I would like to share time with Deputies Finian McGrath, Richard Boyd Barrett and Shane Ross.
Mortgage Arrears: Motion (Resumed) [Private Members]
The following motion was moved by Deputy Michael McGrath on Tuesday, 26 March 2013:
That Dáil Éireann:
notes:
— the worsening crisis in respect of mortgage arrears, with over 94,000 residential mortgages in arrears for greater than 90 days and over 28,000 buy-to-let mortgages in arrears for the same period;
— that almost one in four family home mortgages and more than one in three buy-to-let mortgages are now either in arrears or have been restructured;
— the slow progress made to date by banks in identifying and implementing solutions for distressed borrowers;
— the additional burden being placed on families struggling with their mortgage arising from cuts to child benefit, PRSI increases, local property tax and other measures in budget 2013;
— the adverse impact on mental health, the well-being of society and the domestic economy arising from the failure to adequately address mortgage distress;
— the widespread concern about the threat of a significant increase in family home repossessions arising from the mortgage arrears resolution targets programme, the proposed changes to the code of conduct on mortgage arrears and the Government’s plan to reverse the Dunne judgment; and
— that, in effect, the bank will retain a veto, in the vast majority of cases, over any proposal to restructure the mortgage under the planned new personal insolvency service;
recognises:
— the importance of tackling the mortgage arrears crisis to support economic recovery; and
— the best interests of society are served by ensuring that families can remain in their homes so long as reasonable efforts are made to meet their mortgage commitments;
calls for:
— the establishment of clear, consistently applied guidelines in respect of reasonable living expenses for distressed borrowers;
— the family home to be protected from repossession unless every other possible alternative has been exhausted, including giving the borrower the option of entering a mortgage-to-rent arrangement;
— the Government to refrain from introducing legislation that will remove obstacles to the repossession of family homes until such time as the Central Bank is satisfied that the banks are properly addressing the mortgage arrears crisis by entering into meaningful long-term sustainable solutions to mortgage distress with individual borrowers;
— the setting up of a mortgage resolution office, under the new Insolvency Service of Ireland, to arbitrate between borrowers and lenders and, where necessary, to make a binding mortgage resolution order; and
— greater emphasis on the implementation of long-term sustainable mortgage solutions such as split mortgages, shared equity and permanent interest rate reductions.
Debate resumed on amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"acknowledges that this Government inherited a severe mortgage arrears crisis from the previous Government; and notes the responsibility of the previous Government for the creation of that crisis and its abject failure to properly address it;
recognises that the Government has already taken a number of significant steps to address the mortgage arrears problem and also to stabilise the banking and wider economic situation;
acknowledges, in particular, that shortly after taking office the current Government established the inter-departmental mortgage arrears working group and that it is now implementing the key recommendations of that group’s report;
notes the speedy publication by the Government of comprehensive legislation to reform our insolvency laws and the enactment of the Personal Insolvency Act 2012 which provides for non-judicial debt resolution mechanisms, which include a Personal Insolvency Arrangement which will facilitate the retention of their family home by individuals who are insolvent and enable them to resolve debt issues by agreement with creditors with the assistance of a personal insolvency practitioner;
recognises that Central Bank interaction with mortgage lenders is key to addressing mortgage arrears and that the Central Bank is now further intensifying its engagement with the main mortgage lenders to ensure that lenders offer sustainable solutions to their customers in arrears;
supports the Central Bank in this work, in particular, in setting specific targets for action and in monitoring and auditing the achievement of those targets;
further notes the Central Bank’s review of the code of conduct on mortgage arrears to strengthen protections for customers and also allow to provide for effective, timely and sustainable resolution of individual arrears situations;
accepts that, for a functioning mortgage market, it is necessary to protect and vindicate, in a fair manner, the legitimate rights of both debtors and creditors;
while accepting that the option of repossession has to be one of the options to deal with mortgage default and distress, also notes the view of Government that this should only be an option of last resort and that there are a range of other resolution options available that can be deployed to deal with mortgage distress in the best interests of both the borrower and lender;
encourages the Government and other authorities to continue with the work to bring the Insolvency Service of Ireland, and the debt resolution processes provided for in the Personal Insolvency Act 2012, into operation as soon as possible;
notes that the Insolvency Service of Ireland will shortly publish guidelines on reasonable living expenses for debtors who propose to enter into debt resolution mechanisms; and
condemns the failure of the previous Government to publish or enact any legislation to reform bankruptcy and insolvency law, and its failure to create any statutory debt resolution mechanisms or structures to facilitate individuals in financial difficulty to resolve such difficulties by agreement with creditors and to facilitate the restructuring of mortgage debt."
- (Minister for Justice and Equality).
Is that agreed? Agreed.
A paper written by Ross Maguire of New Beginning best captures what I want to say on this issue. It states:
Family is important for it is the bedrock upon which society is built. The family home is the physical aspect of family... The home is recognition that we are not just economic entities measured on some stock exchange... Those young families who purchased properties between 2003 and 2008 bear the brunt of the economic collapse.
The document refers to "working parents whose principal desire is to pay their way and raise their families". I have come across many such cases. The paper says "we have a simple choice to make" regarding whether we are "on the side of the family" or "on the side of international finance". New Beginning's argument is that "whichever way we look at this, it must mean debt write-down", at least for some of those who are in this terrible trap. It continues:
The banks will demand as much as possible. The grim reality is that the banks will now be devoted to debt collection and teams of people will be incentivised to recover as much as possible [even] when the victims are so vulnerable .... At New Beginning we believe that a sustainable mortgage is based upon a payment constituting about one-third of a borrower's post-tax income. Thus, if a borrower has a post-tax income of €3,000 per month, [it is sustainable to] pay €1,000 per month towards their mortgage. Paying more has two negative effects: firstly it deprives the borrower of funds needed to live and prosper and secondly [and just as importantly] it deprives the economy of families' spending power.
I believe the proposed threshold of approximately 35% is a necessity, although obviously people earning very large amounts of money can afford to pay more. New Beginning refers to the "real case of a young Dublin couple with three children". It explains:
They own a house worth €250,000 and have a debt of €450,000. Their income has been severely reduced. The man lost his job and is now doing freelance work. Based on 35 per cent of their net disposable income they [can sustain a spilt] mortgage of €300,000 – which is €50,000 more than the house is worth.
They put that scenario to Bank of Ireland, but according to New Beginning its "best proposal is that the term of the mortgage be increased by nine years to 29 years; the borrowers will pay over 45 per cent of their net income", with the matter to be reviewed after six months. That is not a solution for that kind of situation. As the document states:
There will be no incentive for this family to improve their lot because any improvement goes to the bank and no matter how much they pay they will never pay off this loan. The family will not spend and they will be deprived. The lack of spending will deprive the economy.
There is a lose-lose in this situation. We should be listening to people who are at the coalface as they try to deal with this issue. The New Beginning document from which I have quoted makes some very good points about the results the current approach will have for families and for society.
