As a point of interest, the phrase "distressed mortgages" in the motion should actually read "distressed mortgagors". Mortgages are contracts; they do not get distressed.
Mortgage Arrears Proposals: Motion (Resumed) [Private Members]
The following motion was moved by Deputy Michael McGrath on Tuesday, 9 July 2013:
“That Dáil Éireann:
notes:
— the latest mortgage arrears statistics published by the Central Bank showing a further increase in the number of arrears cases with 142,118 family home mortgages in arrears at 31 March 2013;
— that, as a result of various initiatives by Government and the Central Bank, the balance of power has shifted firmly in favour of the banks and against the distressed mortgage holder;
— the recent publication by the Central Bank of the Revised Code of Conduct on Mortgage Arrears;
— the imminent enactment of the Land and Conveyancing Law Reform Bill 2013 which, inter alia, nullifies the Dunne judgment;
— the number of family home mortgages in arrears of greater than 12 months has increased significantly and now stands at over 54,000;
— comments from senior officials in the Department of Finance and the Central Bank predicting a significant increase in the level of home repossessions;
— that the banks hold an effective veto on any proposed arrangement involving the mortgage under the new Insolvency Service; and
— that under the Mortgage Arrears Resolution Targets:
— the banks are not yet required to achieve any targets for reaching agreement with borrowers;
— the banks decide on the nature of the sustainable solution to be offered to the borrower; and
— the sustainable solution can involve interest only, putting the borrower into the insolvency process or the repossession of the property by way of a court order;
recognises:
— the widespread concern among distressed borrowers of imminent legal action by banks to initiate repossession proceedings; and
— the evidence from advocacy groups and from direct contact with mortgage holders that banks are now taking a more hard line approach with those in mortgage arrears;
— calls for the Code of Conduct on Mortgage Arrears to be revised to enshrine the following provisions:
— a clear definition of what constitutes an unsustainable mortgage following a process involving representatives of both borrowers and lenders;
— an entitlement to a minimum protected level of income for a borrower entering an arrangement with their bank;
— reinstatement of a maximum number of successful contacts that a bank is allowed to have with a mortgage holder in any calendar month;
— in recognition of the difficulty with placing a value on a tracker mortgage, where a borrower is faced with an offer which involves surrendering their tracker mortgage, a requirement that a third party verify if the offer from the bank is in their best interests;
— reinstatement of the 12 month moratorium on repossession proceedings for mortgage holders who have entered the Mortgage Arrears Resolution Process;
— the Central Bank to require that banks record all calls with borrowers and that these can be stored so that Central Bank staff can access them randomly to check them for any incidents of harassment or following a specific complaint;
— an obligation on a bank seeking an order for repossession to first obtain written confirmation from the Central Bank that it has exhausted every other course of action available to keep a family in their home; and
— an obligation on any bank seeking to classify a mortgage holder as unco-operative and moving for immediate repossession to obtain confirmation from the Central Bank that they can be properly classified as uncooperative; and
— further calls for regulation of debt collection agencies, in particular, where they are engaged by banks in respect of customers in mortgage arrears."
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;
- recognises that the Government has already taken a number of significant steps to address the mortgage arrears problem;
- in particular, acknowledges that the current Government established the Interdepartmental Mortgage Arrears Working Group and subsequently published the group's report in October 2011;
- notes that the group's report indicated the mortgage arrears problem is complex and that a range of measures, such as personal insolvency reform, the development of mortgage-to-rent, the provision of mortgage advice, direct engagement by banks and the development of sustainable options by banks for their customers who are experiencing mortgage difficulty, need to be advanced to address the problem;
- recognises that the Government has moved to implement the main recommendations of the Interdepartmental Mortgage Arrears Working Group report; and that a special Government committee, chaired by an Taoiseach, is overseeing the implementation of the measures across Government;
- acknowledges that significant progress has now been made, including the fact that:
— the Personal Insolvency Act 2012 was signed into law on 26 December 2012;
— the Insolvency Service of Ireland was formally established on 1 March 2013;
— the mortgage-to-rent scheme is now available across the country; and
— a mortgage advisory function is now in place;
- encourages the Government and other authorities to continue this work, in particular to enhance action by mortgage lenders to appropriately address unsustainable mortgage loans;
- notes that the Government has taken steps to address a lacuna in the law arising from the High Court decision in July 2011 which created uncertainty in the law relating to the exercise by lending institutions of their repossession rights;
- notes the targets set by the Central Bank requiring the main mortgage lenders to offer durable solutions to mortgage holders over 90 days in arrears;
- notes that the latest Central Bank mortgage arrears and repossession statistics for end March 2013 show that there was a total stock of 79,689 principal dwelling house mortgage accounts classified as restructured and that 76 per cent of these are deemed to be meeting the terms of their restructured agreement;
- acknowledges the Central Bank's initiative of the Framework for a Pilot Approach to the Co-ordinated Resolution of Multiple Debts owed by a Distressed Borrower;
- notes the revision of the Central Bank's Code of Conduct on Mortgage Arrears; and
- recognises that there are provisions in the Central Bank's Consumer Protection Code for Licensed Moneylenders which provide protections to consumers in relation to the debt collection activities of licensed moneylenders."
- (Minister for Finance).
Thank you, a Chathaoirligh, for that point of information.
I understand Deputy Ross is sharing time with Deputies Finian McGrath, Stephen Donnelly, Maureen O'Sullivan and Catherine Murphy. You each have two and a half minutes.
Thank you, a Chathaoirligh, for the very pedantic correction. You are absolutely correct and we are grateful to have someone as accurate and precise as yourself in the Chair this evening.
It is an appropriate motion from Fianna Fáil at this time, when we are apparently seeing an extraordinary solution to the mortgage problem, supported by the Government. The solution appears to be the final capitulation to the banks. As a solution to the mortgage problem, it is open season for the banks on the victims, who are the people who hold mortgages in this country. We are seeing an extraordinary situation in which the banks are being given, with the consent of the Government and the consent of the Central Bank, a licence to harass their customers. The existing restriction limiting the number of contacts that they could make has been lifted. We have also seen the end of the moratorium on repossessions and we have seen legislation introduced in this House to facilitate repossessions from people who have mortgages which are in difficulty. The result of that will be to give the banks freedom to move where and when they choose, without restriction. It is back to business for the bankers. It is open season on the borrowers.
What will we see? My guess is that we will not see a rush of repossessions. That does not suit the banks, not just in public relations terms, but in practical terms. We will see selective repossessions. We will see examples made of soft targets. We will see those who are not necessarily in negative equity being selected; in fact, we will see those who have equity in their houses being selected by the banks, because the banks will be able to sell those and get something back. This will avoid what the banks so greatly fear, which is a crystallisation of the losses on their loans and a realistic acknowledgment of the fact that their balance sheets are bogus. They will hit a few people here, there and everywhere, but they will avoid the reality they do not want to face, which is the fact that they remain insolvent.
There is much talk about an Oireachtas inquiry into what happened in 2008. That is fair enough, but what is happening now? This crisis, which is building up now, has the potential to be as big if not bigger than the crisis that engulfed us in 2008. The latest figures underline this. There is no reason the inquiry should not extend to how decisions are being made now on the issue of mortgages in distress.
A Chathaoirligh, thank you for giving me the opportunity to speak on this important debate on the mortgage arrears crisis. A total of 142,118 family home mortgages are in arrears as of 31 March 2013. This is a further reaction to the current recession, but also to the current economic policy of this Government, which seems to be words, spin and a lack of action. This is occurring on top of the scandal of the Anglo Irish Bank tapes and the manner in which our banking system is still working in this country. In the last election, the people voted for change and reform. A big part of the change was reform of our banking system and support for the mortgage holders. Our people are in pain, yet the banks want to kick them again and again. This is not acceptable. It is not good enough. Our so-called public interest directors should fight and stand up for these people and the SMEs. If they do not do so, they should get off the pitch and go home. The arrogance of our banking system should never be allowed to raise its ugly head again.
