Mortgage Arrears: Motion [Private Members]

The new speaking time clocks are being used today and they are intended to assist Deputies in keeping to designated time limits. The time indicated on the screens during the debate will be the slot time as provided for in Standing Orders and the order of the day. If sharing time, all Deputies must conclude within the time indicated. I ask Deputies to comply with time limits for debate as running over the time is very unfair to other Deputies waiting to speak. Deputy Michael McGrath is sharing time with Deputies Ó Cuív, McConalogue, Browne and Moynihan.

I move:

That Dáil Éireann:

notes:

— the continuing rise in mortgage arrears with 142,892 family home mortgage accounts in arrears at the end of June 2013;

— the fact that 57,163 family home mortgage accounts are in arrears for greater than one year;

— the evidence presented by the banks during the recent hearings of the Joint Committee on Finance, Public Expenditure and Reform that they relied heavily on issuing threatening legal letters to borrowers in order to meet their obligations under the Mortgage Arrears Resolution Targets Programme for the quarter ending 30 June 2013;

— that the Central Bank has yet to provide an independent verification of the performance of the banks under the targets programme; and

— the banks continue to rely on short-term forbearance measures as evidenced by the fact that only 309 split mortgages and 254 permanent interest rate reductions have been implemented up to 30 June 2013;

recognises that:

— the mortgage arrears crisis represents the greatest social challenge facing the State;

— economic recovery will not take place until substantial progress is made in tackling the mortgage arrears crisis;

— every political party and Independent member of Dáil Éireann has an obligation to identify solutions to the crisis; and

— a threat of repossession should not be regarded as a ‘sustainable solution’ under the Mortgage Arrears Resolution Targets Programme;

and calls for:

— the Central Bank to report on the performance of the banks to date on reaching the resolution targets laid down;

— publication of the targets to be imposed on the banks in respect of the conclusion of arrangements with customers in arrears;

— a clear definition of a ‘sustainable solution’ under the Mortgage Arrears Resolution Targets Programme;

— legislation, if necessary, to establish the right of a borrower who meets the definition of a sustainable mortgage to a long-term sustainable solution, including, for example, a split mortgage of at least ten years' duration or a debt for future equity swap;

— consistent rules to be applied by the banks in the treatment, in respect of interest, of the parked element of a split mortgage;

— the Central Bank to carry out an independent investigation, including an assessment of a sample of individual cases, into claims by the banks that a significant portion of those in arrears are "strategic defaulters";

— the establishment of an independent mortgage arrears resolution Office to oversee the implementation of sustainable mortgage solutions;

— action by the State-supported banks to ensure that rent in respect of buy-to-let properties is not diverted from payment of the mortgage on the property; and

— a review of the costs associated with accessing the Insolvency Service of Ireland to ensure that they are fair and reasonable and that the service can be accessed by all those who would benefit from it."

I will try to keep one eye on the clock. Ministers and Deputies may be wondering why Fianna Fáil is raising the issue of mortgage arrears again, given that it was only a couple of months ago that we dedicated a Private Members' motion to the issue of how the mortgage arrears crisis is being dealt with. We are raising the issue primarily because of the startling evidence given by the bank representatives before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform two weeks ago. We had three days of hearings with representatives of AIB, Bank of Ireland, Ulster Bank and Permanent TSB. By any measure, the evidence given was absolutely astounding.

The purpose of the motion is essentially to stimulate further debate and, more importantly, action on the single greatest social and economic challenge the country is facing at this time. As I mentioned, the evidence given by the banks two weeks ago took me by surprise, and it took every Government Deputy present by surprise as well. It probably even took the Government by surprise. To be fair to the Government and the Central Bank - I will be critical of both in a moment - when the targets were issued last March, the last thing both the Government and Central Bank expected was that up to 15,000 letters would be issued by banks to those in mortgage arrears. These were either to commence legal action or threatening that legal action would begin. Unfortunately, that has been the result of banks attempting to reach the targets set for them in the quarter ending in June.