I am pleased to have an opportunity to contribute to this important debate on the huge mortgage arrears crisis that exists for many families. There should be no mistake about the fact that many people are suffering and need solutions. They are sick to the teeth of listening to all the talk in the Dáil in recent months. A number of options are set out in the motion before the House. Regardless of our politics, we should all support any scheme or plan that offers a sensible solution to the current mortgage crisis. This is particularly important at a time when over 95,000 residential mortgages are in arrears of more then 90 days. We have all noted the slow progress that has been made to date by the banks in identifying and implementing solutions for distressed borrowers. We are aware that budget 2013 measures have placed an additional burden on families who are struggling with their mortgages. I refer to the cuts in child benefit, the PRSI increases and the introduction of the local property tax, etc. I emphasise that I voted against the property tax because it is outrageous to impose a tax on the family home and thereby penalise people who are already under enough pressure. The Government's failure to address mortgage distress in an adequate manner is having an adverse impact on mental health, the well-being of society and the domestic economy. There is widespread concern about the threatened significant increase in family home repossessions as a result of the mortgage arrears resolution targets programme, the proposed changes to the code of conduct on mortgage arrears and the Government's plan to reverse the Dunne judgment. In effect, the banks will retain a veto in the vast majority of cases in which it is proposed to restructure mortgages under the planned new personal insolvency service. I strongly support the proposal to establish a mortgage resolution office, under the new Insolvency Service of Ireland. The office will arbitrate between borrowers and lenders and, where necessary, make binding resolution orders. I call on all Members of the House to support the motion. We need to support families suffering with mortgage arrears. It is a total disgrace that they will be asked to pay the new home tax in the next few weeks. It will heap more misery on the people of this country.
I would like to begin by putting this debate in context. It is worth comparing the outcomes of the crisis in this country and the crisis in Cyprus. Ordinary people in Cyprus have gone out to fight against the troika's disgraceful plans to raid their savings. They have forced the troika and the Cypriot Government to accept that bondholders should be burned and that people below a certain level should not be touched. This is in sharp contrast with what is happening in this country. Our Government's only red line seems to be the protection of bondholders and the very rich. It has chosen to unload all of the cost, the pressure and the suffering onto the shoulders of ordinary people. I refer to the introduction of property taxes, for example. In the area we are discussing, the Government is giving the banks the right to harass and intimidate mortgage holders who are in distress almost entirely through no fault of their own. They are distressed because of the reckless behaviour of the banks, particularly between 2000 and 2008 approximately. There seems to be no recognition in the Government's attitude to this issue that the primary blame lies with the banks. It does not accept that the banks should take the hit for the property bubble and for the massive debts that are around the necks of distressed mortgage holders. As a result, some 180,000 families are suffering immensely and our economy is being suffocated. It is utterly outrageous that the Minister is talking about taking people's second cars from them, telling them they cannot go on holidays and policing what they can spend money on. It is indicative of the utter failure of the Government to address the real issue, which is the suffering that ordinary people are enduring. I have to say Fianna Fáil's motion does not go half far enough in countering this. It is still leaving the door open to the repossession of family homes and the policing of people's spending.
There is a simple answer to this. First, there should be a write down of these mortgages to current market levels, where they should be, and, second, the repayments people are asked to pay should be no more than 30% or 35% of their income. That is it. There should be no further questions about how they spend their money or on what they spend it. That is outrageous.
I tend to agree with Deputy Boyd Barrett in this regard. The opposition to the Government's supposed solution on mortgage arrears has been somewhat meek and mild. It is an appalling solution. Disguised in it is the discussion that comes out all the time about the Dunne judgment. The Dunne judgment saved the houses of many people who would otherwise have had their houses repossessed. Part of the Government's solution, which is not put up front, is to give back to the banks the right to repossession. I do not accept any Minister's statement here that this will be the last resort. Once the banks have it back, that is the power they hold at the back of every single settlement proposed under the new mortgage arrears procedures. It is not the last solution; it is actually the first one, because it is the first threat. It may be hidden and not specifically spelled out in each case, but it is there. The floodgates will be opened to repossession in the next few months. I gather from the Minister's reply here last week that the repossession Bill - that is what it will be, whatever it is called - will be introduced before the summer. We can predict with great confidence and great fear that repossessions will be back in spades by Christmas. That is not a solution to the mortgage problem.
The other issue that is not recognised is that the banks' books completely and utterly underestimate this problem. The banks will be recapitalised - wait and see. They will have to be recapitalised because the under-provisions are so large they will have to allow for more bad debts. The question then is: from where will this money come? There are only two sources of money for recapitalisation. One is the taxpayers, who have not got any left, and the other is the ESM, which says it will not give it anyway. What will be the solution? We are heading towards a disaster, the cracks of which we are trying to paper over by introducing what we call "single individual cases being considered on their merits". That is to extend and pretend. This is an accident waiting to happen on the same-type scale as the last bank crisis.
I wish to share time with Deputies Michael McNamara, Arthur Spring, Jerry Buttimer, Catherine Byrne, Michelle Mulherin, Eamonn Maloney, Paul Connaughton and Dan Neville.
Is that agreed? Agreed.
All of us who are in politics are more than aware of the enormous pressures people are under when they come into our offices. Saying on the floor of Dáil Éireann that repossessions will be back in spades before Christmas is reckless. People are under enough pressure without that sort of emotive scaremongering. The Taoiseach, the Minister for Finance, the Minister for Justice and Equality and many others, including Professor Patrick Honohan and the banks themselves, have all said the very last resort will be repossessions. I urge that speakers bear in mind the enormous pressure people are under.
We have to acknowledge the reason we are here this evening is the economic destruction that has fallen over the country. Even by Fianna Fáil standards of cynicism, this is truly remarkable. An hour and a quarter before polls close in Meath, we can now say that this was an extremely cynical attempt to link a Seanad candidate to a by-election and recreate him as some sort of a property owners guru to try to secure a victory in that by-election. It will be seen for the cynical attempt it is.
House prices in this country were artificially promoted by those in Fianna Fáil. Their cosy relationship with developers, their belief that house prices would only go up, and how they convinced the country of that, not to mention the obliteration of 250,000 jobs, are the reasons all of us are here now trying to sort out this problem. This legislation includes a measure to create an independent body which exists nowhere else in the world. I know Deputy McGrath might say we should be the first country in the world to have it-----
Hear, hear.
-----but the reality is that, irrespective of whether we like it, there are two parties to every agreement, and constitutional prohibitions would prevent an agency that would instruct in this regard. It also would be another incidence of Fianna Fáil setting up another quango and employing more people, not to mention the legislative delays that would be incurred.
The Central Bank is the independent authority. It will be able to monitor the progression of the banks through the 20%, 30% and 50% of cases where they must offer sustainable solutions by the end of the year and the 100% of cases where they must offer sustainable solutions by the end of 2014. Most, if not all, of the measures that are suggested in this Bill, such as mortgage-to-lease, split mortgages and interest-only arrangements, are already included as part of what will make up the sustainable measures. If people are not happy, they have the personal insolvency legislation.
The Government has to be commended for doing a great deal to help in an extremely difficult situation, but Fianna Fáil should use the opportunity here tonight to apologise, not for not taking all of these measures, but for not taking any of them, particularly in the past four or five years of its term in office, when it stood on its hands and did nothing to stop this. Now, Fianna Fáil Members come in here, after the Government has brought in its legislation, plagiarise the whole thing and pretend they are some sort of heroes, which they clearly are not.
I agree with previous speakers. I do not believe anybody in this country is not aware of the huge mortgage arrears crisis that besets us all. It feeds into the difficulties that people have with public sector pay and the negotiations on public sector pay. The great majority of people in Ireland recognise there was a bubble which has simply burst and that what went before the bubble burst is no longer sustainable. People are quite happy, or if that is an exaggeration, people are willing to accept a reduction in their pay but for the fact they borrowed on the back of that pay, and they simply cannot now afford to pay a mortgage they took out in good faith. There are ordinary public sector workers - nurses, gardaí and teachers - right across this country who did not take out just one mortgage that they cannot pay but, in some instances, they took out two.
This Government is very clear about this. The last Government could not but have been clear about it either because, although the rate of mortgages which are now in arrears could be almost 20% at this stage, almost half of those mortgages were in arrears at the time of the last election, yet nothing was done.