Our people want action. Our people want justice. Our people want the truth, and above all, our people want solutions based on top-quality regulation and good governance. These are the demands of our people and nothing below that is acceptable.
I have concerns about the fact that the number of family home mortgages in arrears of greater than 12 months has increased significantly, and now stands at 54,000 people. There have been comments from senior officials in the Department of Finance and the Central Bank predicting a significant increase in the level of home repossessions, and the banks hold an effective veto on any proposed arrangement involving mortgages under the new personal insolvency service. Under the mortgage arrears resolution targets, the banks are not yet required to achieve any target for reaching agreements with borrowers.
I strongly support this motion, which is about protecting the interests of people who are under pressure from the banks. It is about protecting homes and families, but it is also about ensuring that we have proper regulation and good governance in the banking system. I urge everybody in the House to support this motion.
I would like to support this Private Members' motion on the code of conduct on mortgage arrears and the mortgage crisis. I compliment Deputy Michael McGrath on his motion. Early in 2011, I co-sponsored a Private Members' Bill that urged action in the mortgage crisis, and it is quite a crisis. The figures we are talking about are the latest Central Bank figures, which refer to 95,000 mortgages. They are not the right figures. When we add in those in arrears of less than 90 days, the buy-to-lets and the restructured mortgages that are not in arrears, the figure is closer to 240,000. That equates to 650,000 men, women and children in Ireland living in these properties. I accept the Government's genuine efforts to set targets to restructure those mortgages in arrears. However, the arrears are simply the symptom. The cause is too much household debt and too little household income.
I encourage every Deputy to look at a piece of analysis by McKinsey from 2012 called "Debt and Deleveraging", which shows that all over the world, the only way to grow economically and create jobs is to deleverage or reduce the amount of household debt. That is when the private sector invests, that is when the economy grows and that is when jobs get created. That is why the recent changes to the code of conduct on mortgage arrears are not going to help the situation. In fact, they are likely to make the situation worse, because they will make it easier for the banks to restructure mortgages. However, most of these restructures will not involve any reduction in the total amount of debt. In fact, in many cases they will make the borrowers pay even more money, as they are put on interest-only arrangements or given a longer period over which to pay.
Split mortgages have been proposed as a solution, but they are not a solution. As the household hopefully becomes wealthier, the mortgage simply gets topped up again and again by the bank.
Debt for equity mortgages offer a solution that both protects the balance sheets of the banks and helps to reduce household debts, thereby allowing for private sector investment. I will be submitting a paper to the Government presently on this subject. It is a way of deleveraging debt while maintaining the integrity of banks' balance sheets and, critically, allows individuals and families to engage in good economic behaviour and helps us to grow our way out of the crisis.
Aontaím leis an seanfhocal breá atá againn as Gaeilge, "Níl aon tinteán mar do thinteán féin". Ceapaim go bhfuil sé riachtanach gach rud a dhéanamh i dtreo is go mbeidh seans ag daoine fanacht ina dtithe féin. Every avenue to avoid repossessions has to be explored. Evictions played a part in the bleakest moments of our history and we do not want to return to them. However, this is what we see in the case of those who are in mortgage distress. I recognise that the Government inherited the problem and that personal responsibility plays a role in that people took out these mortgages, but Governments and banks also have responsibility for the hype and all but forcing people into taking out these big mortgages without deposits. People bought houses at inflated prices and then encountered a variety of circumstances, including, in particular, job losses, which brought them to their current position. People in negative equity are generally in a particular age group.
The crisis was identified several years ago and if the measures already introduced had been effective, we would not be seeing an increase in the number of mortgages in arrears. The number of mortgages on family homes in arrears for longer than 12 months has increased significantly and there is a real danger that the new code of conduct will make matters worse. I refer to the moratorium and the prospect of limitless contacts by banks. I am told the contact is supposed to be proportionate, but to what will it be proportionate? The lack of an independent appeal mechanism is also significant.
Another distressing aspect of the problem, as related by New Beginning, is that the more responsible mortgage defaulters will be hit hardest. FLAC has pointed out that the new code gives lenders more control than ever and could result in repossessions. I recently had a meeting with Bank of Ireland and acknowledge that what its representatives told me about the position in Dublin Central is positive. One owner-occupied house has been repossessed in the past year and the holders of 92% of the bank's restructured mortgages are meeting their commitments. Public interest directors have an ironic title. Whose interests are they protecting?
I welcome the opportunity to speak on the motion. I agree with the part of it that expresses concern at the huge number of mortgages in arrears. Some 140,000 families throughout the country are suffering the stress of being in mortgage arrears. Not only is it difficult for them to make their mortgage repayments, but they also have less to spend on groceries and to meet their children's needs. This affects their bank balances, family relationships and mental health. When we debate this issue, we need to be mindful of the effect it is having on every facet of individuals' lives. As Deputy Maureen O'Sullivan noted, evictions have an historical resonance for Irish society. All of us are aware of the impact of the Great Famine in terms of people being been thrown onto the road and having to emigrate. We are concerned to do all we can to keep people in their houses.
It galls me to see Fianna Fáil tabling this motion. It is trying to take the high moral ground on a problem it helped to create. For too long when it was in power it allowed lax financial regulation of the banks. This led to cheap money flooding the market. It took no action when banks started to lend 100% mortgages or offered multiple credit cards to individuals, regardless of how much they were earning or repaying. When people tried to shout "Stop, this is going too far," the then leader of Fianna Fáil offered useful advice. What did he tell people to do with themselves? I will not repeat his words in this House because Deputy Michael McGrath remembers exactly what he said. It galls me that Deputy Michael McGrath is now telling us that we are doing something wrong when his party got 140,000 families into this mess.
We are trying to solve the problem.
I know people in my constituency who are hurting because of this. I have met individuals who were given huge mortgages that they had no chance of repaying and are now trying desperately to keep a roof over their families' heads.
The Government's answer is to give more power to the banks.
The Deputy's head is in the sand.
The Government is trying to clear up Fianna Fáil's mess. We know how difficult it is for people and have introduced a number of schemes to make things better. The Insolvency Service of Ireland was established on 1 March. The mortgage to rent scheme is now available across the country. We have also put in place a mortgage advisory function. There has been some, albeit limited, good news. The Central Bank's figures for March indicate that almost 80,000 mortgages have been restructured and most people are now meeting the terms of their restructured arrangements, which is welcome. In the coming weeks we will receive further reports from the banks outlining what they are doing to restructure mortgages and keep families in their houses. If the figures are lower than we wish, we will tell them they are unacceptable. We set the banks a target and put money into them. We expect them to deliver and will be keeping a close eye on them to make sure we keep as many people as possible in their homes.
I previously worked in a bank, but I have never provided a mortgage for anybody. Unfortunately, I took out a mortgage in 2006 and still feel the legacy. Like my colleague, I find it a bit rich that the people in the Galway tent-----
I was never in it.
-----who allowed the developers to ride into the sunset with all their money are now telling us they have a solution for the 140,000 families in mortgage arrears. That is harsh but fair. The only thing missing from Fianna Fáil's motion is the apology its leader gave for what he did to the country. I am sorry, but it will not go away because every day I meet people who are dealing with the legacy in the form of their mortgages. They may be paying interest only or some of the capital on 30 or 40 year mortgages, some of which were for 100% or more. I respect Deputy Michael McGrath, but it is difficult to stomach the motion.
On the idea that Irish banks are somehow against Irish people, if the Central Bank is licensed by the Government, it must do the right thing by the people. It is of paramount importance politically that we are astute about what is happening. The consequence of leaving people in houses when they do not make repayments is that the individuals concerned never get on with their lives, the bank never finds a resolution, the country never gets its money back and we are in limbo forever and a day. The banks want to be sold, but in order for them to be privatised and the money to come back to the State, they need to be in good order and their mortgage books need to be subject to due diligence by prospective purchasers who will examine whether the mortgages are sustainable. That is independence and objectivity on the part of a potential buyer. If the banks have not done their work properly, we will not be able to sell them.