The overall number of letters issued is up to 15,000 in the second quarter. In AIB's case, 74% of solutions offered involved the threat of legal action to repossess the home or its voluntary sale by the home owner. With Bank of Ireland, 49% of sustainable solutions reported to the Central Bank involved the commencement of legal proceedings to repossess the home, whereas with Ulster Bank 80% of so-called solutions for owner-occupiers in arrears was the commencement of legal action to repossess. With Permanent TSB, 36% of solutions amounted to voluntary sale by the home owner or the commencement of legal proceedings. We received that evidence from the banks just two weeks ago at the joint committee hearing, and it startled all the Deputies and Senators present. They certainly did not expect that response to the mortgage arrears targets set by the Government and the Central Bank in March.

Much of the issue goes back to the commencement of the process of setting targets in March. At the time I indicated it was flawed because the definition of a sustainable solution was too vague, and ultimately it was up to the banks to decide what was a sustainable solution to a person's mortgage arrears problem. Examining the definition given in the mortgage arrears resolution targets programme, the indication was the banks must satisfy themselves that the solution is sustainable, and there is the possibility of a property being voluntarily sold, or failing this, repossession of the property by way of a voluntary agreement by the bank or by way of a court order. In effect, the banks were perfectly within their rights to state that the majority of the solutions offered to borrowers were represented by the threat of legal action or the commencement of action to repossess the family home. That flaw in the process was evident from the beginning.

When the Government and Central Bank put faith in these targets and reaching sustainable solutions, neither envisaged that the repossession of the home would be deemed to be a sustainable solution. Anything that involves the loss of a family home, either by way of voluntary surrender or forced repossession by way of legal proceedings, is not a sustainable solution to mortgage arrears. It is a termination of the mortgage rather than a solution to mortgage arrears. We should be honest and clear about that. The most depressing element of the hearings two weeks ago is the feeling that banks still do not really get it or grasp what is required of them in the need to engage meaningfully with borrowers who genuinely want to work to keep the family home. I believe that is the case in the vast majority of cases.

There are a number of important points to be made about the motion. We still have no independent verification from the Central Bank of banks' performance against targets set for the second quarter to the end of June. That is unacceptable, and I know the Governor of the Central Bank, Professor Honohan, will come before the committee next week and we will have the opportunity to question him then. Since last March, the Central Bank and the Government knew that the first set of targets related to the period to the end of June, so why did audits of bank performance not commence in July? We are now in mid September but have no handle whatever on an independent verification of the bank's performance, and my understanding is that the process of auditing the bank performance has not even commenced. Why did it not happen in July, when the targets had supposedly been met by the end of June? It is an important point.

A second issue we call for in the motion is for targets to be set for concluded agreements. I welcome that the Central Bank yesterday moved to issue the first set of targets for the conclusion of agreements. This means banks would no longer be merely required to make offers and would instead be required to conclude agreements with borrowers. The Central Bank has deemed that 15% must be concluded by the end of December, with the percentage increasing to 25% by the end of March. That is a step in the right direction, although those targets should have been set long before now.

I assume the Government counter-motion was approved by the Cabinet today but it is out of date already because it makes no reference to the fact that the Central Bank issued targets yesterday. The amendment refers to the targets being set "shortly", and such an omission is lazy and indicative of the lack of priority that the issue has been given. Nevertheless, I welcome that the targets have been provided for.

From early on we have argued that there should be a legal right for borrowers in arrears to a sustainable solution to the problem if they meet certain qualifying criteria. Considering the forbearance arrangements still being rolled out by the banks, there is a marked reluctance to offer the more long-term sustainable solutions. We have advocated for some time the need for an independent mortgage resolutions office, and it could sit within the new Insolvency Service of Ireland, adjudicating and having the final say in respect of mortgage arrears, subject to overarching issued guidelines.

One of the solutions that banks are beginning to roll out is the split mortgage, which has much potential. I participated in a Topical Issue debate with the Minister some time ago which took these in and the banks are still adopting different approaches in this regard.

I raised directly with the Central Bank the fact that Bank of Ireland is charging full interest on the warehoused portion of the split mortgage while the other banks are not charging interest. There should be uniformity in the way in which a solution such as a split mortgage is rolled out, and I call on the Central Bank again to ensure such uniformity. This is part of the reason the number of split mortgage solutions is not as high as we would like. The official figures show there were only 309 at the end of June. As Deputy Boyd Barrett said at the committee hearings, the uncertainty as to how the warehoused lump sum will come into play ten or 15 years down the road is a concern for borrowers. I have met people who were offered split mortgages but refused them because they had no certainty as to how the warehoused portion would be dealt with down the road.

