Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 112: To ask the Minister for Finance if he will take steps to amend the statutory code of conduct on mortgage arrears to rectify the shortcoming by which the moratorium period commences from the point at which arrears first arose but does not involve any requirement for cumulative arrears. [15872/10]

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 115: To ask the Minister for Finance if he will take steps to amend the code of conduct on mortgage arrears to make specific provisions for homes in negative equity including steps required to ensure best value for borrowers on the disposal of any such properties for which repossession is sought or achieved. [15875/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 112 and 115 together.

As the Deputy is aware, the Financial Regulator first published its Code of Conduct on Mortgage Arrears (the Code) on 13 February 2009 which was updated on 17 February 2010. The Code is mandatory for all regulated lenders and includes provisions on matters relating to a moratorium and mortgage repossessions. In addition, of course, both lender and borrower are bound by the conditions of their mortgage contract, which imposes obligations on both sides.

After my Budget speech in December, I wrote to the Financial Regulatory requesting that consideration be given to extending the then 6 month moratorium out to 12 months to ease the burden on mortgage borrowers in arrears. The Financial Regulator after careful consideration and consultations decided to extend the moratorium to 12 months in line with my request. Any change to the Code of Conduct on Mortgage Arrears is a matter for the Financial Regulator.

The Deputy will be aware that on the 25th February 2010, I informed the Government of my proposals to broaden the membership of the then Interdepartmental Mortgage Arrears Group, to include external experts alongside senior civil servants under the Chairmanship of Mr. Hugh Cooney an insolvency accountant. The external members of the Group were selected on the basis of their individual expertise in areas relating to mortgage arrears and personal debt and include the Financial Regulator.

The revamped Group will focus initially on bringing forward recommendations in dealing with the mortgage arrears problem and will later address the personal debt issue. I expect that these recommendations will be made to me on a rolling basis as the Group progresses with its review with a final report on the mortgage arrears issues completed by end June 2010. I will then consider the merits of each of the recommendations before deciding on whether to submit to Government for decision. The Deputy will appreciate that all proposals will need to be fully costed before being recommended to Government and will also have to represent value for money from the point of view of the Government and taxpayers.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 113: To ask the Minister for Finance if he will take steps to implement the recommendation of the Joint Committee on Social and Family Affairs that the moratorium period under the statutory code of conduct on mortgage arrears be extended to 24 months. [15873/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy will be aware that I wrote to the Financial Regulator after my Budget 2010 speech, requesting that consideration be given to extending the moratorium from 6 months to 12 months. The Financial Regulator decided after consultation that it would be possible to extend the moratorium in line with my request and the new limit of 12 months now applies to all regulated lenders and is reflected in the updated Code of Conduct on Mortgage Arrears which came into effect on 17 February 2010.

As the Deputy is aware, on 25th February 2010, I informed the Government of my proposals to extend the membership of the then Interdepartmental Mortgage Arrears Group to include external experts under the Chairmanship of Mr. Hugh Cooney an insolvency accountant. The external members of the Group were selected on the basis of their individual expertise in areas relating to mortgage arrears and personal debt and include the Financial Regulator.

The Group has since commenced its work and is meeting regularly. Its Terms of Reference which I have approved were incorporated into the supplementary documentation for my Statement on Banking which I delivered to this House on 30 March 2010. In general, the Terms of Reference reflect the commitments made by the Government both in the Renewed Programme for Government and in subsequent Government decisions relating to the issues of mortgage arrears and personal debt and specifically include a commitment to take account of the Report on indebtedness by the Joint Committee on Social and Family Affairs.

The revamped Group will focus initially on bringing forward recommendations in dealing with the mortgage arrears problem and will later address the personal debt issue. I expect that these recommendations will be made to me on a rolling basis as the Group progresses with its review with a final report on the mortgage arrears issues completed by end June 2010. I will then consider the merits of each of the recommendations before deciding on whether to submit to Government for decision. The Deputy will appreciate that all proposals will need to be fully costed before being recommended to Government and will also have to represent value for money from the point of view of the Government and taxpayers.

The proposal to further extend the moratorium on mortgage repossessions out to 24 months as suggested by the Deputy has the potential to cause serious funding problems for Irish banks, and ultimately for the State itself. It must be emphasised that Irish banks continue to rely to a significant extent on international credit markets for funding. Those markets are aware that Irish banks are heavily exposed to the residential mortgage market. Because mortgage default rates are much higher in some other countries than here, there is already a perception of risk in connection with the Irish banks mortgage loan books that is higher than is justified. When the 12 month moratorium by AIB and BOI was announced as part of the recapitalisation, Moody's rating agency were quite critical and the Fitch rating agency published comment with some negative material about mortgage lending in Ireland. While the banks funding position has improved in recent months, it is still quite difficult, even with the benefit of the State Guarantees. It is essential therefore that nothing is done to raise further fears about the quality of mortgage loan books.