David McWilliams advised us to go the mart if we wanted to see people bargain and trade. Unfortunately, we are leaving people to the skill of the pits. Their awareness and capacity to speak are being withdrawn a little because comparability is necessary in my book. People need to go to the bank to say they will declare bankruptcy if they are not given a split mortgage or another sustainable solution. They would rent a home and be back in the market in three years and could hope to save towards purchasing a house in a depressed market because the housing market will be in an even worse position than it is if there is no movement to that effect.
There is no doubt about this. People can offer banks the choice of either having a bad debt on their books or a potential contingent liability through a split mortgage.
Some people are coming here with real solutions. Deputy Stephen S. Donnelly suggested a debt for equity solution, but I do not know of many financial institutions that would buy into such a bank. I have a proposal for people of my generation. We should look at how we go about making our mortgages sustainable. Currently, mortgages offer nothing other than a form of air space in which many of us do not want to live as they cannot support sustainable families. Often all that we have are apartments, but we want to trade up and move into homes. Can we include these apartments and first properties in a private mortgage which could be isolated in a pension investment? In other words, could we convert them to a personal pension fund that would be tax efficient for us? I have suggested this to the Minister of Finance on many occasions. Rather than investing, this would be a way to deal with the issue.
On the code of conduct, I believe the banks are delighted with the idea of having a watchdog and a central bank. The majority of bankers I know are good, honourable people, but they hang their heads in shame because they are associated with particular institutions and certain political parties that are largely responsible for what we are talking about tonight. I believe there are two big issues for the Government. The first concerns the need to deal with the mortgage arrears crisis, while the second concerns the need to deal with the unemployment crisis. We are doing everything we can to deal with these issues, but it is not helpful to suggest that a code of conduct that we will supervise and watch is not the way to move forward on this issue. It is also unhelpful to tell people that we have not done right by the banks. They do not feel confidence in the integrity of the institutions as a result of their being undermined.
The Central Bank is in a much better state than it has been heretofore. I believe that when individuals contact MABS, banks, solicitors and personal insolvency trustees, they will find that there is a way for them to support sustainable debt and for the economy to become buoyant again, rather than for bankers and developers to make exorbitant profits and run off into the sunset. There is a way for people to have a decent standard of living and to have aspirations to trade up and sustain and develop families. The MABS welcomes applications. Banks also welcome approaches from people. The Central Bank knows what it is doing and has targets.
Not being partisan on this issue, it is for this House to observe the Central Bank and ensure it does the right thing. We can, through freedom of information requests and parliamentary questions, ensure it does the right thing. I urge Deputies in non-government parties to do this also. People of my generation who are bearing the brunt of this problem are either emigrating or dealing with mountains of debt. I urge them to go to the banks and seek a solution. The Personal Insolvency Bill is coming down the tracks and will have the greatest impact on our society at this time because people will be able to get on with their lives and the banks will no longer be the burden they are on the Government and the people.
I hope Deputy Michael McGrath does not take what I have to say personally as my tirade is being launched at his party and organisation.
I thought the Deputy would make a positive speech and talk about solutions.
I love it when Fianna Fáil brings forward motions because that gives all of us on this side of the House the opportunity to remind the people of the dung heap left behind by Fianna Fáil.
The Deputy is wasting time. He should deal with the substance of the motion.
Fianna Fáil left people in the position in which they find themselves today. I look at it and see it as like a big elephant with a small brain. It can only look ahead and forgets the big pile of dung it has left behind. Invariably, in recent years Fine Gael and the Labour Party have had to clean up after Fianna Fáil and try to sort out the mess. This happened in 1977 when Fianna Fáil introduced an expansionist programme which caused havoc in the 1980s. I am one person who had to leave the country in the 1980s because there were no jobs to be found. In 2011 Fianna Fáil again left the country in a mess. We must examine the position in which the country was left and try to see what positive moves we can make. One of the good things the former Minister, the late Brian Lenihan, did towards the end of his career was to make Professor Patrick Honohan Governor of the Central Bank. He then selected Mr. Matthew Elderfield as Financial Regulator and he has done great work for the economy. I wish him all the best in his future career.
I want to focus on the problem that occurred, our current position, why we are in a mess and people are still suffering as much as they are. In 2010 when Fianna Fáil was in power, nearly 50,000 people were in mortgage difficulties. What did Fianna Fáil do about this? The reason many of the people concerned were in mortgage difficulties was the policies that had been put in place by Fianna Fáil. We must ensure we do not carry on any of these policies during the party years, between 2000 and 2008. During these years, at the height of the Celtic tiger, people could obtain any type of mortgage they wished. At the height of the Celtic tiger there were almost 380 mortgage packages available. Currently, there are 146. The types of package available at the time included those for first-time buyers and 100% mortgages which were offered, in particular, by companies that had moved into Ireland such as Bank of Scotland Ireland. Also available were top-up mortgages, switcher mortgages and a variety of other mortgages available for residential investment properties. We have done our best to put an end to these and the number of packages now available has been reduced to 146. What did Fianna Fáil do to reduce the number of mortgage packages available at the height of the Celtic tiger and try to prevent what happened taking place? We have put a regime in place where nothing like that can happen again.
We should also look at what else happened. Fianna Fáil allowed in excess of 1,200 small mortgage brokers to be established during the period in question. Most of these ended up dealing with sub-prime lenders. One of the problems we now have is that we must deal with sub-prime companies that lent money to people for whom they did not engage in due diligence when offering loans. When we look at one of the schemes we have put in place, the mortgage to rent scheme, we see that it offers people involved in the resolution process a chance to stay in their homes. When we look at the numbers involved, we see that 60 out of 100 home owners applying for this scheme are home owners with sub-prime loans. AIB has only four such loans per 100. Some banks were providing for due diligence, but the problem was that there were too many companies in operation. Sub-prime lending was a practice Fianna Fáil permitted and we have had to sort out that problem and ensure it will not happen in the future.
One other issue I wish to raise relates to housing lists. There are in excess of 5,000 people on the housing waiting list in Kildare. A great scheme was introduced in 2000 by the former Minister, Mr. Noel Dempsey, under Part V of the planning Act which dealt with social and affordable housing. This was a great idea at the time and what happened was that a portion of the huge amount of property being built by private developers was taken over by local authorities. However, many of the people who bought affordable housing at the time are now in trouble because they are paying more for their affordable house than other people in the neighbourhood. This scheme must now be scrapped. Part V no longer offers a workable solution. This year fewer than 10,000 houses will be built. How many of these will come back to the people? We must make dramatic changes. We must get local authorities back in the business of building houses, as we said to the Minister of Finance previously. We must scrap Part V and put in place a new scheme.
It is welcome that we are allowed to speak and remind the people of who caused the mortgage crisis.
We are putting in place a variety of schemes to help people to stay in their own homes, unlike what Fianna Fáil did and failed to do when it noticed this was going to happen in 2010. As I said earlier, it is like the big elephant, walking forward, forgetting about the dung heap it left behind.
I welcome the opportunity to speak on the motion. Previous speakers referred to distressed mortgages and I want to deal with this issue and the people involved. Some 47% of those who have mortgages are seriously distressed people. I get my information on this from MABS, which is an excellent organisation dealing with this issue at the coalface, and with which I had discussions earlier today. There is considerable personal distress among mortgage holders. While 47% is a suggestion, there are no clear statistics around the level of distress. We are dealing with the whole area of how to handle the mortgages, the banks and so on but we are not dealing with, examining and quantifying the level of personal distress.
Let us make one point clear. The majority of people want to pay back their debts. While there is of course a very small cohort who want to misuse the situation, let us put to bed the idea that people do not want to pay their debts, because they certainly do.
