Tuesday, 9 July 2013
Land and Conveyancing Law Reform Bill 2013: Second Stage
I am pleased to introduce the Land and Conveyancing Law Reform Bill 2013 to the Seanad and I look forward to hearing the contributions of Senators.
This is a short Bill which is designed to deal with the legal uncertainty which has arisen as a result of several High Court judgments concerning lending institutions' remedies in cases of mortgage default. I want to emphasise at the outset that the Bill does not grant any additional powers to financial institutions. It merely restores the position which was thought to apply when the previous Government enacted the Land and Conveyancing Law Reform Act 2009, that is, that the relevant provisions of the law in force prior to the commencement of that Act on 1 December 2009 would continue to apply to mortgages created prior to that date.
I am, however, availing of this opportunity to introduce two provisions which I believe will be of benefit to borrowers in mortgage distress. These are particularly important provisions that did not exist or apply in the law up to now in the context of applications taken to the courts for repossession. First, I have introduced an additional safeguard for borrowers in section 2. It provides that in any future repossession proceedings in respect of a borrower's principal private residence, the court may adjourn proceedings so that a proposal for a personal Insolvency arrangement, PIA, under the Personal Insolvency Act 2012, may be fully explored as an alternative to repossession. This will mean in effect that lending institutions cannot in future proceed to the repossession stage without engaging in good faith in the alternative measures provided for in the Personal Insolvency Act 2012.
Second, I have introduced, in section 3, a requirement that repossession actions in regard to a principal private residence where the mortgage was created prior to 1 December, 2009 must be commenced in the Circuit Court. This provision will lead to a reduction in legal costs for parties and will also mean that the matter can be dealt with at Circuit Court level thereby obviating the need to attend High Court hearings in Dublin. This puts such mortgages on the same footing as similar mortgages created after 1 December 2009; under the 2009 Act actions for repossession must be commenced in the Circuit Court.
The current uncertainty in relation to the remedies available to lending institutions in the case of mortgages created prior to 1 December 2009 originated in the 2011 case, Start Mortgages v. Gunn. In that case, the High Court found that the repeal of section 62(7) of the Registration of Title Act 1964 in the Land and Conveyancing Law Reform Act 2009 had the unintended consequence in certain cases of restricting lending institutions from exercising their repossession rights. The judgment in this case has been appealed to the Supreme Court but the appeal has not yet been heard.
While later High Court judgments in similar cases appear to have limited the potential impact of that judgment, the resulting uncertainty is undesirable. This legislation confirms the simple point that the law in force prior to commencement of the 2009 Act on 1 December 2009 should continue to apply to mortgages created prior to that date. That was the intention of our predecessors in Government when the 2009 legislation was enacted. Mortgages provide lending institutions with security for their loans. This is a centuries old principle and is the basis of all mortgage law.
The Land and Conveyancing Law Reform Act 2009 was the result of a joint law reform project undertaken by my Department and the Law Reform Commission. It repealed approximately 150 pre-1922 statutes, the earliest of which dated from the late 13th century, and replaced them with updated provisions. The statutory provisions in relation to mortgages, which had been contained for the most part in the Conveyancing Acts 1881 to 1911, were repealed and replaced by the provisions set out in Part 10 of the 2009 Act. Chapter 3 of Part 10 of the 2009 Act contains provisions relating to the obligations, powers and rights of lenders. Section 96 of the Act confirms that these apply in the case of mortgages created after the commencement date, namely, 1 December 2009.
As regards mortgages created prior to that date, the joint project proceeded on the basis that the law applicable on the date of their creation would continue to apply by virtue of section 27 of the Interpretation Act 2005. Section 27 provides, inter alia, that where an enactment is repealed, the repeal does not "affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment". However, in the Start Mortgages case which I mentioned earlier, the High Court interpreted this provision of the Interpretation Act in a manner which restricts the application of the law in force prior to 1 December 2009 to certain cases where default had occurred prior to that date and demand for repayment had also been made before that date. As I said, a Supreme Court appeal is pending in this case.
Put simply, section 1 of this Bill does nothing other than restore the position intended by the Oireachtas when enacting the 2009 Act. I would, at this juncture, like to comment on certain ridiculous claims which I understand have been made in the media about the effect of this Bill. It has been brought to my attention that a statement was made on a well-known radio show to the effect that the passing of this Bill would result in the eviction of some 300,000 people from their homes. I am at a loss to understand from where this figure of 300,000 comes. It appears to have been plucked out of the air and has no basis in reality. I do not believe, as has been suggested, that this Bill will open the floodgates for repossessions. The Bill merely reinstates the legal right of lenders in pre-2009 mortgages to go to a court as a last resort to repossess mortgaged properties where there has been a major default by a borrower. As I have repeatedly said, it was never the intention under the 2009 Act that this right would have been compromised by the legislation, but arising from the manner in which provisions in the Interpretation Act 2005 have been interpreted in certain court cases, this is in fact what happened. It is, therefore, necessary for the Oireachtas to take the measures provided for in section 1 of this Bill to rectify the situation.
This Government views repossession of a family home or a principal private residence as a last resort after all other avenues to resolve the mortgage difficulties have been tried and failed. It is clear from the Central Bank code of conduct on mortgage arrears that there are serious procedures and timelines to be worked through between lender and borrower before any question of an action for repossession arises. The personal insolvency legislation provides for a personal insolvency arrangement in which it should be generally possible for debtors to remain in their family homes. I should add that, even where the point of a court action for repossession of a person's home is reached, this Bill makes very specific provision for a late intervention safeguard for borrowers by allowing for an adjournment for the parties to investigate the alternative of a personal insolvency arrangement. This particular option was not contained in the 2009 Act. Those who may criticise this Bill from a party political perspective should be aware of the fact that when the 2009 Act was enacted, the intention was that the blunt instrument of repossession would be available and the alternative process of a personal insolvency arrangement which would facilitate an individual in debt difficulties retaining his or her home was not part and parcel of the 2009 Act.
As public representatives we know that people in mortgage arrears are already under tremendous stress. It is unfortunate, to say the least, that scaremongering of the type we recently witnessed on the radio show referred to can be aired unchallenged. It is all too easy for people to make political or emotive capital out of the terrible circumstances in which many people with serious indebtedness problems find themselves. This Government has provided the appropriate vehicle to assist people extricating themselves from debt, where possible, in the insolvency legislation.
The Bill also provides, in section 2, for the adjournment of actions for repossession in cases involving a borrower's principal private residence where the court considers that the matter could be resolved through recourse to the mechanisms set out in the Personal Insolvency Act 2012. This provision is in line with the commitment I gave in the course of discussions on the Personal Insolvency Bill in each of the Houses last year.
