Terence Flanagan (Dublin North East, Fine Gael)
Link to this: Individually | In context

Question 48: To ask the Minister for Finance his plans to help home owners who find themselves in negative equity; and if he will make a statement on the matter. [8859/11]

Michael Noonan (Limerick City, Fine Gael)
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 are not, or who are most vulnerable to entering into arrears on their mortgage repayments. The ESRI in its report in 2009 on Negative Equity in the Irish Housing Market has noted at the outset that: "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 relationship between negative equity and mortgage default rates. [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).]

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 Central Bank's Code of Conduct for Mortgage Arrears 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 Central Bank. The Code sets out the framework that lenders must use when dealing with borrowers in arrears or in pre-arrears. For the purposes of the Code a "pre-arrears" case arises when the borrower contacts the lender stating that he/she is in danger of getting into financial difficulties and/or is concerned about going into mortgage arrears. Under the Code, lenders must establish a Mortgage Arrears Resolution Process known as "MARP" and use this framework when dealing with consumers who are in arrears and pre-arrears situations. Also under the Code where a borrower co-operates with the lender, the lender must wait at least twelve months from the date the borrower is classified as a MARP case before applying to the Courts to commence legal action for repossession of a borrower's primary residence.

The Expert Group on Mortgage Arrears and Personal Debt made a recommendation in their final report dated 16 November 2010 that lenders should put in place a deferred interest scheme (DIS) or a variation of it. Under the DIS borrowers who can pay at least 66 per cent of their mortgage interest (but less than 100 per cent) can, subject to certain criteria being satisfied, defer payment of the balance for up to five years. Lenders representing the majority of the market have already notified the Central Bank of their intention to introduce a DIS as recommended by the Expert Group. While the DIS is voluntary for all lenders, those who have signed up in support of the Scheme will be monitored by the Central Bank to ensure compliance. The Deputy will also be aware of the existing importance of the Mortgage Interest Supplement Scheme and the Money Advice and Budgeting Service in assisting consumers who have fallen into arrears