Most of the people involved, although not all, are male clients of the banks who are dealing with debts that are out of control. MABS has told me that, increasingly, it has to hold people's hands to try to help them through the crisis they are experiencing. People who are in long-term distress are tired and weary, lack confidence, have lost self-esteem and have lost hope. Let us realise where people are. MABS told me that the first thing it often tells people is to visit their GP immediately. The support systems that are available are all over the place and, to some extent, MABS is being sidelined. Is there a clear strategy by the Government in regard to the role of MABS, which has fantastic expertise? My organisation, the Irish Association of Suicidology, examined this issue at one of our conferences and we know the people in MABS have a lot of expertise to contribute.
There is a lot of confusion around what is going to happen, including what will happen to these people in the context of the Personal Insolvency Act and whether there is long-term support for them. What about the whole area of repossessions? There is no clarity in the talk about repossessions. Targets are given to people but how significant are those targets?
The banks have training for their financial advisers at different levels but the implementation of those skills is the problem. If the bank manager does not support how they handle their clients and the bottom line is the only thing that matters, the stress created becomes an issue. The banks' financial advisers have to be very careful how they handle people on the telephone. Males, in particular, often answer "Yes" and "No" in response to questions they are asked on the telephone. The banks are advised to opt for more face-to-face discussions with people in distress and clients with difficult mortgages, rather than looking for financial information over the telephone, because it is sometimes difficult to communicate in that way. If the banks feel they are not getting the full story, they can get suspicious about their clients, which creates further distress. Face-to-face discussion with body language is vital but it is missing on the telephone. It is important that face-to-face communication is used.
There must be an understanding of how to deal with distress. The banks must ensure the training and skills of financial advisers are improved rather than just focusing on the bank's bottom line. Everything is concentrated on the bottom line rather than the situation of the person. We know about the pressures of the recession but this is an aspect that is not discussed or understood except by those experiencing it.
Thank you. It is important for us all to remember the human side of what is behind these mortgages.
I thank the Chair for the opportunity to speak. To follow on from the previous speaker, whatever about the actions of the past, including those of Fianna Fáil or any other political party, the actions of the present are far more worrying. The previous speaker is correct that there is serious distress for mortgage holders. All of us have a duty of care and a responsibility to put politics aside and not to take advantage of the distress, fear, emotion, the highly charged atmosphere and the hatred towards the banks, and not to ride on that bandwagon. We have to be more responsible in what we do and say. Whatever about the legacy of its past, and let the judgments of history be formed later, I appeal to Fianna Fáil to be more responsible. I charge Fianna Fáil with being irresponsible in many of the statements it has issued that take advantage of that fear factor. It might help it in the polls but, by God, going on the basis of what the previous speaker has said, it will certainly harm an awful lot of people.
I want to take the opportunity to reassure people, in the first instance, that no bank can repossess their home. That is a myth. No bank, no financial institution or no Government has the power to take a person's home. Only the courts can take a person's home. While the banks can take a home with the consent of the homeowner, they cannot do it without the authority of the courts. It is a matter of regret to see the scaremongering tactics being employed by Fianna Fáil on this worrying issue. It is important that people realise that only the courts can repossess a home, not a bank.
Fianna Fáil is constantly making the argument that the Government is not doing enough for mortgage holders. It fails to recognise the measures that the Government has put in place or acknowledge the steps that have been taken to assist people affected by this crisis, such as the Personal Insolvency Act, the Insolvency Service of Ireland, the Land and Conveyancing Law Reform Bill, the Central Bank targets required by lenders to create sustainable solutions, the revised code of conduct, the mortgage to rent scheme and the mortgage advisory service, which had 110,000 hits on its website in the past 12 months.
Some commentators, ably supported by opportunistic politicians, are trying to lead people down the fear route into believing the revised code of conduct somehow allows lenders to start legal proceedings after three months - in fact, this was a glaring headline in one of the newspapers. This is not the case. The earliest a bank can begin legal proceeding is three months after negotiations fail between the bank and the borrower, and a minimum of eight months has to have passed after the account went into arrears. These are the facts people need to be aware of. There are no provisions in the revised code that will enable banks to fast-track repossessions.
Fianna Fáil has further tried to imply that the Land and Conveyancing Law Reform Bill will lead to mass repossessions across the land. This, of course, is not the case. In fact, the purpose of this Bill is to correct a legal uncertainty that arose as a result of a High Court ruling on legislation brought in by Fianna Fáil in 2009.
It certainly was not the party's intention when publishing that Bill that this particular legal glitch would prevent repossessions in the future.
There are a certain number of properties that should be repossessed, including some of the 30,000 buy-to-let properties where the mortgage holder has been in arrears for more than 90 days. These are the unsustainable loans that the banks will move to repossess, not family homes. Claims to the contrary are nothing but opportunistic populism by Fianna Fáil. That party has been calling for some time for an independent mortgage resolution office to deal with the arrears problem. This is yet another example of opportunistic populism and a totally unrealistic, unviable and potentially toxic notion. Members opposite are not living in the real world and are instead spouting fanciful and fantastical economic theories. It simply is not realistic to propose that an independent body should decide whether a bank gets paid all, some or none of its outstanding loans to distressed borrowers. The notion that a financial institution would be expected to lend money to potential borrowers in a situation where that institution is denied any say in how the money is recovered should the loan become impaired is absolutely farcical and would undermine the entire financial system.
The Minister for Justice and Equality, Deputy Alan Shatter, and his colleagues in government have gone to great effort to put in place the new personal insolvency regime which will ensure, for the most part, that homeowners can remain in their homes. A range of measures were put in place to absolve people from household debts of up to €20,000 and investment choices of up to €3 million. It is a fact that the agreement of 65% of creditors will be required to approve a debt resolution plan. I ask Members opposite, however, to put themselves in the shoes of a bank manager who is owed, say, €100,000 by a client. Would they consider it fair and reasonable that a third party, independent of the process, should decide how much, if any, they would be repaid? If this proposal were to be implemented, would any bank ever again be interested in lending to anyone in this country?
That process already applies to every other form of debt.
The purpose of the new Insolvency Service of Ireland is to encourage lenders to come to a reasonable accommodation with borrowers which allows them to keep their family home. I am confident that this will happen, provided that borrowers make a full and honest disclosure of their affairs.
Where agreement is not reached, it will ultimately be up to the courts to adjudicate on a fair solution. This route would, however, involve great costs for the banks and, as such, they will have no interest in pursuing it where they are confident the borrower is co-operating. In a case where the debt resolution proposal is that an individual's mortgage be reduced from €300,000 to €200,000, why would the bank possibly choose to incur legal fees of perhaps €30,000, the time delay of a legal battle and the possible sale of the property for €100,000 less, which would result in the balance being written off? The appeals board Fianna Fáil is seeking to put in place already exists in the form of the courts. Moreover, it is not envisaged that it will be necessary to refer many cases to the courts as common sense will and must prevail. This proposal, if implemented, has the potential to stall the mortgage market completely and have a massive negative effect on the economy as the Government continues to rectify the situation it inherited from its predecessors.
I propose to share time with Deputies Robert Troy, Sean Fleming and Michael Moynihan.
That is agreed.
I thank Deputy Michael McGrath for bringing forward this motion which deals with a very serious issue for people throughout the country. It is an issue that is brought to our attention every day. As the Deputy highlighted, the latest mortgage arrears figures published by the Central Bank show a further increase in the number of arrears cases, with 142,118 family home loans in arrears as of 31 March this year. This begs the question as to what action the Government has taken to address the problem.
Mr. David Hall of the Irish Mortgage Holders' Organisation is of the view that the figures point to a complete lack of action on the Government's part. He has offered as evidence the fact that only 144 split mortgages have been given out in the whole country. He has further observed that the number of people in arrears, particularly long-term arrears, is on the rise, which should worry us all. He has also pointed out that the banks' preferred method, the term extension, offers little solace to distressed homeowners. A term extension is fine if one is very young, he has remarked, but for most people, it is simply a case of delaying payments. The problem is that not all of the supposed solutions are available to everybody. Instead, it is a case of the banks choosing the solutions that suit them.