One of the main priorities of this Government is to deal with the problem of unsustainable personal debt. When I took office as Minister for Justice and Equality in March 2011, it became clear that little work had been undertaken to reform or modernise the law relating to bankruptcy and insolvency despite the enormous financial difficulties being experienced by so many people. The introduction of a modern, practical and humane insolvency and bankruptcy process through the Personal Insolvency Act and the establishment of the Insolvency Service of Ireland was a necessary priority in our path to recovery and growth. The three new insolvency arrangements offered through the Insolvency Service will be of substantial assistance to thousands of individuals and families in financial difficulty. The new arrangements have the capacity to provide a path back to sustainability for those crippled by unsustainable debt. In particular, they provide fair and equitable solutions for those who have no prospect of repaying their debt.
This Government believes it is important that all households can contribute to our economic recovery and that all those currently affected by unsustainable debt have real hope for the future. Under the new arrangements, people will be given the opportunity to start again, relieved of the financial pressure of unsustainable debt. Nobody in this House can be unaware of the issues that arise where repossession proceedings relate to family homes. It is an emotive and sensitive topic and one to which I and the Government have given extensive consideration in formulating this short Bill. That is why, in the course of preparing the Bill, I sought and obtained Government approval for the inclusion of provisions which are set out in section 2 and which will allow a court to adjourn repossession proceedings in such cases in order to explore whether a PIA under the Personal Insolvency Act 2012 would be a more appropriate and acceptable alternative to repossession.
In line with the aim of the Bill which I set out earlier, section 1seeks to ensure continued application of certain repealed provisions of the Conveyancing Acts 1881 to 1911 and the Registration of Title Act 1964 to mortgages created prior to 1 December 2009, the date on which the repeals took effect on commencement of the Land and Conveyancing Law Reform Act 2009. The intention is to remove the uncertainty which has arisen regarding lending institutions' remedies in certain cases of default. Subsection (1) provides that the section shall apply to mortgages created prior to 1 December 2009, the date on which the 2009 Act came into operation. Mortgages created after that date are subject to the 2009 Act's provisions. Subsection (2) provides that the statutory provisions referred to in subsection (6),which were repealed by the 2009 Act, may be invoked or exercised by a person as if those provisions had not been repealed in the 2009 Act.
While the High Court judgment in the Start Mortgages case dealt specifically with the unintended effects of the repeal of section 62(7) of the Registration of Title Act 1964, the opportunity is being taken, on the advice of the Office of the Attorney General, to make it clear that relevant mortgage-related provisions in the Conveyancing Acts 1881 to 1911 will continue to apply to pre-1 December 2009 mortgages. Subsection (3)provides that provisions which were amended by the 2009 Act may be invoked or exercised by a person as if those provisions had not been amended in the 2009 Act. These statutory provisions shall apply to mortgages created prior to the commencement of the 2009 Act notwithstanding their amendment by that Act.
Section 1(4) is a without prejudice provision which provides that subsections (1) to (3) do not affect the ability of any person who is in a position to rely on other rights or entitlements to exercise those rights or entitlements. In short, a lender that is already in a position to seek and obtain repossession within the limits of the Start Mortgages judgment will not be affected by the provisions contained in subsections (1) to (3).
Section 1(5) provides that the section will not apply to any proceedings already before the courts. This is in compliance with the "separation of powers" principle in our Constitution. Section 1(6) is an interpretation provision which contains relevant definitions.
Section 2 provides that in repossession proceedings involving a principal private residence, a court may, where it considers it appropriate or on application by a borrower, adjourn the proceedings to enable the parties to consider whether a personal insolvency arrangement, PIA, under the Personal Insolvency Act 2012 would be a more appropriate alternative to repossession. The intention behind the provision is to ensure that lending institutions do not resort to repossession proceedings without considering the PIA option under the 2012 Act.
Section 2(1) makes it clear that the provision relates only to principal private residences. These include family homes under the Family Home Protection Act 1976 and shared homes under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. Section 2(2) allows the court, either of its own motion or on the application of a person, to consider an adjournment for a period of two months to enable the parties to explore the possibility of a PIA as an alternative to repossession. I ask Senators to note that this provision is designed to enable the parties to explore the possibility of a PIA as opposed to making any final submission to facilitate possible agreement thereon.
Section 2(3) outlines certain matters the court may take into account in its consideration of an application for adjournment. These are particularly important and include whether the borrower has engaged in a process relating to mortgage arrears, whether payments have been made by the borrower in the preceding 12 months, whether the matter has been adjourned previously and the conduct of the parties to the mortgage in seeking to resolve issues concerning arrears on the mortgage. Bad faith on the part of either party may be taken into account by the court. If, for example, either the lender or borrower has not engaged meaningfully in attempts to resolve the arrears, that matter can be taken into account by the court in determining whether to adjourn repossession proceedings.
Section 2(4) provides that at the end of the adjournment period the court may grant a further adjournment if it considers that progress has been made in preparing a PIA. Section 2(5) provides that the court may adjourn a case to a different venue within the relevant circuit in order to meet with the period of two months provided for in subsection (2). Section 2(6) provides that the section will apply to mortgages created both before and after the coming into operation of Part 10 of the 2009 Act on 1 December 2009 and section 2(7) contains relevant definitions. As a result of confusion on the part of some contributors to the debate on the Bill in the Lower House, I wish Senators to note that if a second adjournment is to be granted in order to facilitate an individual entering into a PIA, the length of such an adjournment will be at the discretion of the court. It will not be confined to a maximum of two months. It is, therefore, designed to enable individuals to work through the process that is envisaged, which can result in parties entering into PIAs.
Section 3 provides that in the case of mortgages in respect of principal private residences which were created prior to 1 December 2009, repossession proceedings must, as indicated earlier, be commenced in the Circuit Court. Up to now, the venue would have been the High Court. This means that such cases must be commenced in the Circuit Court, irrespective of the date of creation of the mortgage. However, in order to avoid legal challenges in respect of proceedings already in being, section 3(4) provides that where other such proceedings relating to the enforcement of a mortgagee's rights have been commenced in the High Court but have not yet been determined then, notwithstanding section 3(2), proceedings for repossession of a principal private residence may be taken in that court. This will effectively avoid the risk of enforcement proceedings being taken in two separate courts simultaneously. The latter would lead to increased costs being incurred by the parties concerned, which would be undesirable.
Section 4 is a standard provision containing the Short Title and a commencement provision in respect of section 2.
The Bill is a short but important Bill. It restates the law that has existed over the centuries which enables a lending institution to rely on its security in respect of a mortgage. Section 1 does nothing more than restore the position intended by the Oireachtas when enacting the 2009 Act. Section 2 seeks to ensure that where repossession proceedings concern a principal private residence, full account is taken of the alternative options available under the Personal Insolvency Act 2012. This is a major reform of the law compared with the position as it would have been had this difficulty not arisen under the 2009 Act. In addition, section 3 provides that repossession actions in respect of principal private residences must, following the coming into force of the section, be commenced in the Circuit Court. The Bill will restore legal certainty, promote utilisation of the options available under the personal insolvency legislation and enhance protection levels for borrowers' homes. On this basis, I commend the Bill to the House.
