Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank the Senator for raising this important issue, which I am taking on behalf of the Minister, Deputy Michael Noonan, who cannot be here this evening. The Government has put in place a comprehensive strategy to address the mortgage arrears problem, as the Senator outlined. A key part of this is the Central Bank's mortgage arrears resolution targets, MART, initiative. This process, which was launched last March, requires the main mortgage lenders, in the first instance, to propose sustainable solutions to their mortgage customers who are more than 90 days in arrears. It also requires the lenders to conclude sustainable solutions with borrowers.

The first target set by the Central Bank required the relevant banks, by the end of June this year, to propose a solution for 20% of their mortgage arrears customers. In his presentation to the Oireachtas Committee on Finance, Public Expenditure and Reform in September, the Governor indicated that, based on returns from the individual banks, such proposals were made in respect of almost 34,900 primary dwelling and buy-to-let mortgages. This amounted to approximately 33% of the relevant mortgage arrears accounts, which was higher than the 20% target.

Sustainable solutions are key, as the Senator rightly said, for borrowers in genuine difficulty and, in the long run, for the banks themselves and the wider economy. While it is up to the lenders to propose sustainable solutions in the first instance, it is also necessary to verify independently - this is the key issue - that such proposals are sustainable and durable. That is why the independent audit process is fundamental to the overall MART process. It is important to note that when the Governor spoke at the committee meeting in June, he would not have had the full, independently verified data at his disposal. The Central Bank has informed me that audit work on the first returns by banks under the MART process is well under way and it expects to receive initial reports on these later this month.

While the Central Bank is not in a position to disclose data on an individual bank basis, it has noted a significant mix of "restructure" versus "loss of ownership" treatments across the banks. Those restructures include term extensions and arrears capitalisation, to mention just two. The emphasis on legal action is intended to press those borrowers in arrears who, despite repeated efforts by the bank, have so far failed to engage in a meaningful way. It is anticipated, therefore, that many of the cases in respect of which a legal route resolution is currently proposed will not, in the end, lead to repossession. Where a customer engages or re-engages with the lender, it is expected that an alternative long-term sustainable solution will be achievable in many cases.

The issue of a "legal letter" is not in itself a solution to a mortgage problem. This is a point I made perfectly clear in a radio interview I gave after the June committee meeting. The code of conduct on mortgage arrears makes clear that banks can commence legal proceedings in respect of a mortgage secured on the primary home of a co-operating borrower only where they have fully engaged with the borrower and taken into consideration all the options for alternative repayment arrangements offered by them as a way of addressing a mortgage difficulty. Banks which do not comply with the code of conduct are not acting in a manner consistent with the MART process.

The MART process is an ongoing one. The audit that is currently under way relates to the quarter two proposed solution returns made by the relevant banks. These banks are now due to submit their end of quarter three returns with a target for proposed solutions set at 30%. They are required to have proposed solutions to 50% of their arrears customers by the end of December, and for 70% by the end of March 2014. Furthermore, they are required - this is the crucial point, irrespective of proposed solutions - to have concluded agreements with 15% of their customers by the end of 2013, and with 25% by the end of March 2014. The Senator should bear in mind that these targets are not just a matter of Government policy. They are reflective of our firm commitment in this regard to the troika, which has correctly highlighted mortgage arrears as an area in which we must make much better progress. All of the returns will be subject to audit.

It is important that the pace of sustainable restructures should intensify. We all accept that. The new mortgage arrears data published by my Department, which relate to the majority of the Irish market, suggest that a certain momentum is now building. For example, at the end of August, some 41,000 mortgage accounts on primary dwelling houses had been permanently restructured. This included more than 2,500 split mortgages, of which the Government is anxious that lenders should offer more. The banks must build on this progress and show that solutions are available to borrowers who engage with their lender. As our statistics show, these restructures can be offered to borrowers who are already in arrears as well as those who feel they are in danger of going into arrears.

In summation, all of the necessary elements to effect meaningful solutions to the mortgage arrears problem are in place. The expectation now is that the banks, with the co-operation of customers in difficulty, will work together to ensure the issue is addressed in a definitive manner over the course of 2014. It is the firm intention of the Government that, 12 months from now, we will be in an entirely different position, given the number of solutions that are proposed and the actual conclusion of those sustainable solutions, 25% of which must be in place by the end of March next year. The requirement that all solutions be sustainable is crucial. A situation where people are denied a reasonable and workable solution is bad for the individuals concerned, for the banks and for the broader economy. To reiterate, it is our firm intention that one quarter of all customers in mortgage arrears will have concluded permanent and sustainable solutions with their lenders by the end of March.