There seems to be some surprise that the figures were quite so bad, with the number in arrears for more than one year at well over 50,000. The Irish Times of 22 June pointed out that the number of home loans in arrears for 90 days or more had risen to 12.3% in the first quarter of the year. The Free Legal Advice Centres, FLAC, have expressed the view that the Government has failed distressed borrowers and is more concerned with protecting the State's banks. It has further stated there are 95,000 households in very serious difficulties, which equates to hundreds of thousands of people. In other words, this is not merely a debt problem but also a major housing issue.
The Central Bank must have a more significant role in the matter of property repossessions. We are calling for the code of conduct on mortgage arrears to be revised and, in particular, for the 12-month moratorium on repossession proceedings for mortgage holders who have entered the mortgage arrears resolution process to be reinstated. We also call on the Central Bank to require that banks record all calls with borrowers and allow Central Bank staff to access these recordings randomly to check for any incident of harassment or following a specific complaint.
The current level of mortgages in arrears for over 90 days amounts to a sum of €1.8 billion owing to financial institutions. The former head of lending with Danske Bank, Mr. Fran Dalton, has highlighted some of the problems with one of the commonly discussed options for people struggling with debt, namely, the split mortgage. In the case of a mortgage of €400,000, for example, of which €180,000 is parked, the borrower might well be able to service the remainder of €220,000. If, however, the parked portion of €180,000 continues to accrue interest at, say, 4%, after 25 years it will have grown to €400,000. This will put the person back at square one, except that he or she is now older and has very few options.
The implications for people's health arising from the stress of unsustainable debt are very serious. I read an article recently about a woman who had been in business for ten years when she was diagnosed by her GP as being out of her mind with stress and anxiety. As we know, the self-employed have always had a bad time dealing with banks. This particular individual had a personal loan and a car loan and also a bill from Revenue for some €26,000. She received calls from the bank every day in which her weekly expenses were worked through line by line. The story had a good ending in that she restarted her business and is now on a decent salary, but her final comments were interesting. She said all she wanted from the bank was time, which would have allowed her to avoid defaulting. The problem, she said, was that she did not owe enough and the bank was, therefore, absolutely merciless in its treatment of her.
The Governor of the Central Bank, Mr. Patrick Honohan, said at the weekend that he expected there would be repossessions by Irish banks of buy-to-let properties where the mortgage was in arrears, but he hoped there would be very few repossessions of owner-occupied family homes. In an interview on RTE Radio 1 Mr. Honohan said temporary solutions such as only repaying the interest part of the loan would not do the trick for a large number of people in arrears. It was clear, he said, that there would have to be more fundamental and sustainable approaches. The Central Bank has given banks a timetable to meet in tackling arrears, with the first target being to provide solutions for 20% of such customers by the end of June. Last week, however, Ulster Bank stated it was prepared to take legal action against borrowers not servicing their mortgages.
Fianna Fáil's position is that keeping people in their family home, in so far as it is practical to do so, makes for good social policy and also makes sound financial sense.
I welcome the opportunity to contribute to this extremely important debate. I compliment my colleague, Deputy Michael McGrath, on bringing forward the motion. It is greatly to his credit that all Members, on both sides of the House, have been given a chance to debate this critical issue for the people. It is unfair to say my party is playing on people's fears. In fact, in recent months I have been inundated with requests for help from people struggling with mortgage arrears. They are asking me to intervene with the bank, fill in forms and so on, but what they really want is a reasonable solution.
The sensible solutions we have brought forward were not conceived in recent months. More than two years ago we introduced legislation to allow for the establishment of an independent debt settlement agency and introduce measures to safeguard the family home. That Bill which was introduced in Private Members' time was not opposed by the Government.
At that time, the Government felt it was good legislation and was, in some way, dealing with the issue. Unfortunately, in the intervening two years, instead of getting better, the problem got worse. It is not Fianna Fáil saying it is getting worse; any right-minded or fair-minded independent analysis tells us it is getting worse. The figures speak for themselves. The Central Bank director of credit institutions and insurance supervision, Ms Fiona Muldoon, speaking to the Irish Banking Federation conference in 2012, criticised the lack of long-term sustainable solutions to the arrears problems. She said it was a drag on the economy, new lending and future profitability of the banks. The distressed credit review carried out by the Central Bank found in February of that year that there was an absence of an appropriate cultural skill set in banks to deal with the mortgage crisis and that work-out teams were under-resourced and poorly equipped to engage with customers. Short-term forbearance has been the main response, leading to high default rates and few long-term solutions.
We brought forward sensible solutions, in contrast to what the Government has done. While in opposition, Government parties said they would swoop into office and put manners on the banks. In the past number of years we have seen the number of families in arrears escalate to 144,000. As a result of the arrears, they are having sleepless nights and suffering psychological problems, as alluded to by a previous speaker. If we ask what guidance the Government has given the banks to deal with these families, recent initiatives by the Government, far from putting manners on the banks, ensure the balance of power has moved away from distressed mortgage holders and firmly into the hands of the banks. In the past few weeks, the Government has approved the revised code of conduct on mortgage arrears. The new code of conduct removes essential protections from the homeowner. It removes the limit of three successful unsolicited communications per month. For the first time, the banks' personnel can call directly to the home of a person and there are no safeguards to ensure this level of conduct will not be abused. The moratorium on legal proceedings has gone from 12 to eight months or three months after the mortgage arrears process is complete. Some 15,000 houses fall within that category, meaning 53,000 families could face eviction and mortgage repossession. There is no entitlement to a minimum level of income. What a family must survive on month to month will be determined at the total discretion of the bank. All Members of the House can give examples of experiences of so many families in the past number of years, before the new code of conduct and before the Government gave the banks a pathway to move into an aggressive mode of dealing with the issue.
Previous Government figures have tried to apportion blame for where we are today. In Davos, the Taoiseach said we all partied and that we all must take some element of responsibility. It is very easy to score political points off one another and grandstand. That is very little help to thousands of people who feel neglected and let down and that there is no sense of hope or light at the end of the tunnel. The onus is on all of us in the House to come up with sensible solutions and a sense of hope that things will get better and that people can retain ownership and live in their family homes. Not only is it one of the biggest barriers to growth and recovery in Ireland, it is doing untold psychological damage to the men and women weighed down by the burden of debt. There are no statistics for Ireland but a 2011 survey of 7,000 people in the UK found those in debt were twice as likely as those not in debt to contemplate suicide.
We can move away from the need to address this from an economic perspective. We should look at the damage from a psychological perspective to men and women who are citizens of the State. The onus is on us to bring forward a sensible solution. The charter and the decisions should not remain with the bank. Fianna Fáil produced a number of solutions to ensure there was an independent arbitrator so the banks could not ride roughshod over the citizens of the State. Have we learned nothing over the past number of years about how banks can mislead and mistreat people? There should be an independent arbitrator to determine the terms and conditions of sustainable solutions. Some people are blatantly not paying their mortgages, and they should be dealt with, but 95% of the 144,000 people want to pay what they can.
I met a woman recently whose husband walked away from her four years ago. He left her on her own with two young children. Her only means of income is the one-parent family allowance and child benefit. She has a variable rate mortgage of €700 per month. The ECB has maintained rates at an unprecedented low level but she is paying a variable rate of over 4%. She finds it hard to put food on the table. When she sought help from the local community welfare officers, she was advised they are unable to help her because her estranged husband's name remains on a mortgage. An arm of the State is unable to help someone who is making every effort to repay a mortgage.
There are only 144 cases of split mortgages. The mortgage to rent scheme was championed by the housing section of the Department of the Environment, Community and Local Government. It was going to apply to families who were never in a position to repay mortgages and who are weighed down by the burden of debt. The mortgage to rent scheme was introduced over 12 months ago and the figures to the end of March show 37 cases complete. I do not know how any Government Deputy can come into the House and say the Government is taking the crisis seriously. The figures speak for themselves and unfortunately it is not giving the crisis the attention it deserves. I thank the Acting Chairman for his forbearance.