I welcome the Minister to the House. While I realise that the Bill is amending previous legislation, I note that the Minister referred in his speech to good faith. We should reflect on the actions of the banks to date. We saw in the newspapers today reference to the banks being hauled over the coals by the Central Bank because they have not met the targets in terms of coming to arrangements with mortgage holders. However, when there is no sanction for banks, then those working in the bank are unlikely to worry too much about what the Central Bank says to them. We saw what the banks did in respect of what Patrick Honohan said to them last March. He asked them to consider split mortgages, set out as a possibility under the personal insolvency legislation and under the new code of conduct as well. Rather like the personal insolvency legislation, the new code of conduct was really a charter for the banks for what they can do. While we can talk about good faith, the banks do not act in good faith. The banks act to make a profit. They act in their own best interests and in no one else's interests.
Let us consider what they did for Patrick Honohan, the Governor of the Central Bank, when he asked them to start addressing the 142,000 mortgages in arrears. He asked them to consider split mortgages, and they did so. To date, a total of 142 split mortgage arrangements have been made. However, if we split that among the five banks, it does not amount to much activity by the banks when it comes to making an arrangement in good faith with people in mortgage arrears. The banks have no more regard for the Central Bank now than they did five years ago.
The last time he was here I asked the Minister what discussions were held with the banks and whether he could make available to us details of the discussions and the position papers that the Government had for the Personal Insolvency Bill prior to the banks discussing it with them and what the legislation looked like after the banks came in. Perhaps the Minister would enlighten us about whether he could make those papers available to us?
Since the Minister had no problem replying the last time, I am affording him the opportunity to give a response this time. Is he considering making available to us the position papers that the banks had when they approached him with regard to the personal insolvency legislation?
The Senator knows he is only play-acting given that it was his party that destroyed the economy and put tens of thousands of people in difficulties in their homes.
The people want to know what the banks asked for when it came to the Personal Insolvency Bill. The last time the Minister was in the House I asked him to make those papers available to us and we still do not have them. Would the Minister consider making available to the people what the Personal Insolvency Bill-----
If the Minister does not wish to take that opportunity, he is more than entitled not to respond to the question of what the banks sought when it came to the changes in the Personal Insolvency Bill, which has a bearing on this Bill. We have seen what the banks did when it came to the Central Bank. Never mind that a bank manager might tell a poor mortgage holder that the bank wants to repossess the family home, the Central Bank has informed them to give split mortgages but for the 142,000 people in arrears they have only handed out 142 split mortgages because they do not want to do it and there is no compulsion on them to do so. Can one imagine what they will be doing to people who are sitting before them in good faith?
If we had all the safeguards and proper personal insolvency legislation that had not been written by the banks or if we had a powerful Central Bank that could compel the banks to give split mortgages when people seek to resolve their arrears issues, then we might regard the Land and Conveyancing Law Reform Bill as part of a banking system in a normal working economy. However, we have seen that the banks do not act in good faith and only operate in their own interest. Blaming a bank for making a profit does not make sense because that is what they are established to do. They are not too concerned about the mortgage holders, which beggars belief when one considers that if they repossess these houses they will not grant loans to buy the same houses. It leaves the economic situation in paralysis.
I have said it numerous times and President Bill Clinton, when he was here in November two years ago, said that Ireland needs to solve its mortgage problem. A mere 142 split mortgages indicates that the banks are not solving our mortgage problem, despite the Government's best efforts. The Government is trying as did the previous Government, but unfortunately the banks seem to be ignoring the Government and the Central Bank. Now the troika is going to haul the Government over the coals because the banks are not dealing with the mortgage arrears crisis despite numerous attempts by the Government to make them do so.
When the Government is engaging with the banks and asking them for their opinion, it will only have one result. Those who have worked on behalf of those people in arrears and those who have borrowed money from the bank have pointed out in briefings to many in political parties that the personal insolvency legislation and the Land and Conveyancing Law Reform Bill explain why we had a stay on the amount of repossessions. The previous Government had introduced an initial moratorium and the Land and Conveyancing Law Reform Bill, by accident more than anything else, has put a further stay on it.
Once the banks get their teeth into this they will go through the process of making many offers that are unsustainable. We know they make unsustainable offers because in almost one third of all mortgage arrears solutions offered, the people involved have again gone into arrears. That indicates the level of engagement by banks with people in difficulty.
This is an amazing week in that three major legislative measures are coming before the House on democracy, people retaining their homes, and abortion. It is probably the most important week for any legislator. We are passing this Bill, which is a charter to allow banks repossess homes once they engage in good faith with the owners, having seen the way they engaged in good faith with the Government. The Government is seeking to reduce the number of legislators by one third but we need more legislation when it comes to banks.
On the abortion issue, and some of my colleagues opposite hold similar views to mine, there is a great deal of evidence before us yet we are now legislating for a solution that all the experts tell us is not the solution. It will be an amazing week.
I welcome the Minister of State, Deputy Lynch, and her colleague, the Minister, Deputy Shatter, who made the opening remarks. Whatever about this being an amazing week, the contribution from Senator Daly was not particularly amazing. I heard much of it when he spoke on the personal insolvency legislation, which was very important, but the Senator's contribution was by way of a single transferable speech, which we heard again today. The Senator knows that we are obliged to pass this legislation because of a court case and that we are simply restating what the previous Government, which was very much led and directed by the Senator's party, believed to be the position at that time. Fortunately for distressed mortgage holders across the country, of whom there are tens of thousands, the Minister is at least using this legislation to put some additional measures in place which might be of some help. We all wish we would not have to be in this place politically but our country and our economy is broken and, sadly, these property crises arise from that.
We got the lecture from Senator Daly about the admonishment by former President Bill Clinton when he told us to get our house in order, if Members will excuse the pun, but the way they get their house in order in the United States in terms of people who cannot pay their mortgages is that they repossess and sell. The huge foreclosure market in America is as much a product of President Bill Clinton's Democratic Party as it is a product of the Republican Party and therefore I am not interested in listening to lectures from President Bill Clinton on housing or on many other policy issues facing us, particularly this week.
Every Member recognises that there is a profound problem with mortgages. Sadly, too many families cannot repay their mortgages and face a genuine financial crisis. We must try to work with them to assist in that regard.
It is ironic that we are debating the legislation here when the troika is in town. Apparently, part of the troika's discussions this week with the Government, the Department of Finance and other Departments concerns this issue in its broadest format. It will probably cause further reflection on Government thinking but it is fair to say that as a result of the personal insolvency legislation a suite of measures were put in place by the Minister, Deputy Shatter, and the Government some months ago. We are at least setting out some sort of roadmap and, it is hoped, a path to safety for a reasonable number of families. That must be welcomed.
