Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance further to his announcement on mortgage arrears on 13 March 2013, if he will quantify by reference to the most recently available data, the number of proposed sustainable mortgage solutions that the banks are targeted with proposing by end of June 2013; the number of proposed sustainable mortgage solutions that the banks have proposed by 13 March 2013; and if he will specify what is meant by proposing and if proposals must be in writing to borrowers. [14902/13]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware on 13 March 2013 the Central Bank announced new measures to address mortgage arrears which included the publication of performance targets for the main mortgage banks. These targets are set in relation to both Principal Dwelling Homes (PDH) and Buy to Let (BTL) mortgages and have been set for banks regarding sustainable resolution for arrears cases which are 90 days or more overdue. This new approach is aimed at ensuring that banks offer and conclude sustainable solutions for their customers in arrears by setting specific performance targets and proposing revisions to provisioning standards. The Central Bank's targets stipulate that:

- By end June 2013, the banks should have proposed sustainable mortgage solutions for 20% of mortgage loans that are over 90 days in arrears, and

-By end September 2013, 30%, and

-By the end of 2013, 50%.

The targets will become progressively more demanding so that the vast majority of distressed borrowers will have been proposed solutions by end 2014.

The latest Central Bank mortgage arrears statistics for the end of December 2012 indicates that 94,488 (11.9%) accounts of PDH mortgages and 28,421 (18.9%) of BTL mortgage accounts were in arrears of more than 90 days.

The Central Bank's Mortgage Resolution Strategy Targets, which can be accessed on the Bank’s website at , defines a sustainable solution as one of the following:

a)An arrangement concluded under a bank’s Mortgage Arrears Resolution Process (MARP), in accordance with the Code of Conduct on Mortgage Arrears, where the borrower is cooperating under the MARP and the bank has satisfied itself that the arrangement provides a sustainable solution which is likely to enable the customer to meet the original or, as appropriate, the amended terms of the mortgage over the full remaining life of the mortgage, including repayment of the original or an agreed revised principal sum where offered. This may include an interest only or other temporary solution for a period if it is likely that full repayment of the original or revised principal will be achieved over time, or where there is a payment plan to return the account to sustainability through the clearance of arrears;

b)A personal insolvency arrangement effected under the Personal Insolvency Act 2012; or

c)If an arrangement could not be reached or is not appropriate, that the PDH or BTL property securing the loan has been voluntarily sold or, failing that, any situation where a Specified Credit Institution takes possession of the property including by way of voluntary agreement with the borrower or by Court Order or otherwise.

In determining whether a proposal constitutes a sustainable solution, the Central Bank has informed me that the lender will need to evaluate both actual and prospective affordability for the distressed borrower and the capital implications for the credit institutions in terms of their prudential responsibility to minimise losses.

While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, there are some fundamental principles that must be respected. These include:

- An affordability assessment of the borrower based on both their current and prospective future servicing capacity for all borrowings;

- A realistic valuation of the borrower’s assets, in particular their property, and

- The use of an appropriate interest rate when discounting future income flows, which should take account of the lender’s cost of funds.

The Central Bank has advised that it will assess compliance with these principles in its supervisory audit of compliance with the targets, including through analysis of a sample of modifications.

Section 37 of the Code of Conduct on Mortgage Arrears provides that where an alternative repayment arrangement is offered by a lender, the lender must provide the borrower with a clear explanation, in writing, of the alternative repayment arrangement.