I am not exactly happy with the pace at which this Government has dealt with this issue, but it has dealt with the issue. The personal insolvency service is about to open its doors and deal with the reality that besets ordinary people in this economy. On that basis, I find the timing of this motion somewhat strange. I wonder if it is more to do with electoral cycles than mortgage arrears. What has changed now from one month ago? The only thing that has changed is that the personal insolvency service is about to commence. I greatly welcome that and believe everybody, especially those who are beset by mortgages they cannot pay, would welcome that. While I sincerely hope it is not the case, I wonder whether this motion is motivated by a fear that the personal insolvency service might just work and that this country's progress can continue under a different Government to that which, while it did not cause the problem, certainly allowed this problem to fester to the extent it has.
I acknowledge that we are part of a generation I consider to be jinxed. This pressure was put upon us not through our own doing but by poor political leadership and poor regulation. It is not just Fianna Fáil and the previous Government that are responsible for this. Other factors must be addressed as well. However, I find this goes beyond what is normally accepted as throwing the pie back in the direction it came from. According to Stephen Kinsella's five-year review of the financial collapse, August 2007 was the month in which the growth of the world economy began to falter and fail exposing the weakness of Ireland's banks, bursting the construction bubble, hammering the State's finances, escalating unemployment and bad debt levels and undoing a generation's worth of economic growth and development in a country that was just starting to leave the bad days of the 1980s behind. He then refers to the role of the Fianna Fáil-led Government which was ably assisted by the Green Party and, prior to that, the Progressive Democrats and many cheerleading Independents, some of whom are still in the House. The Government changed the composition of its taxation revenue, reducing income taxes and relying more heavily on property-based taxes exposing the State's coffers to a significant downside risk when the property market went down. The banking regulator was off somewhere playing golf. The media, which was making money from property supplements, stayed silent and was not knowledgeable. The same was true of most economists who were not being paid by the banks to cheerlead the boom.
There is an over-supply of shocking statistics to emphasise how unstable this situation was. I will give two examples. At the end of 2008, the total stock of foreign borrowing by Irish banks was around €110 billion. In 2004, Ireland's banks had only borrowed more than €15 billion from abroad. At that time, we were probably heading towards the abyss of the bubble but, at the same time, we had a diligent and prudent economy without reckless lending. At the end of 2007, Irish banks were lending 40% more to property developers alone than they had to the entire Irish population a mere seven years earlier.
This must be tackled. The Government, in particular the Cabinet, would be from a different generation compared to those of us who will speak so passionately about this tonight. The single biggest act in which we will engage during our tenure will be getting this generation out of negative equity. I agree with a great deal of what Fianna Fáil says here. Unfortunately, I do not agree with the fourth point in the motion where it says that the local property tax and other measures in budget 2013 are not appropriate because it put it here. It said it had to be put in place. Let us not kid anybody. One can kid people a few times but this is far too serious a matter for someone to say that somebody else is responsible for it. Between 160,000 and 200,000 families will be taken out of negative equity and an overburdened position where they are paying off more than a fair share of their disposable or net income.
We now have four vehicles that will allow the State to deal with this. If we do it in a prudent manner, in two years' time, nobody should be pressurised into a position of financial distress because they bought a family home. I welcome this significant development. I have two major passions while I am in this Government for as long as it lasts - the creation of jobs and, more importantly, sustainable mortgages. This Government and I will do everything we can to ensure that what the previous Government did will be undone and that we are put into a better position. I thank Fianna Fáil for raising this motion.
I remind the Deputies opposite that this Government will last its full term. We will not be like the Green Party and Fianna Fáil and we will not flake on the Irish people. If I was to arrive in this Chamber from another planet and read Deputy Michael McGrath's motion, I would have said "fair play" because everything to which he aspires is what the Government is doing and everything he writes down is what we are all trying to achieve. Then I suddenly remembered that I am living in Ireland where the Deputy's party created a bubble for 14 years and the party is over. The carnival is gone and the Irish people are left with the legacy of its reckless behaviour. Rather than debating a Private Members' motion here, we should be before a tribunal with the 14 or 15 members of the previous Government before it justifying their actions because they behaved irresponsibly on behalf of the Irish people. They betrayed the trust of the people and have the audacity to come in here and chastise the Government which inherited a mess, acknowledges the difficulties people face and is trying to get us back to sovereignty. I appreciate Deputy Michael McGrath's motivation because he is a decent person but the party he represents is not. Its policies have made our country the way it is and the people must never be allowed to forget that.
In saying that, some of the speakers opposite who are not in the Chamber are pursuing an agenda that would have got our country into even more trouble and are still cheerleading via the column inches of certain newspapers which do not deserve to be mentioned in this House. What we need to do is to make sure that the family home is never repossessed and taken away and that we preserve and protect that family home for decent men and women.
The Government is going to pass a Bill that provides for repossessions.
I did not interrupt the Deputy when he spoke last night. If I was him, I would be embarrassed by Fianna Fáil's record in government. This is not about punishing people. It is about making sure we have people living in their own homes and that banks behave responsibly and work with and not become disengaged from ordinary people who, in the majority of cases, are trying to make an honourable settlement in the realignment of their mortgages. We all accept it is difficult.
We cannot scapegoat the ordinary person regarding mortgages. We must make sure that they are worked with and that the banks fulfil the obligations they have as outlined by Government. We have seen the targets set by the Government. Let us give them a chance to work. I see people in my office every week, be they from small or medium-sized enterprises or family homeowners trying not just to salvage their family homes but to preserve and protect their family life as well. That is the most important thing. We must work in unison to ensure the family home is protected.
I am very grateful for the opportunity to speak on this very important motion which raises the very serious issue of mortgage distress. Based on my experience as a young mother in the early 1980s, I remember all too well how difficult it was when my husband lost his job and we were left with a huge mortgage and young children. I remember the turmoil, sleepless nights and the worry that tomorrow we might not be able to pay next month's mortgage repayment and stay in our home.
The statistics are alarming. A total of 94,500 mortgages from private dwellings are in arrears for over 90 days, while 23,500 mortgages are in arrears for over 720 days. The Government is well aware of current events. It is not a laughing matter. It involves people's lives and homes. A home is not just bricks and mortar. It is what happens inside those walls that matters. This is a very stressful time for many young people and many people who have lost their jobs. We should not use it in this Chamber to badger each other. We should use it to solve the problems out there.
Perhaps the Minister might take the following matter into consideration. All of the banks have a responsibility to customers and must engage with borrowers right from the start. They cannot bring them in and make fools of them. Mortgage holders cannot deal with any further mortgage interest rates or distress. It is difficult enough for them to pay what they can at the moment. I am very concerned that people struggling to make their payments who want to switch to interest-only mortgages are being financially penalised by their banks. A total of 37% of the restructuring accounts are on interest-only arrangements. A young man rang me today to tell me he had incurred a charge of €700 through switching to an interest-only mortgage and deferring his payments for three months due to financial difficulties. The bank called it a credit cost increase. I have not heard of this but then I am not a financial wizard like some people in here. If that is true, certain banks are able to put even more pressure on people. These are banks that are supposed to be sitting down with people and trying to sort out and help them through their difficulties. The banks should not forget that they were helped out of the mess they were in.
They should not now turn on those ordinary borrowers, the small borrowers and the young people - not the big sharks - who bought into an outrageous market. The banks are charging those people €700 to switch to an interest-only mortgage deferred over three months and are calling it a credit cost increase. I find this very difficult to understand and I ask the Minister of State to address that point.