In terms of one of the measures being taken by the Minister, the legal obligation on him would be to simply put in place what we believed was the position before the court case but he is now bringing about the possibility of substantial negotiation with the personal insolvency provisions. This is not a personal attack on him but Senator Daly said that the banks will continue to ignore us as they have always done in the past.
If the banks are not co-operating to a reasonable degree the courts can decide not to let the repossession go ahead and direct the banks and the borrowers down the route of the personal insolvency process. This degree of slowing down the process is helpful. No new powers will be provided as a result of the legislation; I know we will hear this statement later in the week, but it is true with regard to this Bill. It is a tidying up measure arising from the Start Mortgages court case, but it is appropriate the Government puts in place any further additional assistance it can by way of this legislation.
The Minister has been very clear in his statement as to where he wants the legislation to lead and how he wants it to help. I am sure the Minister of State, Deputy Lynch, would agree with the Minister's view that the repossession of a family home or principal private residence must be a last resort after all other avenues have been tried. This is the starting point of the Government's policy and is at the core of this and other legislation. We must recognise that tragically there will still be cases where repossession will take place, but at least let us have it structured and be aware of the full legal underpinning of the rules so people can be helped as far as possible even though the outcome would not be desirable. The availability of the Circuit Court option is welcome so people will be in a position to avoid having to travel to the High Court in Dublin.
The Acting Chairman often speaks in the House on the question of personal debt, housing debt, mortgages and the need for us to do whatever is possible. The backdrop is our economic crisis, our broken economy and the fact that hundreds of thousands of people borrowed to a level where repayment in full is not sustainable. The personal insolvency arrangement measures are a part response and this is a necessary tidying up of another part of the problem. We all recognise that further efforts are required.
I thank the Minister for his contribution and his personal commitment, which we saw very much in the House, as we also saw from the Minister of State, Deputy Lynch, when dealing with the personal insolvency legislation. It was considered in a thorough and inclusive fashion whereby amendments from the Opposition were listened to with great respect. Many were taken on board and are now part of the legislation. Rather than Opposition Senators, such as the previous speakers, trying to rewrite history and making smart comments and silly interventions on a subject as serious as a person's house, home and family home we should all try to work together. If people have genuine problems with the legislation let us try to improve it, but let us not pretend we live in a Walter Mitty land where we can ignore these problems and wish them away.
I congratulate the Minister, Deputy Shatter. He made the point that one of the priorities of the Government was to deal with the problem of unsustainable mortgage debt. As somebody who has been working in this field for a long time I am well aware of the previous attempts made to try to deal with the situation very unsatisfactorily. Measures to reform and modernise the law relating to bankruptcy and insolvency are critical in removing us from the current impasse we are at in regard to resolving the mortgage debt situation.
I have worked in this area and as a personal solicitor for many years and I am more than aware, as many of us are, of the dreadful position in Ireland today of those facing mortgage arrears.
Let us be real about it, they are facing mortgage arrears because of the collapse in the housing market and the economy. This is the bottom line.
This Bill is viewed with concern by many for whom I have the deepest of respect as part of a wider strategy to permit easier repossessions, coming as it does on foot of the revised mortgage arrears resolution process, which appears to place lenders in an even stronger position than heretofore. Well-respected organisations such as the Free Legal Advice Centres, FLAC, have stated that the revised code reconfirms the lender as the sole arbiter of whether a mortgage is sustainable. A bank will decide whether a borrower is co-operative and what solution will be sustainable. No proper appeals process is in place and there is no provision for the borrower to take credible independent advice when dealing with a lender.
I regret the Bill's timing. It would have been more appropriate to introduce it when the personal insolvency service was up and running and the manner in which the service was going to do business was clear in the public mind. We have not reached that point.
While attempts by the Government and the Central Bank to force the six main mortgage credit institutions to offer solutions to distressed borrowers by way of the 2013 mortgage arrears resolution targets are well meaning, they have yet to show tangible results. Among the wider public, there is considerable fear that, as the housing market recovers in parts of the country, particularly Dublin, banks are proposing so-called solutions that they determine in their sole wisdom to be reasonable, but that will achieve nothing in the long run other than repossessions. It would have been wiser to propose this legislation after the efficacy of the solutions being offered to borrowers could be seen to be just.
The Minister views this legislation as part of a jigsaw, in that it removes a loophole enabling those in mortgage arrears who will not pay - I distinguish between those who will not pay or are reluctant to reach agreements with their lenders and those who cannot pay - to avoid coming to the table in a meaningful way. Not for one moment do I believe the words of Ulster Bank's CEO when he asserted last week that one in three of those in long-term arrears were effectively in the category of those who would not pay. It was a serious overstatement of the situation. However, some people are in that category. They could make payments but choose not to do so. They do an incredible disservice to those who must deny themselves and their children basic necessities to make mortgage repayments. Among this latter group, there is genuine fear that this legislation, intended for others, will be used to dispossess them of their homes. We must address this concern by demonstrating that we are willing to listen to them.
In this context, will the Minister review the revised code of conduct on mortgage arrears as a matter of urgency? Too much power has been placed with the lending institutions. In particular, that a lender has been allowed the discretion to decide what constitutes a sustainable and affordable solution for a borrower goes against the principles of natural justice. A more level playing field must be introduced to balance the rights of borrowers and lenders. The absence of expert legal and accounting advice for many borrowers at the negotiating stage of an agreement is a powerful impediment to the creation of confidence in the system. While the Money Advice and Budgeting Service, MABS, is a wonderful organisation, it is woefully under-resourced in this crisis.
Moreover, there is a lack of transparency in the system. No one knows which lender is offering what to which borrower. This is unacceptable and leads to a lack of confidence in the system. Why a lender cannot be open about what solutions it is offering to borrowers is beyond credibility. The refrain that every borrower and every situation is different rings hollow to someone who is trying to determine whether to accept an offer from a lender. This culture of secrecy leads to the suspicion that those who owe more are being treated better by lending institutions than those who owe less.
I am well aware - I was a practising solicitor - that it is nonsense to behave like King Canute in the face of what is a legal lacuna and to propose that a lender should not have recourse to charged assets. Countries which have an inadequate legal system have, by extrapolation, an inadequate mortgage system. If we want to see the recovery of our housing market, we need to see a robust legal system where lenders have access to the charged assets. However, it is not appropriate to introduce this legislation at this time. I will ask the Minister to take into account the serious concerns in the public domain and to consider delaying the implementation of this legislation until such time as the Personal Insolvency Service of Ireland is up and running and we see what results come forward from the six banks required to reach agreement with borrowers.
I have a major concern I would like to bring to the Minister's attention which relates to recent statements by the Governor of the Central Bank of Ireland, Professor Patrick Honohan. He stated that he foresees that repossessions will be focused on the buy-to-let property sector and not on family homes. That is perfectly understandable but we must understand that currently 20% of the entire housing market comprises people renting their homes. Currently, we have no procedures in place as to how those repossessions are to be treated and how the families in those homes are to be treated. That is a very significant lacuna in the law as it stands.
