Gerald Nash (Louth, Labour)
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Question 175: To ask the Minister for Finance his plans, to address and control the issue of rising mortgage rates in lending institutions such as EBS which are effectively owned by the State; his plans to assist mortgage holders who are in arrears with such institutions; and if he will make a statement on the matter. [18784/11]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that the Government is conscious of the difficulties many homeowners are having in meeting their mortgage repayments in respect of their principal private residence. There are a number of existing measures in place to support those homeowners struggling with their repayments. These measures include the Mortgage Interest Supplement, the Money Advice Budgeting Services and the Central Bank of Ireland's Code of Conduct on Mortgage Arrears. The Mortgage Interest Supplement is managed by the Department of Social Protection and provides assistance where the mortgage relates to a person's home. The Deputy will be aware of the important support provided by the Money Advice and Budgeting Service (MABS). MABS provides a national, free, confidential and independent service operating from 53 offices nationwide. I encourage anyone who is in financial difficulty to contact their local MABS office.

The Central Bank's Code of Conduct on Mortgage Arrears has been substantially revised to implement the recommendations of the Mortgage Arrears and Personal Debt Expert Group which published its final report in November 2010. The code sets out how mortgage lenders must treat borrowers in or facing mortgage arrears with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. An important recommendation of the Expert Group was that lenders would make available a Deferred Interest Scheme to borrowers who cannot afford to pay the full interest on their mortgages but can pay at least 66% of the amount due. The borrower would have to pay the deferred interest at an agreed future date. Lenders representing the majority of the market have indicated their willingness to make available deferred interest schemes. These are Allied Irish Bank, AIB Mortgage Bank, Bank of Ireland, ICS Building Society, EBS, Haven Mortgages, Irish Nationwide Building Society, Permanent TSB, Springboard Mortgages and Start Mortgages. While the making available of Deferred Interest Schemes 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.

Another key recommendation of the Group relates to the requirement of all regulated lenders to introduce a standardised Mortgage Arrears Resolution Process (MARP). Borrowers who are in arrears and who co-operate with the MARP will not be charge penalty interest charges. A lender must establish a centralised and dedicated Arrears Support Unit which must be adequately staffed to manage cases under the MARP. Under the MARP, lenders must agree appropriate forbearance with each borrower following as assessment of the full circumstances and characteristics of each borrower. It is important to point out that borrowers who are in financial difficulties, but not in arrears, are allowed to come under the MARP. In addition to these existing measures, the Government is considering the further necessary actions required to alleviate the increasing problem of mortgage over-indebtedness.

The Deputy will be aware that the Programme for Government contains a commitment to help homeowners who are facing difficulty with their mortgage repayments. The Government will examine a number of proposals in relation to this commitment. In this context, the Government Economic Management Council recently asked that further work be carried out to address the situation of over-indebted mortgage holders with a view to identifying a range of responses appropriate to individual circumstances. The work concerned will be carried out by a group chaired by Mr. Declan Keane, an accountant seconded to the Department of Finance. The group will produce a report by the end of September. The composition of the group has yet to be decided but may include officials from the Department of Finance, the Central Bank and other Government Departments. It may also use expertise from within the banking system. As part of the restructuring and recapitalisation of the banks, the banks are engaging in ambitious cost reduction plans which are well under way. The effect of these cost reductions will be to improve operating margins and permit the banks to better absorb funding costs. The Government remains in consultation with the banks in connection with the more significant parts of these plans including a significant reduction of employee numbers.