We will also have to face up to the issue of strategic default. This was a common theme to which a number of the banks returned time and again during their presentations to the committee. AIB had previously said approximately 20% of those in arrears are strategic defaulters. We need to get a handle on this issue and we need independent verification of the extent of the problem. I am not burying my head in the sand and saying there are no strategic defaulters. I am sure people have made the choice for whatever reason not to prioritise the repayment of their mortgages, but there is an onus on the Central Bank to get to the bottom of the issue. It is easily done. Staff should examine a sample of the arrears cases and arrive at a conclusion as to whether people are strategically defaulting, because it is unfair to cast a slur on up to 20% of those in arrears and claim they are deliberately not paying their mortgages despite having the means to do so. That assertion should be evidence-based. No evidence whatsoever has been produced so far to substantiate it. There is, therefore, an onus on the Central Bank to examine that claim, agree on a definition of strategic default and examine how widespread the phenomenon is.

I acknowledged during the hearings that some of the banks, particularly AIB, should be more proactive in the appointment of rent receivers. If landlords who receive rental income from their tenants are not passing it on to the bank by way of mortgage repayments, the banks should use their powers to intervene and seize the rental income to put it towards the mortgage. That is accepted by most Members. There has been a dramatic difference, again, in the application of rent receivers by the banks. Bank of Ireland has appointed more than 1,100, while AIB has appointed a few dozen. There is no consistency in the way the issue is being treated. As I said at the committee hearings, if AIB is convinced that one in five of those in mortgage arrears is deliberately not paying his or her mortgage - the bank's representatives said that a high percentage of these involve buy-to-let properties - why has it not moved in to appoint rent receivers to ensure incomes are put against these mortgages? They have not done so and they acknowledged that they have not done enough work on the issue.

I welcome the fact that the new insolvency service is up and running and accepting applications. However, The Sunday Times has examined the 37 licensed personal insolvency practitioners, PIPs, and potentially there is an issue regarding access to the new service. Those who need it most may not be able to access it because some PIPs are demanding money up front. The Insolvency Service of Ireland, ISI, is envisaging that they will be paid where an agreement is reached to restructure a person's debts, but where there is no agreement, how will they be paid? The result is that in all likelihood PIPs will cherry-pick the customers they will take on and identify those who have some ability to pay their fees up front. There is a need for the State to ensure that those who most need access to the ISI get it and that the fees issue is not a barrier.

The Minister of State was critical of the banks as recently as this morning and, hopefully, he will repeat some of those criticisms in his contribution, because it is important that they are held to account in a fair way. Nobody is asking the banks to throw away the capital they have been given by taxpayers. They have a duty to guard it closely, but they also have a duty to engage meaningfully with borrowers. Where individual cases merit it, people should be offered permanent interest rate reductions, as Ulster Bank has done through its economic concession, debt for equity swaps should be implemented and split mortgages that do not punish people should be provided. We want to see solutions that are genuinely sustainable.

Although the crisis is bad, it could get much worse if the ECB decides to increase its main interest rate, which is currently 0.5%. We are potentially sitting on a tracker time bomb in the context of mortgage arrears. Up to half of those with mortgages have tracker mortgages, with an interest rate of between 1.25% and 1.75%. Heaven forbid the ECB increases its interest rate by 0.5% at a time, because thousands of people will be in difficulty and will join those currently in difficulty. That makes it all the more important that we establish the architecture to resolve the mortgage arrears situation. Any independent assessment will find that we do not have that right yet. There have been steps in the right direction but there is much more to do. The motion is not intended to be adversarial; it is intended to ventilate the frustration felt by all Members at the committee hearings two weeks ago and to bring about improvements in the way the Central Bank and the Government are forcing the banks to deal with this issue.

I support everything Deputy McGrath said. We face a huge unresolved problem with mortgages. It is a circular problem. The Government parties told the Central Bank that they wanted it solved, but they were in not position to say that if crystallising the losses on the mortgage book meant the banks needed further capital, they would put in the money. The Central Bank told the banks that it wanted the problem solved but it would not give them money and it did not want to impair their capital base while the banks are involved in various non-deals. The number of resolutions to date demonstrates that there is a paralysis in the system because they have no way of crystallising the losses if that is the way the Government wants to solve the problem. Like Liza and the bucket, there will be a hole in the bucket and they will have to return to the Government parties to try to get money, saying what they said at the beginning, which is that they have no money.