I understand the necessity for this legislation to remedy the lacuna which has come to pass but the Minister should exercise his discretion and take into account the serious concerns in society.
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.
I welcome the Minister. It is timely that we are discussing the Bill in the House because it has given us an opportunity to debate in issue of major concern.
It is that there is a prevailing view that the banks and lenders are ruling the roost at the expense of the mortgage holder. It is very important that we flag the issue with the Government because the matter needs to be addressed.
The Land and Conveyancing Law Reform Bill 2013 is clearly rectifying an issue arising from a court case and we are remedying a loophole in a previous Act. We must act to remove the unintended constraint on banks to realise the value of a loan collateral under certain circumstances. We must also ensure at the same time that the rights of the home owner are protected. I particularly welcome section 2 of the Bill, which provides that in repossession proceedings involving a principal private residence, a court may, where it considers it appropriate on application by a borrower, adjourn the proceedings to enable the parties to consider whether a personal insolvency arrangement under the new Act would be a more appropriate alternative to repossession. That is helpful.
We really need to be careful in Ireland because we do not have a history of repossessions. Should that begin to happen here, we will change the landscape completely, and we will alter a trust that has existed for decades. We can give out about banks all we want but there has not been a history of repossessions. I lived in the United States for three and a half years and there is a very big history of repossession there, with auctions of repossessed properties and foreclosures. Should we go down such a road, much trust will be lost at very delicate moment in our history.
Will the Minister of State collaborate with the Minister for Justice and Equality, Deputy Shatter, as we urgently need a thorough review and analysis of the prevailing concern that banks are getting too much power in the impending repossession scenario? I accept that we have a low rate of repossessions but we do not want that to unnecessarily increase if people can be enabled to stay in their homes. I request for the autumn a progress report on the personal insolvency legislation and the split mortgage issue in particular. If there are so few split mortgage being arranged, we need to know the reason, as a split mortgage is one of the best ways to enable people to repay what they can afford while parking another piece of a mortgage until they are in a better position to pay. Like others have indicated, such as Senators Hayden and Mullen, I would like a review of the code of conduct on mortgage arrears.
I want to be able to see people enabled to stay in their own homes so we should call a spade a spade. The collapse in the economy was largely - and perhaps wholly - caused by banks and a lack of regulation by the previous Government. The Minister of State might address the following question in summing up. Would people be facing repossession today if the banking collapse had not happened, through no fault of those people? If the answer to the question is "No", the people in question should be enabled to stay in their own homes. However, if people were reckless enough to be facing repossession regardless of the banking collapse, we are talking about a different kind of customer. On the whole, we condemn the behaviour of people who can pay but will not pay but we must carefully work out which is which.
I am particularly concerned about the prevailing reports that banks are moving on homes that have equity because they are good value. That would be despicable behaviour. The majority of proposed changes should not favour the lender over the borrower in the mortgage arrears process and it must be on a level playing field, with engagement between customers and advisers.
There are many concerns and much to say about the Bill. I do not know if my time is close to an end.
The most important information we can get from the Minister of State concerns when we will have a discussion on the new mortgage arrears code. We should have that before the summer. There must be a review of the personal insolvency legislation in the autumn. Let this Government not be judged on failing home owners who did not cause the banking collapse in this country. It is pushing them down the road of arrears on the family home, which is a person's most important possession.
I stand to absolutely and wholly oppose this legislation, which is the wrong legislation at the wrong time. In a normal, functioning economy, when people are in work, one would not mind having a system of repossession. However, when people do not have a job and cannot pay their mortgages, it is not right. There is no evidence of the strategic defaulters referred to by Senator Mullen. When a person cannot pay a mortgage, why should the banks be given the power to oust him or her from a home?
This legislation is giving banks the power to put people out of their homes, as under it the banks will be entitled once again to go to court to seek repossession orders. The court has no discretion but to grant the order, except with regard to a two-month adjournment and an adjournment relating to personal insolvency legislation. If the Minister for Justice and Equality or the officials had read the texts on this law as it applied before the 2009 Act, they would have seen that there was always a major gap in the law and a judge has no discretion but to give a repossession order. The judge has no guidance whatever on what factors should be taken into account when he or she must give the repossession order. This means that in effect there is no point in having a court process as nothing will happen aside from a granting of the order or pushing the process towards the personal insolvency area if it is not there already. I am surprised this issue has not been addressed.
On this side of the House we put forward a family home Bill at around the same time as the Dunne judgment, which was designed to address the loophole created by the judgment as there is nothing to guide the courts in this area. That position is not changing with the Bill and there is still a major gap. If the Department officials had looked at the texts in this area they would know about this, as they would have if they had looked at our Bill. The Bill before us is simply putting the banks back in charge.
I pay tribute to the Oireachtas Library and Research Service because once again it has produced a totally unbiased and potentially controversial statement in the Bill's digest. The service has done that before with the septic tanks legislation, as it contradicted Government statements. The digest indicates "Repossessions will allegedly focus mostly on investment properties rather than family homes". There is no difference except that with a family home case, personal insolvency arrangements may apply. Why can that not happen with other properties or why does it only apply to family homes? The family home ought to be protected and there should be guidance but there is nothing to tell the court that if people have nowhere to go, the repossession order cannot be made, or that alternatives like a mortgage to rent scheme can be suggested. Our family home Bill tried to facilitate a position where if proceedings went to repossession, many other options would have to be considered. There is nothing in this Bill in that respect. That is wrong and unfair.
I pay tribute to the Members of Dáil Éireann who stood up at the Allsop auction last week and I will do the same if any family homes in County Meath - or anywhere else - are in a similar position. It would be wrong and unjust for that to happen. Senator Healy Eames analysed the position very well. If a person is in a bad position because of the economic collapse or the loss of a job that is beyond the person's control, he or she should not have the family home repossessed. If somebody has gone overboard, on the other hand, it is hard to justify keeping him or her in the house, as long as there is some place for that person to go. We cannot kick out people to the streets, no matter who they are. Why should this not be addressed in the Bill, as that is what we tried to do with our family home legislation?
The Government has been lobbied by the banks, as has happened before and is happening once again. The code of conduct is another bankers' charter. There was some nonsense during the by-election a few months ago about targets that would be reached but the issue has proven to be a bankers' charter. It is the same with this Bill. It is about time we had some fairness.
The Irish public has given so much to the banks that it is time for those institutions to give back something. There should be some balance on that see-saw; it is currently stacked in favour of the non-paying borrower who cannot be put out of a house, in effect, but the see-saw is going right in the other direction. We are only seeking balance because if somebody is not paying a mortgage on a property, the matter must be addressed. Nevertheless, the State cannot put these people out on the street because the consequences for society would be horrendous.
