Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I will get a copy for Senators. The Government cannot support the Bill because, if brought into law, the Bill as drafted raises very serious concerns from a number of perspectives, including housing policy. The Bill could lead to the State housing budget being reallocated from social and affordable housing to the blanket purchase of mortgages in arrears for the benefit of individual mortgage holders.

In terms of fiscal implications, the Bill could lead to reductions in spending and other Government priorities in order to fund the proposal. It could also lead to a breach in the State's fiscal targets., the meeting of which have allowed the State to return to economic and employment growth. In terms of fiscal stability, the Bill, as drafted, would incentivise an increase in mortgage arrears, given the ability to transfer costs from individual borrowers to a State backed scheme, with no impact for the individual borrower. This would follow an impressive 15 consecutive quarters of decreases in the levels of mortgage arrears and would also be likely to undermine wider payment discipline, with consequent costs in terms of higher interest rates for the majority of holders who are paying their mortgages. In addition, there are no substantive details provided for this proposal and no worked up business case. Based on the information provided, it is virtually impossible to see how a large mortgage book of non-performing loans can be turned into a performing security eligible for low-cost funding without a massive capital injection.

There is no evidence that the proposed national housing co-operative society could issue bonds. The establishment of a co-operative would require significant levels of capital and there is no information contained within the proposal about where this capital would be found. The level of capital required to acquire €13.9 billion of outstanding non-performing loans would be significant and it is not possible to see how the State could provide this capital without breaching fiscal rules. There is also no evidence that the co-operative could be kept off balance sheet. Furthermore, the Bill raises state aid and competition issues, and could prompt the European Commission to open an excessive deficit procedure against Ireland at a time when we have repaired the damage to Ireland's reputation at EU level and globally.

The Bill states; "The availability of EIB funding at historically low interest rates for bodies providing housing and the potential to refinance housing debt from this source" as justification for the Bill. There are serious difficulties with this approach, including the fact that European Investment Bank, EIB, will only lend to viable business proposals and there is no basis for how this proposal is viable. It is difficult to see how the viability of this proposal could be established when a business case is reliant on borrowers with poor credit records making regular payments. Even if viability could be established, any funder, be it the EIB or a third party, would likely require a significant risk premium to fund this project. Therefore, no cost funding cannot be assumed. The EIB will only provide half of the funding for any project, so the private sector would have to provide at least the other half of the required funding. For the reasons outlined already, any third-party fund will charge a significant risk premium for this proposal. Furthermore, the explanatory memorandum displays no understanding of how the ECB operates as it suggests that the co-op would, through a secured property bond, raise the total needed from the ECB and EIB with a combination of 15 and 20-year fixed interest rates.

The ECB cannot directly fund this proposal. It could only purchase such a bond in the secondary market if it was properly marketable, rated and met all of the required conditions. However, it is highly unlikely to be able to do so as the co-op would have to be off balance sheet. The bond would have to be bought by the private sector and would have to be performing, none of which would appear possible.I will touch on the Government's response on mortgage arrears. Members will be aware that the Government has already introduced the mortgage-to-rent scheme which enables borrowers unable to restructure their mortgage to remain living in their home as a social housing tenant. My colleague, the Minister for Housing, Planning, Community an Local Government, recently adjusted this scheme to make it more flexible and accessible to a greater number of borrowers. It is also the case that the Department of Housing, Planning, Community and Local Government and the Housing Agency are initiating pilot projects to explore potential mechanisms that would facilitate investment into the residential market by private equity firms using the mortgage-to-rent model. Should these pilot projects prove successful the refined MTR model would eliminate the need for a national co-operative society proposed in this Bill.

The Government has also introduced personal insolvency legislation to provide a framework to allow indebted borrowers to restructure their debt in a sustainable way by means of a personal insolvency arrangement with priority being given to the objective of facilitating the borrower to remain in the principal dwelling where possible. This legislation was further amended to introduce a court review of PIAs which included the family home which had been rejected by the lender. The court now has the power to impose the PIA on the lender if it forms a view that the proposal is the most reasonable and best alternative to bankruptcy. The insolvency service reports that the level of applications for PIAs has increased since the introduction of this court review.

Part 3 of the personal insolvency legislation is currently the subject of a review for which the public consultation phase will close on 30 June. The outcome of this review will be laid before the Houses of the Oireachtas in due course. The term for this charge of bankruptcy has been reduced from 12 years originally to three years, and last year was reduced to one year for applicants who fully co-operate with the process, allowing people to start again in a reasonable timeframe.

Last October the Tánaiste and then Minister for Justice and Equality, and the Minister for Social Protection launched a new Abhaile home mortgage arrears resolution service.