Pearse Doherty (Donegal South West, Sinn Fein)
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24. To ask the Minister for Finance the way he has communicated to the banks that under the MART process letters threatening legal action do not constitute a sustainable offer. [8349/14]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) places an onus on the banks, in respect of a co-operating borrower, to explore all the options for an alternative repayment arrangement offered by the lender to address a primary dwelling mortgage difficulty before any legal action is considered. 

Furthermore, as the Deputy is aware, under the MART process, the Central Bank is requiring the main lenders to work through their mortgage accounts in arrears of more than 90 days and, where possible, to propose and conclude sustainable restructures with their borrowers in arrears.  The Central Bank has indicated that all six mortgage lenders covered by the MART process have reported that they met the 20% proposed sustainable solutions target for the second quarter of 2013 and also the 30% target for the third quarter in 2013.  In particular, with respect to the third quarter 2013 target, which is the latest available data, the lenders have reported to the Central Bank they had issued proposals to 43% of mortgage accounts in arrears against the 30% target.  In that context the Central Bank has also advised that its MART publication of last March clearly indicates the where a lender relies on legal action to address an arrears situation it must be able to demonstrate that an alternative arrangement could not be reached or is not appropriate. Furthermore, if such a decision is made by the lender, the cooperating borrower has the right to appeal a decision not to offer an alternative repayment arrangement.

Of course, the CCMA and MART can only work in circumstances where the borrower cooperates with the lender and engages with the process.  Where this does not happen, the lender may have no other option but to go down the legal route to deal with an arrears case.  However, if that course of action leads the borrower to commence a constructive engagement, this can lead to a more favourable outcome for the respective parties. The Deputy may wish to note, that according to information collected by my Department, in the case of private dwelling homes some 51,000 mortgage accounts in difficulty have been the subject of permanent restructuring following engagement between borrower and lender.  A further 21,000 mortgage accounts in difficulty have been the subject of temporary restructures.

The strong view of the Government is that, in respect of co-operating borrowers under the Central Bank's MART process, repossession of a person's primary home should only be considered as a last resort and that every effort should be made to agree a sustainable arrangement as an alternative to repossession. 

It is important to point out, however, that even if a repossession case has commenced in the legal system, the Land and Conveyancing (Law Reform) Act 2013 now provides a power to the Court to adjourn a repossession proceeding in relation to a principal private residence to enable the borrower to consult a personal insolvency practitioner (PIP) and, where appropriate, to instruct the PIP to make a Personal Insolvency Arrangement (PIA) proposal.  In formulating a proposal for a PIA, the Personal Insolvency Act 2012 places an onus on a PIP to do so on terms that shall not insofar as reasonably practicable, require the borrower to dispose of an interest or cease to occupy a principal private residence. 

I have informed the Deputy previously that letters threatening repossession or legal action could not in my opinion be considered a sustainable solution under the mortgage arrears targets, and should only ever be considered after every possible avenue for solution has been exhausted. I can assure the Deputy that I have expressed this view to the lenders and my officials are keeping in regular contact with the lenders on this important issue.