One can consider some of the cities in America where repossessions are rife and some parts have turned into ghost towns. I do not know if that is likely here but there are tremendous social consequences to repossessions which have not been addressed at all in this debate or legislation. We really need to give people a break until they get back to work because once people are working, there is no excuse. If people are working in a sustainable job but their mortgage remains unsustainable, something else must be done. There should be a proper mortgage to rent or mortgage to shared equity scheme in place, with some fairness shown to people in difficulty.
This Bill ought to be opposed or at least amended significantly to consider the family home Bill that we produced. We consulted with the Free Legal Advice Centres and New Beginning but I do not know their position on this Bill; they can speak for themselves. At the time we produced our Bill, they felt the lacuna in the law was significant, although the Dunne judgment addressed it to some extent by essentially postponing repossessions. The matter has not been dealt with in the Bill and I ask the Government to look at what the standard Irish textbooks on conveyancing state about repossession orders. The gap is not being dealt with in this legislation.
I welcome the Minister of State to the House. The Minister for Justice and Equality, Deputy Shatter, has already given a full and detailed explanation of the reasons for this Land and Conveyancing Law Reform Bill 2013, which is meant to deal with a loophole that has arisen with the 2009 Act. That law was introduced to reform the Registration of Title Act 1964 and the Conveyancing Acts 1881 to 1911.
It is interesting to hear Senator Byrne argue that this legislation should not proceed. It is important to consider the Minister's speech for a clear example of what he is talking about. He states "However, in the Start Mortgages case which I mentioned earlier, the High Court interpreted this provision of the Interpretation Act in a manner which restricts the application of the law in force prior to 1 December 2009 to certain cases where default had occurred prior to that date and demand for repayment had also been made before that date." Taking Senator Byrne's comments into account, this means that if a person owns a €5 million house in default prior to 1 December 2009, with demand for repayment made prior to that date, the Senator wants the person to continue living in that house.
I am giving an example from the Senator's comments. The Senator argued there should be no change in the law and it should be left as it is, even if the house in question is worth €5 million. There is a loophole in the legislation and the Minister has brought forward this Bill, making provision under sections 2 and 3 specifically with regard to a principal private residence, as the courts would have certain obligations with regard to new personal insolvency arrangements. That is to ensure proper procedures are followed so that every opportunity can be given to the home owner in dealing with the matter. There would also be an attempt to reduce costs by ensuring the matters are dealt with in the Circuit Court.
In supporting the Minister and this legislation, it is important that we analyse how the banks behaved when they gave out money prior to 2008. For example, I know of one case where €4.5 million was given to a borrower, with €1.5 million of the sum given to the borrower in order to buy shares in the bank lending the money. There were 11 properties remortgaged in that case and the bank did not hesitate in repossessing those properties. The banks behaved disgracefully in that case. In another example, €180,000 was borrowed by a couple who went their separate ways. A parent tried to help one of the parties who wanted to stay in the house, and an additional €40,000 was borrowed, with the parent signing a mortgage for the full €220,000. That property is now worth 50% of the value. It is another example of unreasonable behaviour from the banks prior to 2008.
At the time the banks were acting on behalf of builders and in order to keep cash flowing, they wanted bank officials to contact colleagues and get customers to buy properties that the banks' clients had for sale. That ensured constant cash flow for builders. One branch would loan the money and another would collect the money in a builder's account. All this went on when the banks had no real control or supervision, which was a major contributory factor to many of the problems we ended up with. I have had discussions with bank officials about their concerns that decisions are not being made at the coal face or by the people meeting borrowers; instead they are made at a central level in Dublin. There is a big concern about the process and banks should ensure that all the facts are being considered before decisions are made.
This legislation must be put in place to remove the loophole that exists but it is also important that the banking sector should deal with the buy-to-let area. In a small number of cases there are people with extensive borrowings collecting rent but making no contribution to the bank. As a result, the taxpayer will unfortunately end up carrying the can when insufficient money is collected for the repayment of those loans. Such issues must be dealt with.
I agree with other contributors with regard to principal private residences, and every opportunity and assistance must be available to families and house owners so that it will be a very last resort for legal proceedings or repossessions to take place. Priority should be given to the house owner and the Minister in the legislation is ensuring that changes have been brought in to incorporate the personal insolvency process and ensuring courts must follow certain procedures. I support the Bill.
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.
Cuirim céad fáilte roimh an Aire Stáit. Táim ag éisteacht go cúramach le gach a bhfuil le rá ar seo. Almost 190,000 households are in mortgage distress and almost one in four residential mortgage holders are unable to meet their repayments. Some are in arrears for extended periods of time while others are in reduced payment schemes but one in four are unable to repay their mortgage debt and the numbers are rising. While this problem was created by Fianna Fáil, it has got significantly worse since Fine Gael and the Labour Party took office. The number of struggling mortgage holders has doubled. Many of us cringe when we hear Fianna Fáil Senators and Deputies offer solutions to a crisis they created and then refused to tackle when last in government.
However, Fianna Fáil's role in this crisis does not absolve the current Government of its responsibilities. Fine Gael and the Labour Party have continually talked about giving priority to addressing the mortgage crisis and we heard it here again today but it took it almost two years to publish the Personal Insolvency Act, which is the centrepiece of its response to this crisis. After all its talk of protecting the family home and standing up to the banks, what did the Government do? It did what Fianna Fáil did when it was in office and allowed the banks to dictate the agenda. In fact, it did something worse. It gave lenders a cast-iron veto over any solutions to individual distressed mortgages. These same banks have done virtually nothing to assist struggling family home owners since this crisis erupted and many have made things worse by hiking up interest rates on variable rate mortgages.
To add insult to injury, the establishment of the personal insolvency service has been much delayed. We still have no idea when personal insolvency practitioners will be on the ground working with distressed families. Not a week goes by without more bad news for mortgage holders such as rate increases, regressive changes to the mortgage arrears code of conduct and delays to the personal insolvency service. This is hurting families and the local economy and is, without doubt, a major contributor to the ongoing recession.
In response to this growing crisis, what does the Government do? Does it force the banks to step up to the plate and help struggling families? Does it take away the banks' veto over insolvency arrangements? Does it give the Central Bank and the Financial Regulator the powers to insist that ECB interest rate reductions are passed on to mortgage customers? No, it does not. Instead, it brings forward a Bill that makes it easier to evict struggling families from their homes. This is what the Bill before us is about. It is not just removing an unintended loophole from earlier legislation. It is not about ensuring that legitimate repossessions can take place from so-called strategic defaulters. Plain and simple, it is an eviction charter with one simple purpose - to empower the banks to take people's family homes.
The Minister and the Government should be ashamed of themselves. They should be ashamed of the additional burden of stress and uncertainty they are heaping on struggling mortgage holders. If they had held this legislation back until the personal insolvency service was up and running and the number of families in mortgage distress was falling, Sinn Féin may have taken a different approach. I note that this was a proposal put forward by Senator Hayden. We accept that there are occasions and exceptional circumstances when repossession is necessary but to give the banks these powers now while the mortgage crisis continues to rage all around us is not only bad policy but bad ethics.
