Eamon Gilmore (Dún Laoghaire, Labour)
Link to this: Individually | In context

Question 117: To ask the Minister for Finance his views on the recent Economic and Social Research Institute report which indicated that some 200,000 households, or one in three mortgages, could be in negative equity by end 2010; if his attention has been drawn to the fact that the true number in negative equity could be far higher if house prices have fallen by 50% or more from their peak by that time; his plans to bring forward proposals to deal with this phenomenon; and if he will make a statement on the matter. [37680/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

A clear distinction needs to be made between householders who are in a position to meet their mortgage repayments and those who presently are not, or who are most vulnerable to entering into arrears on their mortgage repayments.

The ESRI in its recent report on Negative Equity in the Irish Housing Market has noted at the outset that, and I quote: "In many cases negative equity will not be an issue. Many of those in negative equity will be unaffected and will continue to pay their mortgage without difficulty."(ESRI Report 319, pp 2) Indeed the ESRI, through its trawl of the international literature, did not conclude that there is a direct causality between negative equity and mortgage default rates. [Indeed, in its concluding commentary, the ESRI noted that "negative equity does not cause default or foreclosure but rather is a condition of default" (ESRI Report 319, pp 17).]

In overall terms, policies directed towards the recovery of the economy will do most to help those who are in a position of negative equity, as this would generate the necessary stability and confidence in labour and property markets to improve the personal situations of such householders.

However, I am acutely aware that there are many householders who require immediate assistance and in this regard there are numerous measures in place to alleviate the problems faced. It is a particular priority of the Government to ensure as much as possible that difficulties in relation to mortgage arrears do not result in legal proceedings for home repossession. Home repossession should be, and generally is, the last resort for the lender and the preferred method of dealing with arrears cases should be early intervention.

The Financial Regulator has a Code of Conduct for Mortgage Arrears which applies to mortgage lending activities with consumers, in respect of their principal private residence in the State, and is mandatory for all mortgage lenders registered with the Financial Regulator. Under the Code, where a borrower is in difficulty the lender will make every reasonable effort to agree an alternative repayment schedule and will not commence legal action for repossession until after six months from the time arrears first arise.

In addition as part of their recapitalisation scheme, the two banks concerned, A.I.B. and Bank of Ireland, will not commence court proceedings for repossession of a principal private residence until after 12 months of arrears appearing where the customer continues to co-operate with the banks.

People in serious debt or in danger of getting into serious debt can avail of the services of the Money Advice and Budgeting Service (MABS). This is a national, free, confidential and independent service. The Operational Protocol on Debt Management agreed between the Irish Banking Federation (IBF) and MABS, which was recently put into effect, is to be welcomed and provides further assurance that the lending institutions will approach all genuine personal debt cases sympathetically and, where possible and appropriate, with the required degree of flexibility.

In terms of financial assistance for mortgage repayments, the Mortgage Interest Supplement Scheme, administered by the Community Welfare Service of the Health Service Executive, provides assistance where the mortgage relates to a person's sole place of residence.