We are tinkering away at the edges of the problem but we are not up-front about the scale of the problem, which is fundamentally simple. If we do not do something to help mortgage holders, the banks will potentially face another black hole on their balance sheets because of their reckless lending. In the meantime, ordinary people up and down the country, particularly families with young children, are living a daily hell because they cannot finance day-to-day living and all their commitments, both secured and unsecured. There are approximately 750,000 mortgages in the State. Let us assume 300,000 were taken out between 2000 and 2008. A total of 143,000 are in visible trouble - that is, they are in arrears. However, of the remaining 157,000, a significant number of people are not paying credit card bills and unsecured loans, and they may be a little smarter in terms of prioritisation in realising that the mortgage is the final bill one stops paying. They are also in financial trouble but they are not in visible mortgage trouble because they have prioritised their mortgages, although they are struggling to pay.

I do not agree with the theory that everyone who borrowed during that period did so in a reckless way. The majority bought houses at the going rate because there was no choice and they bought them for genuine reasons because they wanted somewhere to rear their families. I speak exclusively of owner-occupied houses. It is simplistic to say everyone borrowed too much money according to their income or income prospects. For two public servants at an executive officer, EO, grade in 2006, it would have been reasonably prudent to borrow on the basis that in the next five to seven years – it is seven years since 2006 – one of the couple would receive a promotion and that their wages would have increased by a modest 5% to match inflation. Therefore, it would have been quite prudent at the time to borrow on that premise. What happened was that wages reduced by 17%, promotions virtually came to a halt and new taxes such as the property tax were introduced. The vast majority of those who are in trouble could not have foreseen the set of circumstances that would prevail in 2013. On the broad scale I have zero sympathy for the moral hazard argument. It does not hold water.

We must ask ourselves what we are offering 143,000 people. As Deputy Michael McGrath said, split mortgages are fantastic. However, when one splits the mortgage in two or takes off one third of it, one must be advised whether it will come back to bite one in the future in terms of whether interest will be accumulated. Split mortgages are no good, unless one parks the interest on the split part and only the capital remains as a liability.

We have between 20 and 30 houses in the mortgage-to-let category. That seems to be a very expensive solution for the State because it must give the money to a voluntary housing body to buy a house from the bank in order to let it back to the person concerned. If one were to do this on a large scale, one would have to come up with a considerable amount of money, which is not tenable.

Many years ago when we introduced the shared ownership scheme, I thought it was a great idea, as people on low incomes could buy half a house and rent the other half, while over time they could borrow the balance. They could buy a house in a housing estate of their choice, rather than seeking social housing. Anyone who ever dealt with the scheme would say it worked out to be a bureaucratic and legal nightmare. There were also incredible delays in obtaining such houses. I do not believe it is a practical solution.

We must examine whether there is another way. The 20,000 to 30,000 people who are in irrevocable difficulty must be dealt with on a once-off basis. The personal insolvency system is required. The Fianna Fáil Party has stated time and again that if the banks have a veto, one is creating a system that cannot work. If one tries to deal with 143,000 people through such a system, one will have the initial proposal made fairly quickly, but it will be months before the person who has the mortgage and the various credit institutions, including banks, come to a conclusion. The negotiations will be endless and it will be like all of the other schemes. The State is awash with bureaucratic delays.

A presentation was made recently to Members by the Phoenix Project. It proposes a different but simple solution that works on the premise that the average person who bought a house between 2000 and 2008 paid 50% more than they would pay if they bought their house now. The proposal is that for the next five years while we reboot the economy, we should increase tax relief at source, TRS, and in one fell swoop - at a cost of €300 million a year which one could take out of the great bounty received because of the deal done on the promissory note - one would deal with the people who are in severe difficulty but repaying their mortgage and allow them to live again. The people who are paying interest only could pay interest and capital. Those who are between 20 and 40 days in arrears could catch up. People who are 90 days in arrears could at least pay the interest and stop the arrears accumulating on it. That would allow us to deal with the problem in a non-bureaucratic way and the underbelly of people with severe problems who require a more complicated resolution could be addressed on a one-to-one basis in the way outlined by Deputy Michael McGrath.