The Government is rewarding the banks for their intransigence and their failure to do the right thing by their mortgage customers but then, since taking office, the Government has really changed its tune on the banks. It talked tough on remuneration when in opposition but rolled over once in office. It is almost halfway through its term of office and we still have no banking inquiry. What the Bill before us today makes clear is that when it comes to the banks, Fine Gael and the Labour Party are no different to Fianna Fáil. Senator Bradford noted the single transferable speech. I think the previous Government might have left behind some of its single transferable speeches and they were picked up by this Government. When the banks say "Jump", this Government, like its predecessors, says "How high?" Sinn Féin will oppose this Bill and I urge all other Senators to do likewise. I note Senator Hayden's comments and I agree with a lot of what she had to say. If we are to oppose this route of dealing with this scenario, the best way to delay this is to vote against it and I call on Senator Hayden and other Senators in her party to do so.
Tá an Bille seo náireach. Ba cheart go mbeadh náire ar an Rialtas leis an rud atá á dhéanamh aige. Níl sé ag dul i ngleic leis an bhfadhb. Tá fadhb na morgáistí ag dul in olcas. Tá sé ag méadú in aghaidh an lae agus níl an Rialtas ach ag leanacht an bhóthair céanna, ag leanacht na n-amadán a chuaigh rompu.
I welcome the opportunity to contribute to the debate. The loophole that is being filled today, while the anomaly needs to be addressed, puts the final tool into the shade of the banks in terms of making them all powerful in pursuit of their debts. In 2009 we were in Government when I first started to lobby on this issue in the north west and set up the Prevention of Family Home Repossessions Group. People laughed at what we predicted would be a huge crisis and so it is. Some of the media covered this point at the weekend. Senator Sean D. Barrett often used the phrase "a metaphorical backstairs" that was available exclusively for the use of the banks into the Department of Finance.
The recommendations of the Prevention of Family Home Repossessions Group eventually grew into the Family Home Bill. The then Minister, the late Brian Lenihan, believed in those points of view, that before an order for repossession could be granted the bank would have to convince the court of the quality of the original underwriting in the application, that a full range of alternatives was considered by the bank, including, split mortgages, extending the mortgage up to 20 years, intergenerational mortgages and a number of other measures of which the House is well aware, having listened to me in recent years. The then Minister's concern was that his officials advised that one had to be conscious of the market and what the market might think of this and, as a result, the best the Minister could do at the time was to get me to make a presentation to the then Hugh Cooney expert group on mortgage arrears and personal debt.
We also had the Keane group on mortgage arrears, others reviews, a Cabinet subcommittee and a code of conduct, which was useless. Indeed, the Minister of State, Deputy Brian Hayes, representing the Minister, said when the Family Home Bill was before the House on 11 July 2011 that the code of conduct on mortgage arrears was working exceptionally well. There was no problem. He also questioned the constitutionality of the Bill, which is the default position for Ministers when they do not want to accept a Private Members' Bill. We now have a renewed code of conduct, on which Senator Aideen Hayden and I are on the same page, which gives complete power to the banks. As Deputy Joe Higgins put it in the other House, the fox is now firmly in control of the hen house, which makes no sense whatsoever.
In normal trading conditions and if we were considering normal economics and its effects on society, whether one is neoclassical or Keynesian, or whatever aspect one wants to take, I would say that perhaps we have to let repossessions take place. I have heard others refer to advice that repossessions have to take place and we need to get on with it, in order that we can find the floor and move on. If this was in a normal scenario, I would say perhaps but we are not in a normal scenario. There is no school of economics in any trading conditions that would advise guaranteeing the entire banking system to save the euro, to pay back the bondholders in Germany and France. There is no economics book that will advise one to do that. For good or for bad, we did it. Many of us would feel there was no other option at the time. If Fine Gael was in power it would have had no choice but to do the same; even the mighty Sinn Féin may have had to do the same, and probably would have done it. We will never know.
The point I am making is that the Irish people stepped up to the mark in a major way and it saved the euro at that time. I believe they are entitled to something in return. We are not in normal trading conditions and equally the banks, in their relentless pursuit of profitability - as a State we are shareholders in them - should have to take cognisance of the people who saved them. They are not doing so. I ask the Minister of State to take it from someone who knows, who is dealing as an intermediary for many people in mortgage distress, that the banks, despite what her officials say and despite what the Bankers Federation produce in terms of statistical analysis, are only engaged at a superficial level. I challenge anyone in the Chamber to give me one example of one person they know who has had 15 years added to their mortgage. The answer is none, because it has happened to nobody. Ask anybody who has been given a new mortgage rate or a doubling of their mortgage and the answer is none. Some 144 lucky people have had their mortgages split but the reality is that the level of superficial engagement with people does not reflect the needs of the people on the ground.
I agree with Senator Trevor Ó Clochartaigh who said there is little to differentiate between a banking policy of the previous Government and this Government in the context of mortgage arrears, because there is none. The same advice that was given to the late Brian Lenihan, in terms of how to deal with the mortgage arrears crisis, is being given to the Minister for Finance, Deputy Michael Noonan. That is as clear as day. There are two axis of collusion, one is that Department officials and their counterparts in Europe only tell the Minister what it suits them to tell him. That is a fact, and the few Ministers I have known over the years will bear that out. The second axis of collusion is clearly the hold that the Central Bank and the banks have over the key officials in the Department of Finance. Those two axis of collusion need to be broken down, otherwise the people will always come last. I believe it is time the people began to come first.
I welcome the Minister of State and thank Senators for their contributions. I am learning a great deal, as always, on housing from people such as Senators Aideen Hayden, Senator John Crown and Senator Marc MacSharry. The problem was that in a period when incomes doubled, the price of houses increased by 500%. Nobody partied, so far as I can see, except banks. As Senator John Crown said, people had to have some place in which to live and we steadily put that beyond their reach. Mortgages of two-and-a-half times the first income and one-and-a-half times the second income would not have bought any house that people wanted. That is what we are trying to clear up.
I am concerned that when the consumer wins in a court case it is called a loophole. That is the relationship between the law, banks and the citizen in Ireland. The briefing document states that the repossession rate, which the IMF said is too low, at 0.03%, could rise to between 3% and 5%. Therefore, that raises the spectre of ten to 15 times more repossessions than at present. Given that 95% of owner-occupied mortgages are in serious deficit and 30,000 buy-to-let mortgages are in the same position, that is a sizeable number of people facing some kind of evictions.
As Senator Aideen Hayden said, there should be protection for those who rent from buy-to-let mortgage holders. The landlord changes but there are stories to the effect that the new buyers of those mortgages will impose stricter conditions or, maybe, even require the tenants to be evicted. They have got to be protected. I would like the Bill, in its later versions, to put a Chinese wall between the family home and those who invested in buy-to-let mortgages. I hope the Bill will make that distinction clear.