I welcome the opportunity to speak on this motion. The statistics show that 94,500 private home mortgage accounts are in arrears of more than 90 days, with 23,500 in arrears of more than 720 days. These statistics are very sobering, recording as they do the nightmare situation facing families. Most of these purchasers started out with dreams and hopes spawned in a Celtic tiger era. People bought their homes in good faith. They intended to pay for them. Unfortunately, many people lost their jobs and they are unable to pay a mortgage nor can they sell the property. The mortgage would still be in place even if the property could be sold. They do not know where to turn.
The situation is complicated and overwhelming in many cases. The scale and the legal implications mean there is no overnight solution. The mortgage is a debt to be paid yet the taxpayers bailed out the banks. There needs to be a finely calibrated response to mortgage debt because each person's circumstances are different as is a person's ability to pay. In some cases there is no ability to pay. I agree with Deputy Buttimer's point about the family home. I refer to innovative approaches such as trade-down mortgages, split mortgages, mortgage-to-rent schemes.
The attitude to home ownership has not changed despite the economic crash; we like to own our own homes. In my view there is serious merit in allowing people to have 50-year loans. Most loans are between 20 and 30 years. People want to be able to hold on to their homes and to repay the mortgage at an affordable rate. This was done in the case of the promissory notes. The home may well be inherited by the following generation and this is already happening. I suggest that this may be a solution to allow people to hold onto their homes.
The issue of mortgage arrears and the pressure that this in turn is putting on households all across this country is to the fore in every Deputy's mind. The figures are stark, but the stories behind the statistics are even starker. The Government has acknowledged that this is one of the most serious social and economic problems. It has taken determined action to ensure that those most in need of support are supported in a proper and timely manner.
Thankfully, the number of new families in mortgage arrears is falling, but there remains a significant number of mortgages, over 94,500 for private dwellings alone, that are over three months in arrears. The targets have been set out by the Government to tackle this crisis. For example, by the end of June of this year, the banks should have proposed sustainable solutions for 20% of distressed borrowers, rising to 30% by the end of September and 50% by the end of the year.
Much has been made of the dangers of moral hazard. We are not looking for a write-off of debt that can be paid, but where a mortgage is in distress and there is not enough money to meet the mortgage then the bank must pull out all the stops to reach a workable arrangement for that family. For too long the talk has been about the distressed mortgages and the pressure of these on the banks. The focus must be and must remain on the distressed mortgage-holders and the families involved, in cases where what was once an ambitious mortgage is now sucking the economic lifeblood from a family.
It is not just families that have been affected. Our towns and villages are suffering from a severe case of economic inactivity as all of the available spending in the local area is sucked into faceless banks to pay interest on vast sums borrowed during the boom. If we are to ensure that the banks deal properly and fairly with these distressed families, then funding is not the sole issue to be discussed. We must not focus on providing a carrot for the banks but rather a stick in terms of bank oversight and heavy repercussions for banks who fail to meet the targets set out to reach sustainable solutions for families in real distress.
The Taoiseach and Ministers must set out a clear plan of how banks will be dealt with in the event that they do not live up to these targets. I welcome the fact that the Central Bank is to set demanding quarterly targets for the conclusion of sustainable solutions. People want to see firm action, especially as the Government has in recent years provided the wherewithal to ensure the very survival of these banks.
I refer to the issue of remuneration for bank personnel. People are sick listening to the defunct argument that in order to get the top people, we must pay wages that compare well internationally. For decades, Irish bankers have been earning top wages at a time when the banks they were overseeing were teetering on the brink of total collapse. The money paid to top bankers during the boom was wasted. In my view, banks that have been bailed out by the Government, whether to a large or small extent, especially in cases where they continue to lose billions annually, must show restraint in terms of wage levels at the top of the tree. The danger is that the public perception becomes tainted to believe that bank personnel are paid too much. The vast majority of ordinary bank workers have been through a torrid time in recent years, unsure of the future of their jobs, facing irate customers on a daily basis, dealing with people in huge financial difficulty, while also dealing with their own financial reality of reduced wages and increased costs.
I support the Government's counter-motion and look forward to thousands of ordinary families reaching workable solutions with the banks in the remaining months of this year.
I welcome the opportunity to contribute to this debate. I wish to deal with an issue associated with mortgage distress which is the personal and family difficulties experienced by people. One of the factors causing psychological distress is the fear of losing one's home or the actual loss of a home. The attachment to owning a home is ingrained in Irish people; it is in our genes. I refer to the great quote from Parnell, "Keep a firm grip on your homestead". The fear of a loss of the home has a significant impact on psychological well-being. The loss of a home is often accompanied by the loss of employment with attendant severe psychological effects. The three most common questions asked on meeting a person are, "Who are you?", "Where are you from?" and "What do you do?" Loss of a home causes loss of self-esteem and self-worth especially in cases where a person is also unemployed. It especially affects vulnerable people who have lost their job and are in danger of losing their home because of difficulties with paying the mortgage. This creates stress in the home and has an effect on relationships, leading to their breakdown. It can also lead to a stressed person abusing alcohol and drugs in an attempt to relieve the distress. In many cases the compounding factors can lead to serious depression and other mental health issues. There has been an increase of 24% in suicide rates as a result of the recession and other factors.
The banks should recognise these outcomes in their discussions with very vulnerable people. Some banks have trained and informed their staff on how to deal with customers and to be aware of the psychological difficulties they are experiencing. However, more investment is needed in training banking personnel to understand the psychological distress being experienced by those with mortgage difficulties who are in danger of losing their homes and the consequences that might ensue as a result of their situation.
I commend Deputy Michael McGrath on his tabling the motion and on his work on mortgage debt. The latest figures underline the need for the Government to fulfil its pledge to deal with the mortgage arrears crisis. The figures published almost three weeks ago show that approximately 186,000 family home mortgages, with a total mortgage value of more than €30 billion, are in some form of distress. The crisis has had a serious impact on the daily lives of people who are not able to pay their mortgages. In the last quarter, an additional 6,500 families have fallen into some form of mortgage distress. The level of arrears represents a crisis and requires a decisive policy response from the Government.
Deputy Michael McGrath stated that 40 split-mortgage arrangements had been implemented in the last quarter, bringing the total to 52. Splitting mortgages must be central to the effort to resolve the crisis. I would like to see the banks accelerate the roll-out of this option for eligible mortgage holders. Deputy Michael McGrath proposed affording the mortgage resolution office a number of options which could be included in a mortgage resolution order. These include the option of a split mortgage, whereby part of a loan is parked for up to ten years. He also proposed interest-only payments for up to four years, extension of the period of a mortgage by up to 20 years, a repayment holiday for up to 12 months and participation in a deferred-interest scheme. Deputy McGrath proposed that in the event of voluntary surrenders, financial institutions should lease family homes to borrowers at market rents.
I quote from an article in the The Connacht Tribune on the 8,500 home owners across Galway who are in mortgage arrears or have restructured home loans and who face the prospect of leaving a legacy of debt and even repossession. It is certainly very serious when it is revealed that additional debts incurred through default on mortgage payments or the restructuring of loans are not covered by mortgage protection life cover. The article states:
One of the country’s biggest life assurance companies has issued a warning that while life cover always 'cleared' the balance of a mortgage in the event of a death, average debts of up to €27,000 could be left behind after the policy pays out, which could ultimately lead to a repossession. Central Bank figures published this week show that the number of problem mortgages in Ireland grew sharply in the last three months of 2011, putting further pressure on its banks and highlighting the challenges the government faces in reviving the moribund domestic economy. Nearly one in seven Irish home loans are not being fully repaid and repayment is getting more difficult as unemployment remains stubbornly high and house prices continue to fall, according to the Central Bank findings. Some 70,911 private residential mortgages – out of a total 768,917 in Ireland - had lapsed into arrears of 90 days or more by the end of last year, the latest figures confirm.