I join my colleagues in supporting Deputy Michael McGrath’s motion to ask that the Government take account of its failure thus far to address the severe mortgage crisis. Deputy Michael McGrath outlined some actions for the Government to take with immediate effect in order to address the growing mortgage crisis.

A total of 142,000 family homes are in mortgage arrears. That is double the figure when the Government took office. That means that approximately 500,000 people are living under a roof where the mortgage is not being paid regularly and is in arrears. Many of the people who are struggling to pay their mortgage are at a stage in their lives where they are trying to raise a family and have the attendant bills and stresses that go with it. In the past week a Behaviour and Attitudes poll of people in the 25 to 49 year age group was published. That is the section of society which is most stretched and finds life most difficult in this country. A total of 33% were either unable or found it exceptionally difficult to pay their mortgage on a monthly basis. A total of 66% found it very difficult to get by day to day. They are also the people who have been impacted on most by the rising costs of raising a family and increased daily living expenses. In addition, they are impacted on by the increased cost of many of the measures the Government has introduced since it took office. In the past week it was revealed that inflation in the education sector was particularly high. In the past 12 months inflation in that sector increased by 5%. That is due to measures taken by the Government such as the €250 increase in the annual registration fee for third level students in September. That is on top of a similar increase last year and the Minister has indicated there will be a further increase next year. The same sector is affected by cuts to many payments such as the back-to-school allowance.

This is the biggest crisis facing many families. The motion tabled by Deputy McGrath asks the Government to take specific action to ensure this will be addressed with the authority that it deserves. The fact that the Central Bank has not carried out any audit of the types of offers that have been provided must be noted. We want results and not just targets pertaining to what will actually be delivered to families in arrears.

The whole country and many politicians were shocked by what occurred. Some members of the Government did not realise in advance of the deliberations of the finance committee last week that, in the vast majority of cases where offers were made, they constituted threatening letters to the households and persons in arrears. That is simply unacceptable and we need to see a change of approach.

We need a clear definition of a sustainable solution. It is not acceptable that it is left to the banks to implement solutions on a case-by-case basis, and that those in arrears cannot have the assurance that there is a guideline and direction given to the banks in terms of what constitutes a fair deal for them. We ask that the Minister take on board the details of the Private Members' Bill put forward by my party last year. It called for an independent mortgage resolution office that would offer backup to and an independent arbitrator for people in arrears when negotiating with their banks. I commend the motion to the House.

I welcome the opportunity to say a few words on the motion tabled by our spokesman, Deputy Michael McGrath. It gives us an opportunity to highlight the problems faced by people with mortgage arrears. The number in mortgage arrears continues to rise. There were 143,000 family mortgage accounts in arrears at the end of June 2013 and some 57,000 family home mortgage accounts have been in arrears for more than one year. Two weeks ago, the Oireachtas Joint Committee on Finance, Public Expenditure and Reform met representatives of the banks and they spoke about the threatening letters that the latter sent out. I am sure all politicians meet in their clinics people who have received threatening letters and who are begging for support and help when negotiating with the banks. Obviously, the threatening letters are adding seriously to the burdens already placed on families with mortgage arrears. The families are experiencing severe hardship and stress, causing depression, family break-up and, in some cases, suicide. A resolution needs to be found to deal with the problem.

Banks are not being very helpful; they issued the letters. Many people making interest-only mortgage repayments are meeting their commitments but are now getting harassed by the banks, which are stating that is just not enough. The banks want the full payment, despite the fact that people are not in a position to make full payments. If families are meeting agreements to make interest-only payments on a monthly basis, they should be allowed to continue in that regard until a reasonable and final solution is found. Interest-only payments are certainly a way forward in that they help the mortgage holder, who may have lost his job or have a lower income than he or she had previously. Obviously, different banks have their own ways of dealing with customers. As I said, these include frightening letters and abusive and demanding phone calls. People do not have the means of meeting the mortgage payments.

It is time that the banks seriously considered finding solutions. Threatening letters are one thing but finding a long-term solution is what people are looking for. Split mortgages are certainly a way forward. We need to consider mortgage repayments that could be spread over two generations. This scheme was introduced in Canada some time ago and was found to be very reasonable.