I welcome the opportunity to speak in this debate. I join colleagues in thanking Deputy Michael McGrath, the Fianna Fáil spokesperson on finance, for tabling the motion. When all is said and done, this is the most important issue facing Irish families, especially those with young children and people who purchased houses over the past decade. They are in a severe situation and they are becoming more and more distressed, not just because of the financial distress but also because of social and family distress caused by difficult mortgages.
Deputy Michael McGrath has highlighted in his motion the latest mortgage arrears statistics published by the Central Bank. There were 142,118 family home mortgages in arrears at the end of March last. I am sure the figure has increased by 3,000 to 4,000 since then at a rate of 1,000 per month. I am not even including buy-to-let mortgages but refer only to family homes. Various initiatives of the Government and Central Bank have shifted power in favour of the banks and against the mortgage holders who are their customers. The recent publication by the Central Bank of the revised code of conduct on mortgage arrears is causing further problems and distress. The banks hold the veto on any proposed arrangements involving mortgages under the new insolvency service. Under the mortgage arrears resolution targets, banks are not yet required to achieve any targets for reaching agreement with borrowers. The targets relate only to the making of offers. An unsustainable offer can be made, allowing the bank to send a figure to the Central Bank to demonstrate that it is meeting the targets. Such targets are fictional as they do not deal with cases which are being concluded or arrangements being entered into. They may simply relate to an offer.
Fianna Fáil calls for the code of conduct on mortgage arrears to be revised as it must include a clear definition of what constitutes an unsustainable mortgage and require a process involving representatives of both the borrower and the lender. Currently, a bank may unilaterally decide what constitutes an unsustainable mortgage and will base such assessment on its own subjective criteria. The code should also include an entitlement to a guaranteed minimum level of income for a borrower and his or her family, taking into account the number of children living in a house. That is not adequately catered for at the moment. There are differing views on the guidelines and a level of inconsistency exists in the approaches of various financial institutions. The code must also include an obligation on a bank seeking an order of repossession to obtain written confirmation from the Central Bank that the bank itself has exhausted every other course of action available to keep a family in their home. I stress that this is perhaps the most important issue that needs to be dealt with. We cannot allow banks to decide unilaterally that they have made every reasonable effort. Somebody must be able to certify on behalf of the public and in the public interest that the banks have done so. There should be an obligation on any bank seeking to classify a mortgage holder as unco-operative and to move to immediate repossession to obtain, again, written confirmation from the Central Bank that such person can be properly so classified. There must be independent verification of the process.
Fianna Fáil also calls in its motion for regulation of debt collection agencies, in particular those engaged by banks as representatives who want to contact customers on their behalf. It is an issue which has been overlooked. There are a number of unsavoury people out there, some of whom have criminal convictions and records, calling to people's houses to collect debts. It is a practice which must be regulated. Fianna Fáil does not consider that adequate safeguards have been put in place to counteract the possibility of abuse and increased contact by the banks with distressed borrowers. The new code fails to enshrine an entitlement to the minimum level of income required for a household. FLAC, which advocates for a number of people in the firing line, has said that the revised code confirms that the lender is the sole arbitrator of whether a mortgage is unsustainable or not. The bank will decide whether a borrower is co-operative or not and what the sole solution will be. There is no proper appeals mechanism and there is no guarantee of advice to borrowers going through negotiations with the lender.
We published draft legislation some time ago in relation to the Personal Insolvency Act. We believe a number of options should be considered and included in the mortgage resolution order, including split mortgages, which has not adequately been addressed, and interest-only payments. When we talk about interest it might not be the full interest but two thirds or 60% depending on the particular case. We have looked at extending the period of mortgages and also we want to talk about the debt for equity swap. In the draft legislation we highlighted that in the event of a voluntary surrender, a financial institution should rent the family home back to the borrower at the current mortgage rent. That rental or lease agreement should provide that in the event that the person sees their financial situation improve through obtaining good employment, they should have the first option to re-purchase the house. That should not even have to be done at the voluntary surrender stage. That can be done informally between the financial institution and the borrower. It is important that people are given the option to remain in their houses. Why do we have such arrears? It is because of the level of unemployment. From whatever angle one considers the matter, it is clear that people are in arrears because they have lost their jobs. Many who still have jobs are on reduced incomes. Until the Government takes action to deal with unemployment, we will continue to have mortgage arrears.
I am concerned that the banks will pick the easy targets. They will target people with substantial equity rather than to go after those with negative equity as they do not want to face up to having to sell properties at a loss. They will go after people who have paid a substantial portion of their mortgages. In particular, they will go after people in areas where house prices are beginning to rise. They will not go after people in areas where property prices are not rising. The Government is giving the banks carte blanche. This is strengthening bankers' hands and reinforcing the old culture. Banks will not learn from this process. If they do not, they will come back and cause havoc in another decade or 15 years when the current draft of managers has moved on. This is happening now because the banks want it to happen. They did not want these extra powers three years ago when house prices were still dropping. They did not want it two years ago when prices were dropping. They see that, in some cases, the property market has stabilised and that property prices are beginning to rise. Now is the time they want to come in for the kill and repossess properties in a rising market. They are taking this power now because it suits them. Mortgage arrears are causing families stress, creating mental health difficulties and leading to family break-up. We must restore the balance between customers and the banks from which they obtained their mortgages.
I welcome the opportunity to speak on the debate and compliment Deputy Michael McGrath on moving a timely motion. This is one of the more serious issues with which every public representative is dealing on a daily basis.
Deputy Fleming said the banks must learn from this. The parties opposite will remember that a bubble was created in the agricultural sector when we joined what was then known as the Common Market. Enormous prices were paid for agricultural land in the mid to late 1970s. It took a decade or more for farmers to trade out of it. A debt relief system was introduced in the 1980s to sort out the difficulties of the farming community. Many farms were sold and repossessed. Deputy Fleming's point is that in the case of that crisis, things were softened and farmers were allowed to trade out of difficulty. The banks did not learn the lessons of that credit bubble. We must ensure, whatever decisions are made at Government level or in the Oireachtas, that what has happened in the past will not be allowed to happen again.
If we take that as an example, the fundamental issue with regard to house repossession is the targeting of those who simply cannot pay their debts but want to pay them. I have constituents coming in to express their concerns in this regard. For instance, I went with a couple to a meeting with their bank in the fall of last year. The couple, who have a number of children in secondary school and possibly going on to college, outlined their expenditure, which was of the most modest kind. There was no extravagance whatsoever. When the meeting on the debt was over, the bank's representative gave an assurance that there would be no house repossession. The debt problem has not resolved itself and we had occasion to meet the bank again in the past four to six weeks. When we were finishing that meeting, the bank official was not able to give us the assurance on the house repossession that was given to the family in the fall of last year. That is where that family is at. That is where thousands of families are at right across the country.
We must look at the banks. The capital and the returns and all the rest of it will have to be marked up, but politics is about managing to ensure there is not only an economic policy but a social policy. This country, by and large, has developed a significant social policy over the years, to the betterment of many families, and we want to continue on that path. That episode in which I engaged with the banks shows clearly that there is a different attitude within the banking sector. There is a significantly different attitude coming down the line and the staff who are at the coalface meeting borrowers are being told a different story.
In the small-to-medium business sector there is a considerable overhang of debt as well. Until we deal with this in a manageable way - we can repossess houses all we want, and we saw an episode of this last week when auctions were disrupted and stopped - why would a bank take on a repossessed house when it will not be sold on the market?
A person who came to me on Monday last, and on Friday of last week, told me he had been engaging with the bank and had no arrears with it in any shape or form. He said he had told the bank that he had encountered a considerable difficulty due to a loss of employment. After leaving the bank on Wednesday, he got a letter from one of the banks, the opening paragraph of which stated that the best option for him was to sell the house. That letter was issued after discussions, but there was not one cent of arrears on that mortgage or on any other private borrowings of that couple. Those are the instances with which we are dealing, and there are far worse cases. I will not even refer to the pressures moneylenders are applying right across the country. This is one of the most fundamental issues challenging the ordinary decent people of this country at this time, and how we handle it will be a measure of how our society will develop.
