Fidelma Healy Eames (Fine Gael)
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Tá fáilte roimh an Aire Stáit, who is the right man for this Adjournment debate. He is not quite the Minister for Finance but he is in there with a shout. This Adjournment debate concerns why the Central Bank is not using the mortgage arrears resolution process, MARP, as an instrument to benchmark against how the banks are doing to help customers in arrears reach a mortgage resolution. I am also asking about the progress made towards achieving targets.

We have a huge problem on our hands. Some 142,892 mortgages are in arrears for more than three months, which amounts to one in every five homeowners. Some two thirds are in negative equity, which is a trap. This is about nothing other than the family home. I cannot think of anything more important to a family. What has the Government done to help? It has introduced the Personal Insolvency Act, which is good but very slow. We should not need to go down that route if a resolution can be sorted out between the bank and the homeowner in arrears.

This is where the Central Bank's MARP comes in. In March 2013, the Central Bank introduced the MARP, which has five detailed stages - communication, the completion of a standard financial statement, assessment, resolution and appeal. If people are not happy with the appeal, they can go to the Financial Services Ombudsman. I was very surprised that, at the September 2013 meeting of the Joint Committee on Finance, Public Expenditure and Reform, the banks were allowed to produce vague, general statements on their progress towards achieving the targets set by the Government to help people reach a resolution. At the very least, the banks should have been asked to specify how many mortgages in arrears were at various stages of the MARP. This would have given a clearer indication of the work the banks were doing to assist customers to find a sustainable mortgage solution. MARP is a valid instrument yet the Governor, Professor Honohan, and the Central Bank are not using the instrument.

A colleague tabled a parliamentary question and the reply stated: "The Central Bank of Ireland has informed me that it does not track the number of borrowers covered under the MARP but does track the number of mortgage accounts in arrears". What is the point if we do not have joined-up thinking between the banks, the Central Bank and homeowners in arrears? The Government is out there setting targets.

How can one manage a process if one is not measuring it?

The latest quarterly figures from the Central Bank, issued in June, show, as I said, almost 143,000 mortgage accounts in arrears, 79,000 of which are in a restructured arrangement. These are quite shocking figures. What about the 63,000 or so mortgage accounts that are in arrears but have not been restructured? There are huge gaps in the process. What is the point of having a mortgage arrears resolution process if the Central Bank and its Governor, Mr. Honohan, do not use that valid and useful instrument to track the progress of its constituent banks in working with customers to achieve mortgage solutions? How can the Government reliably establish the progress made in achieving the targets that have been set if it is not more tightly managing the process?

The bottom line is that the Central Bank cannot manage what it does not measure. It is a process worth managing because it is, after all, about helping people to keep their homes. We must have a more proactive approach by the Central Bank and the Governor on this matter. The last Government was guilty of light regulation in this area, while the former Regulator, Mr. Neary, did not manage the process in an effective way. I am concerned that danger may lie ahead if Mr. Honohan does not take a more proactive stance with the banks to ensure sustainable solutions are devised for home owners. What is the point of having the useful instrument that is the mortgage arrears resolution process if it is not used?

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

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

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

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

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

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

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

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

Fidelma Healy Eames (Fine Gael)
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I have heard what the Minister of State has had to say but we have an opportunity to make even more progress. As he said, the quicker we are out of this, the better. We will not solve the problem completely but there is a missed opportunity here, as written in the reply. It states:

The code of conduct on mortgage arrears makes clear that banks can commence legal proceedings in respect of a mortgage secured on the primary home of a co-operating borrower only where they have fully engaged with the borrower and taken into consideration all the options for alternative repayment arrangements offered by them as a way of addressing a mortgage difficulty. Banks which do not comply with the code of conduct are not acting in a manner consistent with the MART process.

Brian Hayes (Dublin South West, Fine Gael)
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With respect, I am not sure I fully understand the Senator's question. If the Senator is concerned about a lack of oversight on the part of the Central Bank, whose task it is to manage this on behalf of everybody, all I can say is that the information given by the Governor of the Central Bank to the committee was given in the initial phase over the summer because he had not concluded an independent audit. That will be published by the end of the month and we will be in a greater position for verification. We can use terms until the cows come home but the net issue is whether the 100,000 people in this position will find a solution to their problem. I say to the Senator, on behalf of the Government, that we are more than confident that the approach being adopted by the Central Bank, which is putting out the information on a quarterly basis, along with the information put out by the Department of Finance on a monthly basis - a new initiative on our part - will give us the full view of the banks getting on with the task.

Fidelma Healy Eames (Fine Gael)
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The Central Bank can do more.

Paddy Burke (Fine Gael)
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I cannot allow further debate on this.

Brian Hayes (Dublin South West, Fine Gael)
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We could all do more. Much progress has been made and more needs to happen. The Senator will see it in the next 12 months.

Fidelma Healy Eames (Fine Gael)
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I hope so. I am watching it.