It is important to set out clear guidelines on what the word "sustainable" actually means. Currently, banks have vastly different interpretations of what constitutes reasonable living expenses. It is ludicrous to suggest the insolvency service should micromanage family finances, particularly if it means telling families that one parent cannot work outside the family home. The Vincentian Partnership for Social Justice has undertaken excellent work on minimum income standards and set out the actual cost of living. This work should be relied on to inform the debate fully as to what arrangements should be put in place for distressed borrowers.
The Mortgage Resolution Bill offers practical and urgent assistance to those in mortgage difficulty. This is the time for action, which is what people want. We do not want banks retaining a veto over any proposal to restructure a mortgage. The best solution is to ensure that families can remain in their homes as long as reasonable efforts are made to meet mortgage commitments.
I welcome the opportunity to address the House on this important issue. I compliment my colleague, Deputy Michael McGrath, on this motion. Others, particularly Labour Party members, have raised questions about why the issue should be raised at this time. Our party has raised the issue consistently in recognition of the very serious numbers of people who find themselves in mortgage arrears and under enormous pressure on a daily basis because they are in debt to financial institutions. The motion should not be a surprise to anybody and it should not be construed as somehow tied up with the by-election that is taking place. If someone in the Labour Party feels a discussion in the House tonight will improve or worsen the chances of a candidate, he or she will have a bigger surprise on seeing the level of support for the Labour Party tomorrow. That is an issue for another day.
It would be populist to come in here to have a go at the banks and blame financial institutions for the entirety of the crisis in which we find ourselves. I am not going to do that. I am aware, as are others, that there have been significant personnel changes at board and senior management level in the banks. There is a group of people within the financial institutions now who are committed to finding a resolution to the problem. Notwithstanding that, there is considerable inertia about resolving the crisis. That is not surprising given the fiduciary duties of executives and board members, whose responsibility is to get the greatest return for shareholders. The taxpayer is the only shareholder in one bank and the part-owner of another. In one of the other institutions, the State has a considerable amount of share capital. The best outcome from a shareholder's perspective will not always accord with the interests and needs of borrowers who are under significant pressure. It is for that reason that one must take responsibility for resolving each individual case away from the financial institution. If a bank has a veto, it will have to exercise it in almost all circumstances in order to meet its fiduciary obligations in company law.
Deputy Michael McGrath's proposal formed part of a previous Fianna Fáil Bill. It seeks to create an independent office to act on the basis of a uniform set of guidelines to find a resolution and act as an honest broker to ensure banks get the best return possible while borrowers end up with a reasonable level of living expenses from their income. The Taoiseach denied the existence of guidelines today and said that no spouse would have to leave employment where a family's child care costs were greater than that person's income. While I welcome his clarification, I wonder what will be the next level of conditions to suck the lives out of people whom we need to encourage to return to the market. The economy is in a perilous state. It is completely hamstrung because of built-up debt. People have no concept of what is available to them at the end of a week or a month to spend on a reasonable lifestyle.
We have heard the criteria put forward over the weekend as to whether someone should be entitled to a Sky package or to retain a second car. That frightens people. They recognise that if guidelines such as this emerge, the banks will push them to the nth degree. Rather than to trying to take the burden off the shoulders of distressed borrowers, it seems we are to place a noose around their necks for the next 15 to 20 years. That must damage confidence in the economy. On occasion, Ministers talk up the economy - perhaps to a much greater extent than is merited - as part of their effort to create an environment of confidence. Do they really think that if they place that noose around the necks of so many borrowers, it will do anything for confidence or to generate growth? We must take this seriously.
I am not so sure whether it will take another wave of evictions or another wave of draconian actions by the financial institutions for the Government to accept it got it wrong from the start. The Government will not get hullabaloo from this side of the House if it slightly alters its course and accepts there is a better way, an independent way and one that will benefit the individuals who have the output from it and the economy, which will have the benefit of people with a positive outlook, money to spend in the domestic economy and who will go to work more positively and deliver better for all concerned.
I used the term noose around the neck without making any direct implications. Sadly, hardly a constituency in the country has not seen an increase in suicide. It is not always the case that it is associated with debt issues. There are other contributing factors in some cases but a considerable number of people in recent months, and certainly in the past two years, have taken their own lives because of the financial pressure they are under. While I accept the behaviour of the financial institutions has changed dramatically from what it used to be years ago in terms of the appropriate level of contact through telephone calls and letters, that has helped but has not lifted the burden. People under financial pressure had high hopes when the Government said it would address the issue but the hope has abated. People see the Government has left control in the hands of the financial institutions for the reasons I said. They are not in a position to look favourably on proposals from individual borrowers.
Mental health is one of the more serious issues we must deal with but we are not addressing it. We are spending a lot of time dealing with road safety, which is fantastic and which has reaped benefits and rewards. The Minister for Transport, Tourism and Sport, Deputy Varadkar, is publishing a strategy and it will save lives but the approach in respect of the resolution of the mortgage debt issue continues to be a charter for an increase in suicide by people who find themselves with no way out. It reflects badly on all of us in the House. We should put aside political differences and examine the issue from a vantage point. In addressing it, we should try to find a solution that gives hope to people who, at the moment, have none and see no way out. They see themselves looking into a dark tunnel. If there is anything the Minister of State can do, it would be greatly appreciated by the families of people for whom, sadly, any changes will be too late. If the actions the borrowers have taken in taking their own lives can lead to a change in policy from the Government, perhaps the loss of their lives will not have been in vain.
In conclusion, it is right and fitting that the Government puts in place the appropriate level of income for families to allow them to live normal lives. People should be able to have a holiday, retain a family pet and where two cars are a necessity, they should be allowed to retain them. If we continue along the way proposed by the Government, a serious situation will develop.
I thank Deputy Michael McGrath for tabling this motion and publishing the Mortgage Resolution Bill. I also thank him for the work over the past two years on the issue. In these two years the situation has considerably deteriorated and we have seen a relative lack of action on many fronts to deal with the issue. The 94,000 mortgage holders whose residential mortgages are in arrears of more than 90 days look at the effort going into so many other areas of political activity, such as trying to get a deal on debt, the Presidency and the CAP, and see a comparative lack of effort on this issue. The kinds of frustrations we are all seeing in our offices on a daily basis is easy to understand. The lack of an independent solution is a key issue.
Deputy Dooley put his finger on the issue in respect of banks. It is easy to come in and slam the banks for a couple of cheap headlines. Their legal obligations are such that they are not in a position to deal with the level of debt they have and, if they were, they can use that as an excuse. It is one solid legal reason for an independent broker.
Two weeks ago, there was a big press conference with the Minister for Finance, Deputy Noonan, outlining a programme of timescales for offers to be made to people with mortgages. The problem is that the bank gets to make the offer. The bank is still in the driving seat. How will we equip the borrower in terms of an ability to handle the offer? MABS continues to be under-resourced. It cannot deal with any more people. If we are serious, we should resource MABS to the extent that it needs. There are enough experienced financial professionals out there to give other assistance if there was a willingness to do so.