While the minds of many people may be elsewhere in terms of legislation being debated in this House, I agree with the Opposition on one point, namely, that this is the fundamental issue of primary importance to this country right now. This affects real people in real situations, not the theological debates - dancing on pinheads and the like - in which some are engaged. This is a real issue that affects 100,000 families in the country. It is a bread-and-butter issue that affects real people. While other ideological debates take place in this House late into the evening and beyond, fascinating and all as they are-----
The Minister of State should stick to the motion.
My apologies. The reason I have expressed that in such forceful terms is that the Members opposite will be aware from discussions with real people in their constituencies that this is the primary issue that must be tackled this year.
The Government is tackling this issue. We have introduced a suite of measures that will help those who are in this position in a way that is consistent with the policy we have set out. The Members opposite will be aware of the Keane report, which was published in the autumn of 2011. It is the case that the great majority of its recommendations have already been acted upon. At the highest level of Government, we have a Cabinet subcommittee chaired by the Taoiseach, with the Secretary General of the Department of Finance responsible for delivering the implementation of the mortgage arrears strategy. Not since the foundation of the State has there been a radical look at personal insolvency legislation. The Personal Insolvency Act took a significant effort on the part of everyone in this House and the other House to get through, and that is now in place. We now have a specialist mortgage information and advice service, which we did not have previously, with the important staff who will give borrowers the advice and support they need in working out the best solution with the covered institutions that are involved.
Deputy Troy and others spoke of their disappointment about the mortgage-to-rent scheme. The fact is there have been 37 cases thus far, but there are a total of 735 cases under the existing scheme, and I hope we can make progress on those. On split mortgages, Deputy Michael McGrath raised this by way of a Topical Issue matter, at which time I told him that in the first quarter of this year the evidence from many of the banks was that this option was now being worked through. That is something to be welcomed.
Crucially, we have set with the Central Bank clear targets for each of the institutions - I refer to ACC, AIB, Bank of Ireland, KBC Ireland Bank, Permanent TSB and Ulster Bank - with regard to proposed solutions that must be put in place. As the Members opposite will be aware, the banks should have proposed sustainable mortgage solutions for 20% of distressed borrowers by the end of June this year, 30% by September and 50% by the end of the year. As I understand it, we will know in the next two to three weeks whether we have hit our target in the first tranche of proposed solutions by the end of June. That is a position the Central Bank will make known in due course, as it has the responsibility of ensuring that these targets have been set with the banks.
The Government is determined that those targets be adhered to. This is an issue upon which the entire economy is based - not merely people's livelihoods, but their future, their homes, the future of their children. This is an issue upon which the economy depends, because until we resolve this issue we will not see any improvement in the domestic economy due to the fact that a group of people are effectively locked out of it.
I assure the House, irrespective of the points that have been made by the Opposition, that the Government is focused on what it needs to do. This is the primary target and responsibility on which the Government has to deliver this year. We have got to deliver on our targets this year. The banks know that, the Department of Finance knows that, and the Central Bank knows that. As far as we are concerned, we will be judged at the end of the year on the targets that have been set and whether they have been achieved.
Whether additional measures will be countenanced is, obviously, an issue that we will keep under review. That would be the sensible course of action. However, we need to get to a point at which these cases are moved on. The suite of options is there. It is now a matter for the banks to deliver on that and we are determined that the banks will deliver on their side of the equation.
I support the motion brought forward by my party colleague, Deputy Michael McGrath. It is consistent with the approach he and our party have taken since the last election in terms of ensuring we are a credible Opposition and that we are bringing forward credible proposals on the most important issues.
It is more than two years since Deputy Michael McGrath and other party colleagues introduced a Bill to establish an independent mortgage resolution office to ensure independent oversight so that those mortgages in arrears and people in trouble with repayments would have some type of independent arbitration available to them. Oversight of the banking sector failed in the boom years. Unfortunately, when mortgages are in trouble, it seems that independent oversight and governance of the banking sector will be weak in this instance also. We saw the problems created as a result of banks being left to their own devices when mortgages were being handed out. Little regard was paid to a person's ability to repay a mortgage and many people are in difficulties now.
I know of a single person who was granted a mortgage worth €500,000 in the good times which, fortunately, the person did not take up. That same person, who had not taken on any debt and who is employed, was refused a credit card during the boom. That was the type of lending policy the banks adopted when left to their own devices. Those will be the types of principles and action we can expect from the banks now when we leave it in their hands - when we give them the power of veto in striking deals with mortgagors who are in distress.
Unfortunately, it is not the good and betterment of society which drives the banks; it is the need for profit and the need to ensure that the interests of the banks win out and are served. We cannot expect that the banks will act in a way that is in the best interests of the people who need our protection and who need independent oversight in order to ensure they are not left behind or failed.
There are now 140,000 mortgagors in distress, which means that half a million people are living in houses in which the household is unable to keep up with the mortgage repayments. Deputy John Browne outlined one instance of how the Government's failure to implement independent oversight may play out. One mortgagor with €27,000 remaining on his mortgage and with equity in his house, who has been paying an interest-only mortgage, was asked by the bank to sell the house in order to repay that money. It has been very disappointing to listen to the contributions from many of the backbenchers on the other side of the House. Instead of dealing with the issue at hand, they have been finger-wagging and blaming as a means of covering up for their failure to deal with the issues and to present real solutions. There was an unfortunate failure in the past with regard to oversight of the banking sector. People can claim they were not aware of this failure at the time. Nobody can claim they were not aware of the situation and the troubles facing the country. There is no excuse for not ensuring that proper oversight is implemented and that mortgages in default are dealt with appropriately and in the best interests of citizens and not of the banks.
I welcome the opportunity to contribute to the debate. I congratulate our spokesperson on finance, who has brought forward credible proposals and has done so consistently over recent years. As the Minister of State rightly said, the mortgage issue, which is bedevilling so many families and which requires a resolution, is central in Irish life today. Just last week, the Minister effectively handed the banks a charter for home repossession. He previously enacted personal insolvency legislation which gives the banks the final say in that process. There will be no independent arbitrator, as advocated by Fianna Fáil and others, to solve the banking situation to ensure that families and banks are treated fairly. The Minister of State will then understand why I find it difficult to accept the political charge levelled here last week by the Taoiseach that there existed an axis of collusion between Fianna Fáil and the banks when it could easily be asserted that this Government is colluding with the banks to force hard-pressed homeowners into a state of penury. It seems to me and to many others that the Minister is using the situation in which people find themselves to drag out the process and hope the Government will get to the next election on the back of the mistakes of previous Administrations. The Irish people will not forgive him for that cynical approach to doing business.
Last week the Taoiseach informed the House that there was a need to establish the truth and to remember the thousands of victims - the property owners - of the axis of collusion that existed between Fianna Fáil and the bankers. The Taoiseach has consistently been at variance as to whom to attribute the blame. He had previously proclaimed that those so-called victims went mad. I remind the Minister of State of what the Taoiseach said to the World Economic Forum at Davos in 2012:
What happened in our country was that people simply went mad with borrowing ... The extent of personal credit, personal wealth created on credit, was done between people, banks - a system that spawned greed to a point that this went out of control completely with a spectacular crash.
Nowhere in his speech did he mention that the political establishment colluded with the rogue bankers to deliberately steer us towards a crash. Then again, how could he? He had already voted for it in this House. Indeed, at the time, he had also said that he supported the bank guarantee, insisting subsequently that far more wide-ranging action should have been taken by the then Administration. It is clear that the Taoiseach picks and chooses for political gain on whom and where he apportions blame for the country's economic woes, not forgetting that we slipped back into recession two weeks ago. The so-called get-tough approach with the banks on mortgage arrears seems to be another appeasement moving towards giving the banks what they want. One could assert that this Government is part of an axis of collusion with the banks to allow the banks to do what they want at the expense of homeowners. That has escaped the minds of many of the backbenchers who have used it in order to level political gain in recent weeks.
