of the tens of thousands who are in serious mortgage difficulties. In the past two years there have been minimal repossessions. Over 70,000 individuals have made temporary, short-term forbearance arrangements with their bank. It is not that any of us wants to see repossessions, but there have been extraordinarily few repossessions in the State, considering the overall background circumstances. Why is that? The previous code of conduct effectively put a block on banks rushing to the courts to look for repossessions and required them to engage. The engagement we have had substantially to date has been by way of debt forbearance and there has been very little by way of debt forgiveness in circumstances where it may be the only feasible option. We need to have a coherent set of laws. We cannot have individuals with mortgages from before 2009 simply deciding they will not repay them when they can do so and the banks being blocked from bringing repossession proceedings against them. We must ensure the financial institutions behave reasonably. There is Central Bank oversight of the new code of conduct.

Senator Darragh O’Brien challenged me to come back next year to inform the House of the position on repossessions. I am surprised that he has not noticed that under the new Central Bank code of conduct, there will be quarterly publications on repossessions and the progress the banks are making in debt resolution.

The arrangements put in place by the Central Bank are designed to require banks to enter into medium to long-term arrangements to facilitate individuals in addressing their debt issues, where possible, not just short-term arrangements which involve kicking the can up the road. In that context, there will be transparency, which is important.

I have constantly referred to a particular provision in the legislation about seeking adjournments. Under section 2(3)(d), one of the issues to which a court must have regard in deciding whether to adjourn an application for repossession is "the conduct of the parties to the mortgage in any attempt to find a resolution to the issue of dealing with arrears of payments due on foot of the mortgage;". Quite clearly, if someone in mortgage debt and financial difficulties is able to tell a court, where a repossession order is sought, that he or she is in a position to make a repayment that a court may regard as reasonable but the financial institution has refused to engage, the judge will adjourn the proceedings to enable a personal insolvency practitioner to try to effect that engagement. The personal insolvency practitioner can assess the practicality of a personal insolvency arrangement being entered into and even before engaging with the financial institution, an application can be made for a further adjournment under section 2(4) which states "...the court may grant a further adjournment of the proceedings concerned where it considers that significant progress has been made in the preparation of a proposal for a Personal Insolvency Arrangement".

When the Bill is enacted, there will be a court architecture that was never in place for repossession proceedings built in to our law to provide protection for those who over a period of time have some prospect of resolving their financial difficulties. No economy or banking system can survive in circumstances where large sums of money are owed to a financial institution, individuals are making no payments of any description, there is no prospect of their ever making any payment, and the banking institution cannot take security for their payments. No economy can survive in that way. Do the Fianna Fáil Senators want to create a situation where taxpayers must put even more money into the banking system?