The briefing note states that the purpose of the Bill is explicit. It has been noted by the IMF in its most recent view of Ireland prompting calls for a need to strengthen the efficiency of the repossession regime. It an oblique way of saying we need to put more out if we want to get to the 3% or 5% repossession rate rather than 0.03% as at present.
The risk of flooding the market is mentioned on page 17 of the briefing document, which was helpfully prepared by Oireachtas staff. That risk has been recognised by banks and alternative options are being considered. Therefore, we are trying to keep up the price of houses artificially so that they look better in banks' balance sheets because the Government does not want to put more capital into the banks. I see it as pretty well inevitable that the banks will have to be recapitalised again. Why are we organising this strange kind of fake market at the banks' behest? Immediate measures should be taken to sell off ghost estates rather than letting them fall apart. Somebody could buy them and they would make housing more affordable. That is one of the routes by which this economy will eventually recover from the dreaded recession for which the banks and property sector bear the prime responsibility.
In this period of madness, we have seen the destruction of building societies which were a quasi part of the co-operative movement. In the Educational Building Society, older teachers gave younger ones funds to buy houses and other building societies were also based on various sectors. We should look askance at such developments, including the destruction of the banking system and building societies, ever being allowed to happen again.
This side of the House proposed stricter penalties on banks when dealing with recent legislation on regulating banks. The Minister for Finance, Deputy Noonan, praised us for doing what he called the heavy lifting. The following day, however, the Minister of State, Deputy Brian Hayes, threw out everything we had said. Much stricter regulation of banks is needed to prevent a recurrence of this situation.
I am as unhappy as Senator Crown is about any measure that makes life easier for banks. We have an alternative Bill on the Order Paper to change to the Danish system of mortgage finance here. This is an unhappy occasion. I gather that the banks have appealed against the High Court verdict in the Dunne decision. They brought in some of the heavy guns in the legal profession and I gather that verdict is due on 12 September, although I do not know whether that will affect what we are saying here. It appears to be distinct from the appeal to the Supreme Court, which the Minister mentioned. We have a lot to do in order to remedy this situation and get a new system of housing finance, rather than just facilitating banks that wish to repossess houses, which were sold to mortgage holders at vastly inflated prices during the boom. We are all trying to correct that situation.
I appreciate Senator Crown's remarks. I genuinely believe that when Senators stand up to speak, they do so on behalf of the people, regardless of how they managed to get here. We all get to the Dáil or Seanad by different routes but, nevertheless, Members of the Oireachtas speak on behalf of the people. The voice of the people is the voice of God and that has always been my opinion. I believe fundamentally in democracy and that is why I take particular note of what is said in here. I appreciate very much some of the thoughtful considerations that are expressed here.
For the last two years, due to the awful problems that have befallen the country, I keep hearing from certain people that we need a new type of politics. They say the old politics did not work, so new politics are required. The very people who shout that at me are the same ones who, when I give open responses, revert to type with the old politics. They start telling us about typical U-turns and say the Government is no different to any other, yet they are the very people who refer to the need for new politics, which always amazes and amuses me.
I always take criticism on the basis that people have a genuine concern about certain issues. We should take the pressure that is put on Government Ministers in all sorts of areas as a call to arms, a call to do something about a particular issue. There are some matters we can do nothing about, while we can deal with others. That type of pressure, however, ensures that these issues get the attention they deserve.
While some Senators were not as genuine as others, virtually everyone who contributed today had a genuine concern about people who are in danger of losing their homes. One can talk about lenders and borrowers, including mortgage holders, but we are discussing people's homes. I cannot imagine a worse scenario than having to return to one's spouse and children and tell them that they have to leave the family home. None of us can imagine that and I hope none of us will ever have to do it. Many people have to leave their homes, however, and it is something the Government has to do more about.
Senator Byrne said that judges do not have any alternative to granting repossessions, but they do. Judges make these decisions every day of the week. In a recent court case, a judge decided not to grant an order for repossession because the bank did not act honourably or in the manner it should have. Judges, therefore, have incredible powers of discretion which are used daily.
Senator Mullen was anxious that every assistance should be given to those in debt to ensure that they are not put out of their homes willy-nilly. The Bill deals with that matter clearly via a two-month adjournment period. In the event that that is not enough to allow the insolvency programme to kick in, there is an opportunity for a further adjournment. That is very important because, as Senator MacSharry said, this will be an issue for negotiation. When the rules become clearer, such negotiations will be happening more and more.
I agree with Senators Crown and Barrett. I do not believe that all bankers are bad and, by the same token, I do not believe that all politicians are bad either. Having said that, however, we need to be extraordinarily careful that, given the circumstances we find ourselves in, we do not give exceptional powers to enable lenders to render people homeless.
I concur with Senator Hayden whose contributions on housing are not just thoughtful and considered but also very knowledgeable. The legislation is about what happens when the action for possession occurs. We believe that the insolvency service will be up and running in a few weeks. The Senator's points, which were well made, have already been thought out and discussed in terms of what action comes first.
Senator Mullen referred to people being able to stay in their homes and rent them. I am a great believer in cross-government co-operation, but the Department of the Environment, Community and Local Government is proactively working on this issue. The mortgage-to-rent scheme, to facilitate families to stay in their homes, is currently being worked on. However, I will bring the Senator's views to the Minister's attention.
How could we disagree with what Senator Hayden said about people who are living in such circumstances? Sometimes we imagine that buy-to-let properties comprise a separate little nest egg waiting for the market to rise again so that they can be sold, but these are people's homes.
That is where they live and it is something on which we must take careful views. Again, it will be about ensuring that people who live there will not simply be turfed out as a result of the banks repossessing those homes. All of those points were well made.
In response to Senator Crown, we cannot sustain a legal system in which lenders’ rights to repossess are in doubt. The Bill is clear. Members have made grandiose speeches, some of ten pages long – I do not refer to Senator Crown – about the fact that we are so concerned about the possibility of people’s homes being put on the line. We must ensure that the legal system is robust and that when loopholes are identified they are addressed. I like Senator Barrett’s point that when the common man wins it is a loophole. I will take that on board. I assure Members that all of their points will be brought to the attention of the Minister and he will respond himself in a more fulsome manner. I thank Members for their contributions.
- Ivana Bacik
- Paul Bradford
- Terry Brennan
- Colm Burke
- Deirdre Clune
- Eamonn Coghlan
- Paul Coghlan
- Michael Comiskey
- Maurice Cummins
- Jim D'Arcy
- Michael D'Arcy
- John Gilroy
- Jimmy Harte
- Aideen Hayden
- Fidelma Healy Eames
- Imelda Henry
- Caít Keane
- John Kelly
- Denis Landy
- Marie Maloney
- Mary Moran
- Tony Mulcahy
- Rónán Mullen
- Michael Mullins
- Catherine Noone
- Susan O'Keeffe
- Pat O'Neill
- Tom Shehan
- Jillian van Turnhout
- John Whelan