In his Ard-Fheis speech in 2008, the Taoiseach said that the nation had been damaged by the bankers' reckless behaviour and that they must be held to account. He said that under Fine Gael they will be held to account. I do not see any sign of that, nor any effort by the Government to hold the banks to account for past or current omissions. He said at the time that Fine Gael was the only party who would hold people to account for failure, irresponsibility and criminality. I do not see any of that whatsoever, and neither do the people who are finding themselves in extremely distressed situations as a result of the continued procrastination of the banking institutions. The people have lost faith and hope.
These words should have been uttered in this House last week when the Taoiseach was talking about the axis of collusion. He has consistently failed to address the issues relating to the decision to award the second mobile phone licence to Esat, when nine members of the current Administration were in Cabinet at the time. None of them has cried foul with regard to the collusion that existed, in my view, between the then Government and the company that won that licence.
The Minister must accept that he has failed abysmally in supporting homeowners who find themselves in a distressed state. He has sought to level political charges against my party and others. He has sought to apportion blame. He has done so in advance of the establishment of an inquiry. In my view, he has created an inability for such an inquiry to act impartially. All the while, the Taoiseach and the Government failed to address the findings of the Moriarty tribunal. They are prepared to splash around and suggest that there is an axis of collusion between my party and others. Unless the Government, including the Taoiseach, addresses what happened in regard to the Moriarty tribunal and all its aspects, the Minister of State will not be in a position to come in here and level any charges.
I thank all the Members who made a contribution to this debate last night and tonight. By and large, it has been very constructive. The purpose of my tabling the motion was to highlight the plight of borrowers. Some 142,000 families are living in houses in respect of which the mortgage is in arrears. Furthermore, some 39,000 buy-to-let mortgages are in arrears.
I am not suggesting for a moment that the Government is not taking action. I acknowledge that it wants to resolve this issue and I am not questioning its bona fides. However, I am questioning whether it is taking the right actions. My party and I believe that, in a number of respects, it is not taking the right actions. Our view is that the Government has given far too much power to the banks. Its approach has been deferential. By any independent measure, the protections afforded to borrowers in distress have been diluted. That is beyond question. If one examines the key elements in the revised code of conduct on mortgage arrears, for example, one will note the removal of the cap on the number of contacts a bank can make in a calendar month. If after three successful contacts where the bank actually gets to speak to the borrower and the borrower cannot make the mortgage repayment in the month in question, will a fourth, fifth or sixth telephone call make any difference? It will not, but it will add greatly to the level of stress and anxiety of the affected family.
For the first time, those with the benefit of a tracker mortgage find that it is no longer sacrosanct. The bank can, as part of an overall deal if no other option is on the table, remove the tracker rate from the borrower. That is a very significant and serious development. Even more significant is the reduction in the moratorium. The length of time the bank must wait before it can initiate legal proceedings has been reduced from 12 months to a maximum of eight.
In a very bizarre contribution last night, Deputy Ciarán Lynch stated that he was very worried about Fianna Fáil's proposal to reinstate the 12-month moratorium. When I re-examined the programme for Government, I noted that Labour and Fine Gael signed up to increasing the moratorium from 12 months to two years. If the Deputy is very worried about reinstating the period of 12 months, what must they think of the two-year moratorium that the Government signed up to?
The Minister of State put a lot of stock in the issue of targets. Targets are important but the banks will no doubt, in the next week or so, say they have achieved the target of offering sustainable solutions to 20% of those in arrears. Some have stated this already, and the Central Bank will verify it. What does that actually mean? What are the targets? The banks are required to offer sustainable solutions. Page 25 of the mortgage arrears resolution targets document contains an attempt at defining "sustainable solution". It is left up to the banks to decide what it is. It can be putting somebody into an insolvency arrangement or it can be repossessing the property, by way of either voluntary surrender or court order. When the Central Bank states the banks have achieved their target of 20%, it tells us nothing. It is the composition of the offerings that is important, in addition to the agreements reached.
We must ask why there were only 144 split mortgage arrangements. Why have there been only approximately 240 permanent interest rate reductions? Why has there been no serious effort whatsoever to enter into debt-for-equity arrangements, for example? This is a question that the Government and the Central Bank will have to face up to.
I acknowledge the work of the many advocacy groups in this area, including the Irish Mortgage Holders Organisation. Mr. David Hall was in the Visitors Gallery for the past couple of nights. Other groups include New Beginning, the Phoenix Project and FLAC. We should listen to what they are saying because they are actually dealing with borrowers on a day-to-day basis.
I acknowledge that repossessions are inevitable in certain cases. I am not burying my head in the sand at all. There are some who would actually be better off surrendering their properties and starting afresh financially. However, there is no doubt that the structures in place and the powers given to the banks are such that there will be unnecessary repossessions. That is the key issue. We will see a significant spike in the number of family home repossessions.
There is no doubt in my mind that the vast majority of mortgages can be rescued if there is sufficient will. While it is fine to say the banks are not doing as desired, it must be acknowledged that they will act in their own commercial interest, and we cannot expect them to do otherwise. However, borrowers in distress expect that their elected Government will watch out for them, advocate for them and protect them. They expect the Central Bank to do likewise. Unfortunately, that is not what we have seen thus far.
Many Government Deputies stated that repossession is a last resort. Can the Minister of State put his hand on his heart and say the banks are currently treating repossession of the family home as a last resort? Only today I received an e-mail from a lady in County Tipperary who owes her bank €38,000 on a mortgage. She has just completed 12 months on interest-only payments. She sought a renewal of her arrangement but the bank stated that the mortgage was unsustainable and that it wanted her house. The reason it wants the house is that, when it sells it, it will clear the €38,000 loan fully and its balance sheet will be fully intact. Therefore, we need to examine what is happening. Evidence on the ground is very different from the rhetoric we are hearing from the Government and the Central Bank. The proof will be in the pudding when we see exactly what the banks have offered.
Amendment put:
The Dáil divided: Tá, 103; Níl, 54.
Tá
- Bannon, James.
- Barry, Tom.
- Breen, Pat.
- Bruton, Richard.
- Burton, Joan.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Coonan, Noel.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Coveney, Simon.
- Creed, Michael.
- Creighton, Lucinda.
- Daly, Jim.
- Deasy, John.
- Deenihan, Jimmy.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Ferris, Anne.
- Fitzgerald, Frances.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Gilmore, Eamon.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Tom.
- Heydon, Martin.
- Hogan, Phil.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lynch, Kathleen.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Nicky.
- McGinley, Dinny.
- McHugh, Joe.
- McLoughlin, Tony.
- McNamara, Michael.
- Maloney, Eamonn.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Nash, Gerald.
- Neville, Dan.
- Nolan, Derek.
- Noonan, Michael.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Penrose, Willie.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Shatter, Alan.
- Sherlock, Sean.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Twomey, Liam.
- Varadkar, Leo.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Adams, Gerry.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Browne, John.
- Calleary, Dara.
- Collins, Joan.
- Collins, Niall.
- Colreavy, Michael.
- Cowen, Barry.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Flanagan, Luke 'Ming'.
- Fleming, Sean.
- Fleming, Tom.
- Halligan, John.
- Healy, Seamus.
- Keaveney, Colm.
- Kelleher, Billy.
- Kirk, Seamus.
- Kitt, Michael P.
- Lowry, Michael.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Martin, Micheál.
- Moynihan, Michael.
- Murphy, Catherine.
- Naughten, Denis.
- 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.
- Shortall, Róisín.
- Smith, Brendan.
- Stanley, Brian.
- Tóibín, Peadar.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Michael Moynihan and Seán Ó Fearghaíl.
Amendment declared carried.
Motion, as amended, put and declared carried.