The Minister insisted there would be no forced repossessions but then Mr. Elderfield said there would be. Today, the Taoiseach said no one will be forced to give up her job but the Minister for Transport, Tourism and Sport, Deputy Varadkar, who has a habit for telling it as it is, said people will be forced to give up their jobs. The difficulty is the vacuum of information. Why did someone have the bright idea of leaking the guidelines over the weekend? Someone in government had sight of the guidelines and decided to throw them out in an attempt to project action in the run-in to the by-election. All it has done is scare people. The debate about work and the choice available to those who work in respect of child care costs will be replaced by other issues as the guidelines become clearer. Given the manner in which it has been handled over the past two days, if the guidelines are ready they should be published so we can have an informed discussion about them. At least there would be uniformity in the financial system. One bank looks for one set of information while another bank looks for different information. Any Deputy worth his or her salt is dealing with this issue in the constituencies. We are all engaging with banks on behalf of mortgage holders and commercial loan holders. We know the different approaches of banks. By publishing the guidelines, we can get rid of the fears arising out of the Government misinterpretation of the guidelines and we can allow people to start preparing.
Regarding the announcement two weeks ago, offers will be made and the banks must have offers made to 30% of mortgage holders by the end of June and to 50% by September. However, there is no deadline on settlement of the offers. Much like SME lending, when banks all say they are reaching their target while we know it is not happening, the banks will say they have met the targets and made the requisite number of offers by June and September. However, there will be no pressure on anyone to move the offers from the status of offer to a concluded deal. It comes back to the central point of the argument, that there is no third party, independent broker to decide whether the offer is fair and whether the borrower is dealing appropriately and properly with the bank. That is missing in the Government's approach. Deputy Michael McGrath's Bill presents a resolution.
Who can argue with the proposals of Deputy Michael McGrath? Split mortgages, parking part of the loan for up to ten years, interest only payments, extending mortgage payments, repayment holidays and debt for equity swaps are all practical initiatives that will not pull the ground from under bank recapitalisation. The asset is still in place except it is priced at a more reasonable level.
Many of these have been on the table for some time. One would think the banks only came across the idea of split mortgages last week the way they have suddenly rushed to state they will offer these products. They are available. Surely the Government will not turn its back on a Bill which proposes a solution to the problem faced by so many citizens - the number is 94,000 and rising. We are going to pass the buck to the personal insolvency service which is in its infancy, without giving it any idea of how many will avail of its services. The Minister for Justice and Equality, Deputy Alan Shatter, reckons that it will receive 3,000 bankruptcy applications in its first full year of operation. That is just on the bankruptcy and commercial side alone. We have seen how many have gone overseas in the past few years. What the Minister for Finance, Deputy Michael Noonan, did two weeks ago was to lump the entire mortgage resolution issue on top of the personal insolvency service. Will it be given the resources it needs to manage it? Will the commercial side which was greatly trumpeted and welcomed not be touched while we deal with the mortgage side?
In the early days of any new agency - for example, Student Universal Support Ireland, SUSI; the centralisation of the medical card applications process and so on - it does not cover itself in glory. What we are doing is that instead of giving the personal insolvency agency a chance to get up and running, we are placing the futures of 94,000 families on its shoulders to try to resolve their 90 days plus arrears issue without providing it with extra resources, without a clear timeline within which we expect it to deliver and without bringing in an independent third party to referee and define who is making a proper offer.
Mortgage arrears cause enormous distress and lead to enormous insecurity. They are a major drag on the domestic economy, contributing to unemployment and the collapse of the retail and services sectors. The issue needs to be resolved. As a result of personal distress, the ability to make a judgment call is impaired, as is the ability to deal with matters as one might otherwise do. That is another reason an independent third party should make that rational judgment call on the offer from the bank and the response of the affected mortgageholder. There are so many reasons we need this agency, as prescribed in Deputy Michael McGrath's Bill. There are so many additions it would bring to the equation and so many positives which would assist us in the solving of this problem. It is beyond me why the Government cannot accept it as a practical step.
The personal insolvency legislation still gives the bank a veto. A person's mortgage accounts for some 65% of his or her debt. The banks still have a veto and there is no independence in terms of a bank making an offer. One may not be in a position in terms of resources to respond to that offer and there is no independent body in place. We are under-resourcing the Money Advice and Budgeting Service, MABS, at a time when it needs resources more than ever. There is, therefore, no option available to many of the 94,000 borrowers affected. If they go to the MABS, they must wait because of the level of service provided. I cannot understand why the Government does not take this Bill on board and see it as the practical initiative it is or put forward some alternative in the form of a third party agency which would deal with this issue in a calm and rational way, the legal responsibilities we have given the directors of financial institutions and the moral responsibility we have as a country to resolve this issue and allow the people concerned to live their lives in an organised manner without the pressure and stress of this debt and allow the economy to start to grow again.
Some of the Minister of State, Deputy Brian Hayes's colleagues asked the question, why now. They should have asked, why is Fianna Fáil raising this matter again. My colleague, Deputy Dara Calleary, alluded to the passage of the personal insolvency legislation through both Houses of the Oireachtas. We sought, by way of amendment on Committee and Report Stages, to establish an independent appeals mechanism as part of the personal insolvency regime being introduced. We welcomed and supported the main thrust of the legislation, but it is deficient and limited, as there is no participation by an independent third party to try to bring about a dispute resolution mechanism and disputes will undoubtedly occur.
The purchase of a home by a person or young couple is one of the most significant and landmark transactions they will make in their lifetimes. Currently, 94,000 people find themselves in a dire set of circumstances. Instead of having a capital asset which is appreciating in value, they have a liability which is growing in size. We are more than two years into the term of the Government, but we still have not progressed this matter significantly enough to give the people concerned hope.
As a practising public representative, like everybody else in this House, the Minister of State, Deputy Brian Hayes, will know there are independent appeals processes for every State-backed scheme. There is an independent social welfare appeals mechanism, including for jobseeker's, carer's and domiciliary carer's allowance and for medical cards. We have the Office of the Ombudsman and if one goes through the planning process, there is an independent appeals mechanism. There is the Employment Appeals Tribunal to deal with employment disputes. One can even appeal through the various courts. There is also an independent appeals mechanism to deal with third level grants. We are now faced with a situation where the banks ultimately have a veto.
The Minister of State, Deputy Brian Hayes, is in the same wing of Fine Gael as the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, who, to his credit, is always clear. Does the Minister of State trust the banks? Will he give us a straight answer? Does he trust the banks to deliver on their promise under the legislation? I will be interested to hear his response.
There is no fairness in the thrust of the legislation. Much of what the Minister for Finance is bringing forward does not have fairness as a central tenet. For example, if one looks at local property tax, the Minister has not recognised inability to pay. There are some limited deferrals and some other minor reliefs. In my constituency alone there are 25 unfinished housing estates. Those living on these estates who are all in negative equity are liable for local property tax. Many of the 94,000 people in mortgage arrears are living on such estates and are liable for local property tax. These estates are largely unfinished and there are serious public liability issues attached to them. Many of them should be demolished.
We will have sight of what are considered reasonable living expenses when the guidelines are published. There was a leak to the newspapers, to which the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, referred. One person's reasonable living expenses would represent a barrier for another and his or her family. For example, is the Minister seriously thinking of removing the ability to maintain private health insurance cover? Today in my local hospital, the Mid-Western Regional Hospital, people were asked not to attend the accident and emergency department unless the emergency was genuine. What message does that send?
There is much to take into consideration when it comes to fairness. However, we are not allowing people to avail of the services of an independent honest broker in a process covering the biggest transaction they will make in their lives and which affects their welfare. We are always talking about the economy.
Let us talk about the societal issues. We must recognise that we must foster a society in which people can live. I would like the Minister of State to say whether he trusts the banks. Does he believe they will do the right thing? I do not believe they will. We need independent oversight. We sought this when the legislation passed through the Houses initially and we are now offering the Government a constructive alternative to what we proposed within the personal insolvency legislation. I hope the Government will take it on board.
I am glad to have the opportunity to contribute to this debate. I suspect that if I were on the other side of the House, I would be raising this issue on Private Members' business. I do not criticise the Opposition for doing so because this is a seminal issue. There are many issues that will define the country's comeback from crisis to recovery that are out of our hands and determined by international factors, including the status of the eurozone but mortgage arrears comprises an issue that is entirely within our hands and one that we can resolve for ourselves because of the extraordinary recapitalisation of the banking sector by the Irish taxpayer. It is, therefore, right and proper that the Opposition has tested the Government last night and tonight. I do not blame it for having done so.
The remarks made by Deputy Neville are also critical as they go to the heart of the debate. I refer to the enormous stress that mortgage impairment is exerting on families and to the ability of people to fight back after four or five really challenging years. The Government has made it absolutely clear that this issue is a priority this year. We have set very firm deadlines and targets with the pillar banks for the resolution of the problem, and they must achieve them.
Deputy Niall Collins asked me my view on the banking sector.
I asked the Minister of State whether he trusts the banks.
That is a related question. It is fair to say there has been considerable frustration on the part of the Government about the time it has taken for the Irish banking sector to come to grips with this problem and make progress. The sector has been a bit like a rabbit caught in headlights in recent years, including when Fianna Fáil was in government and during our term in government. We will soon know whether our strategy is working. We will know whether the timelines we have set – 20% by the end of June, 30% by September and 50% by the end of the year – are working, and whether that of Fianna Fáil is a better one.
I am not in any way criticising the Deputies opposite for tabling this motion. I have considerable experience in opposition and one of these days I will get around to writing a book about it. If I were in opposition, I would be doing the same thing myself.
The Labour Party will have lots of time after the next election to help the Minister of State with it.
Time is a great leveller in this place. We have been setting ourselves timelines. Let us see whether we can achieve the targets. There is confidence that we can do so.
It is only right and proper that we put the banks through this process and demand that they deliver. The fundamental problem in this society over the past two decades has been the extraordinary amount of group-think at the heart of the regulatory and banking systems. This was responsible for the national crisis. I have a very open mind as to whether the banks will actually achieve their targets. They hoodwinked the current and previous Governments and we should be critical in our analysis of whether they will achieve the targets we have now set for them. None the less, targets have been set and we will soon see whether they can be met.
Section 23 of the insolvency legislation deals with what is regarded as reasonable living expenses. If we are to make progress, we must be honest and truthful with people who have totally unsustainable mortgages and acknowledge that, in a minority of cases, their homes may be repossessed. This is because they are in an entirely unsustainable position, despite the fact that, in the great majority of cases, people can stay in their homes.
One aspect of dealing with mortgage resolution is being utterly truthful with people who find themselves in this appalling situation. We must ensure this truthfulness is a fundamental part of the Insolvency Service of Ireland, which has been established under Mr. O'Connor. We look forward to success in that regard.
I concede that this is a crucial issue for this Dáil, its Members and the economic recovery of the country. We can get to a better place if we make progress. There is confidence among members of the Government that the actions it has taken will help with the restructuring of impaired mortgages.
I welcome the Minister of State, Deputy Brian Hayes's, comment that this is the most significant issue facing the Dáil, in its debates, and broader society. Last night, I listened to the opening remarks of the Minister for Justice and Equality, Deputy Alan Shatter. To say the least, it was abusive and insulting that such an important issue could have been so trivialised. We have come forward with proposals that we believe are genuine and honest in their interpretation. Their purpose is to address the difficulties families are facing throughout the country. Despite this, we were given a lesson in the history of the problem. I accept that my team was on the pitch but, by God, the cheerleaders and pom-poms were very much on the Opposition side at the time in question also. Time and again, people criticised the fact that the banks were not lending enough through mortgages, and it was argued that stamp duty should be removed to further inflate property prices. We need a very honest debate on this issue. We can look to the historical record to see who was right and wrong.
Fianna Fáil is being told continually that it should have seen the problem coming. The Minister for Justice and Equality is very forceful in that regard. He has a property portfolio that would put NAMA to shame. Throughout the 14 years in office of the previous Government, the Minister was investing in properties. He is a landlord of major importance and has properties in Florida, London and Dublin. He has properties all over the place.
Members' personal affairs are not to be brought into the debate.
They are on the register of interests.
The Deputy should not mention personal affairs. There is no need for it. It is not acceptable, no matter what side of the House one is on.
Last night I had to listen to a very severe lecture from the Minister.
I was not here.
I am trying to make the point that nobody saw this particular difficulty coming. Does the Ceann Comhairle believe that any political party in this House would have allowed circumstances in which people must live with unsustainable mortgages? We are coming forward with very genuine proposals, proposals we believe are important in ensuring independent oversight. We must remove the veto of the banks.
The Minister of State may interpret the legislation and guidelines any way he likes with regard to personal insolvency but the fact of the matter is that it is the lenders, the banks, that will have the final say on the resolution mechanism for people with distressed mortgages. For the Minister for Justice and Equality to dismiss in the House last night any proposal to address the problem is disingenuous to say the very least, or arrogant to say the very most. We are trying to highlight the difficulties of families and point out that the banks cannot be seen as independent in addressing this issue. They were the bodies which, at the outset, increased lending in the system by assessing disposable income, including child benefit and revenue from property letting. The Government is now asking the institutions to be adjudicators in cases where there are distressed mortgages and where there are families liable to lose their homes.
Deputy Michael McGrath's proposal is very simple. It is about ensuring that there is independence in adjudication and that there is a system in place that ensures families are given an opportunity to make a settlement and get on with their lives. Nothing in the proposals on personal insolvency removes the simple fact that the bank is the ultimate decision-maker.
Why has the Government not been pushing for mortgage resolution as speedily as we expected? It made considerable commitments in this regard. I am concerned that if the Government knows there is to be a mortgage resolution mechanism that is fair, equitable and independent, banks may need further capital.
The Government knows this politically because it stated previously that any further injection of capital into the banks would be viewed negatively by the public. The Government has stated in the past that not another cent would go into the banks, but they may need further capital. What is known for sure is that the banks will not address this issue in a way that is fair because doing so could expose their capital base. I have major concerns about this. For this reason we need an independent system to address the 94,000 mortgages under duress and the families supporting them. The system must be independent because the banks cannot be trusted in this particular aspect of their affairs. They have proven this previously in terms of how they assess a person's ability to pay and all that flows that that.
Proposals put forward from this side of the House are a genuine effort to try to resolve this issue. As stated by every Deputy who has contributed to this debate, this is a massive societal issue. It has a hugely damaging impact on society at large and on individuals and their families. Deputy Neville spoke about suicide, mental illness and all that flows from that. Our proposals are solid and are put forward in a genuine effort to address this issue. I will not sit in this House night after night and take a historical lecture from the Minister, Deputy Shatter, when he, given his involvement in property, did not see this coming either. That is on the record and is not a personal slight. People are saying that Fianna Fáil saw this coming but chose not to do anything about it. Time and again, I have called in this Chamber for an honest debate on how we got to where we are.
The Government amendment states that it inherited a severe mortgage arrears crisis. We acknowledge that. It would be no harm if the Government members also acknowledged that when on this side of the House they did nothing for 14 years to raise this particular issue. Not once was there any discussion about attempting to deflate the property bubble that was developing. Not once in this Chamber did any Deputy criticise the then Government or put forward proposals. The contrary was the case on every occasion. The clarion calls from Government members when on this side of the House were for the Government to abolish stamp duty and open up the banks to further lending.
What we are trying to do is to address a problem that is destroying society and families. One has only to go to Dunshaughlin, Stamullen or any of the other commuter belt areas to see the pain and devastation this problem is causing homeowners. I do not believe any party would have tried to cover up this issue and pretend that the property bubble would never burst. If I or any member of the previous Government now on this side of the House had known that the property bubble was going to burst we would have cried halt. Any time we tried to do so we were accused of interfering. There were calls from those who are now members of the Government, when they were on this side of the House, for the abolition of stamp duty and the introduction of further tax reliefs. They are now saying the opposite.
Honesty is important. The families who are listening, or are not listening, tonight want solutions. I urge the Government, even at this late stage, to establish an independent appeals mechanism and remove the veto from the banks, which are the ones with vested interests in terms of adjudicating on a person's ability to pay. The draft guidelines published in the Sunday Business Post are disturbing. Under these guidelines, families may be forced to give up private health insurance. Private health insurance is now considered a luxury, as is being in employment. The Government needs to get involved in the real world. I urge the Government, at this late stage, to accept Deputy Michael McGrath's proposal that independent oversight be sacrosanct and the central tenet in any attempt to address the issue of mortgage arrears, which is a huge and damaging problem for families and society. I commend Deputy McGrath's motion to the House.
I thank all Deputies who contributed to this debate over the past two nights and acknowledge the constructive and conciliatory contribution of the Minister of State at the Department of Finance, Deputy Brian Hayes. It was consistent with the purpose of this motion, which is solutions-driven. That is what we are about. It is the reason my colleagues and I are in politics.
As stated by Deputy Kelleher, the approach last night of the Minister for Justice and Equality, Deputy Shatter, was unfortunately very different. He spent most of his time giving his version of history and lambasting Fianna Fáil to such an extent that he almost ran out of time and had to read quickly through the important part of his speech. He used all of his time lambasting Fianna Fáil in what was an utterly non-constructive speech, which, in my opinion, was not befitting of a Minister. The core of his argument was that any deal must be voluntary in nature. He stated as a matter of fact, citing constitutional precedent, that the body which Fianna Fáil proposed be established would be struck down by the courts. I believe that is a debatable point. Article 43 of the Constitution is clear that the issue of property rights is in the context of the principles of social justice and can be set aside if in the common good. There is a strong case to be made that this proposal is sound. Even if a constitutional amendment is required, so be it. Let us have that referendum. I do not accept that the Government can legislate to take people's private pension savings yet cannot introduce a proposal such as this because of property rights under the Constitution. The reality is that if the political will existed this issue could be dealt with. We could certainly enact legislation along the lines suggested by Fianna Fáil. I believe this should be done.
The essence of the argument made by the Minister, Deputy Shatter, last night in opposing this motion, leaving aside his vitriolic criticism of Fianna Fáil, was that the banks will do deals with borrowers because they know that if they turn down a deal the borrower has the option of bankruptcy, which is utterly ridiculous. The Minister is essentially saying that bankruptcy will be the solution for a great many families. There is no requirement for this. In the vast majority of cases, a proper sustainable solution can be put in place without families being pushed to bankruptcy and all of the consequences that flow from that. The best way to get the banks to act and enter into deals voluntarily, which is what we would all like to see, is to put in place an independent body which would have the ultimate power to impose a binding solution. That would bring the banks to heel and ensure they enter into arrangements with people. Currently, based on all the announcements from the Government, more power is being given to the banks. Ultimately, if a person ends up in an insolvency arrangement the bank retains the right of veto.
What is frustrating is that this problem can be solved. The economy will recover. Many people currently dealing with mortgage distress will be in better financial circumstances in the future. This is about sitting down with the banks, negotiating and putting in place the right solution and establishing an independent body which, when such negotiations fail, can put in place a solution. We all know the scale of the problem. The total mortgage book in respect of family homes is approximately €110 billion, €30 billion of which is accounted for by mortgages that are in arrears or have been restructured. That is the scale of the problem. It is enormous. We know that action such as that proposed by Fianna Fáil is urgently required.
The point of disagreement between us and the Government is who should have the final say if banks and borrowers cannot agree on a voluntary arrangement. The Government's position is that the banks should have the final say through the measures provided in the revised code of conduct, the mortgage arrears resolution process and proposed legislation to reverse the Dunne judgment. Fianna Fáil has proposed a different solution, which requires that if it comes to it, an independent body would have the final say. If the Government were to signal to the banks that if they do not step up to the plate and reach all of the targets set it will legislate to give effect to a proposal such as ours, we would see far more action on this issue.
Amendment put:
The Dáil divided: Tá, 77; Níl, 42.
Tá
- Bannon, James.
- Barry, Tom.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Coonan, Noel.
- Costello, Joe.
- Coveney, Simon.
- Daly, Jim.
- Deenihan, Jimmy.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Ferris, Anne.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Flanagan, Terence.
- Griffin, Brendan.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Brian.
- Hayes, Tom.
- Heydon, Martin.
- Hogan, Phil.
- Humphreys, Heather.
- Humphreys, Kevin.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Kathleen.
- McGinley, Dinny.
- McLoughlin, Tony.
- McNamara, Michael.
- Maloney, Eamonn.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Nash, Gerald.
- Neville, Dan.
- Nolan, Derek.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Shatter, Alan.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Twomey, Liam.
- Varadkar, Leo.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Boyd Barrett, Richard.
- Browne, John.
- Calleary, Dara.
- Collins, Niall.
- Colreavy, Michael.
- Cowen, Barry.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Flanagan, Luke 'Ming'.
- Grealish, Noel.
- Healy, Seamus.
- Healy-Rae, Michael.
- Kelleher, Billy.
- Kitt, Michael P.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Moynihan, Michael.
- Murphy, Catherine.
- Nulty, Patrick.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Dea, Willie.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Smith, Brendan.
- Stanley, Brian.
- Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Joe Carey; Níl, Deputies Seán Ó Fearghaíl and Timmy Dooley.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Dáil divided: Tá, 76; Níl, 42.
Tá
- Bannon, James.
- Barry, Tom.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Coonan, Noel.
- Costello, Joe.
- Coveney, Simon.
- Daly, Jim.
- Deenihan, Jimmy.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Ferris, Anne.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Flanagan, Terence.
- Griffin, Brendan.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Brian.
- Hayes, Tom.
- Heydon, Martin.
- Hogan, Phil.
- Humphreys, Heather.
- Humphreys, Kevin.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Kathleen.
- McGinley, Dinny.
- McLoughlin, Tony.
- McNamara, Michael.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Nash, Gerald.
- Neville, Dan.
- Nolan, Derek.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Shatter, Alan.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Twomey, Liam.
- Varadkar, Leo.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Boyd Barrett, Richard.
- Browne, John.
- Calleary, Dara.
- Collins, Niall.
- Colreavy, Michael.
- Cowen, Barry.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Flanagan, Luke 'Ming'.
- Grealish, Noel.
- Healy, Seamus.
- Healy-Rae, Michael.
- Kelleher, Billy.
- Kitt, Michael P.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Moynihan, Michael.
- Murphy, Catherine.
- Nulty, Patrick.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Dea, Willie.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Smith, Brendan.
- Stanley, Brian.
- Wallace, Mick.
Tellers: Tá, Deputies Joe Carey and Emmet Stagg; Níl, Deputies Seán Ó Fearghaíl and Timmy Dooley.
Question declared carried.
The Dáil adjourned at 9.20 p.m. until 10.30 a.m. on Thursday, 28 March 2013.