Many people who come to my clinic are seeking debt relief or a write-down of the loan so they can make the repayments. Those who paid €200,000 or €300,000 for their houses now find themselves no longer in a position to make the repayments agreed when the mortgages were first obtained, perhaps because of job losses or reduced wages. In many cases, there was reckless lending by the banks. Many people should certainly not have got loans in the first instance based on their income. Some never had a hope of making their repayments. Banks have a certain responsibility in this area. They made loans available to people who were never in a position make repayments. This was the position with 100%, 110% and 120% mortgages, which were ridiculous.

The time has come for the banks and the Government to take action and for solutions to be proposed by the various interested bodies in order to help people to remain in their homes. Keeping people in their family homes makes for good social policy and makes sound financial sense. I compliment Deputy Michael McGrath on tabling the motion. It affords Deputies on all sides of the House an opportunity to put forward ideas and suggestions. I hope we can come forward with a reasonable solution for families who are finding it very difficult to make ends meet and make repayments at present.

I commend Deputy Michael McGrath on his timely motion. I have a couple of issues to raise. Let me pick up on Deputy John Browne's point on reckless lending. I dealt with a case recently in which a man in his early 50s received a mortgage of in excess of €200,000 although his only source of income was an invalidity pension. That demonstrates the level of crazy lending by the banks. This is an issue to be considered.

Let us consider the issue of negotiations with the banks at stressful times of the year, particularly when children are going back to school. A family I have been dealing with had in its current account approximately €2,000, which was saved during the year to meet the cost of sending children back to school. The car insurance premium and motor tax had to be paid. When the family sent its documentation to the bank, the bank was looking for the €2,000 it had saved. Would the family be classified as a strategic defaulter? Are the banks talking about people who cannot meet their mortgage repayments in any way but who are trying to make provision for their families as they enter an expensive period of the year? The individuals concerned are making sure they are giving what they can towards their children's education, for example. Over the next few years, when people in trouble with their mortgages encounter very expensive times, such as when children are going to college, they will not have a hope. This must be realised.

Deputy John Browne referred to ensuring that mortgage repayments could be spread out over several generations. In years gone by, a provision was made whereby several generations could repay the moneys owed on transferred land, including Land Commission land. When land was passed from parent to child, repayment conditions were enclosed in the transfer documentation. Something of this nature needs to be done. We have seen evidence that there has been no full audit of what is actually taking place with regard to the mortgage crisis in the major pillar banks.

Something needs to be done in that regard. Evidence suggests that there is no full audit of what is going on in the major pillar banks in terms of the mortgage crisis. There is no audit which shows the true figures. We also do not know the truth about the deals being done and whether the banks are really making a serious dent in what is an enormous problem.

A huge number of families are in arrears and Deputies are meeting them every day of the week. Such families are under frightening and appalling stress trying to deal with this problem. It affects children, parents and grandparents. Deputies will all have heard stories about the repossession of vehicles, of threatened repossessions, threatening letters and so forth. Some people cannot see any way out of their difficulties, which has led to people taking drastic action.

I take issue with the use of the term "strategic default". I would love to challenge the banks on that. As I said earlier, in many cases people are putting aside some money to provide for their children returning to school or other expensive times of the year, like first communion, confirmation, Christmas and so forth.

I must ask the Deputy to conclude now.

Are such people regarded as strategic defaulters?

The seriousness of the situation is such that we need to examine whether there is another way of dealing with it, perhaps along the lines of what was done years ago in the context of the land commission. It is so serious that we really need to do something like that.

I now call on the Minister for Finance, who will move an amendment to the motion.

I move amendment No. a1:

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;

accepts that the mortgage problem is a significant economic and social challenge for the State and that the Government is aware of the significant difficulties some home owners are facing in meeting their mortgage commitments;

notes that this Government published the Report of the Inter-Departmental Mortgage Arrears Working Group in October 2011 and that the key recommendations of that report have been adopted by Government as the most appropriate framework to address this major problem;

accepts that the Government is committed to advancing appropriate measures to assist those mortgage holders who are experiencing real and genuine difficulty with their mortgage repayments;

recognises that Central Bank interaction with mortgage lenders is key to addressing mortgage arrears and in particular to ensure that, where appropriate, lenders put more long-term and sustainable solutions in place for their customers in mortgage difficulty;

notes that the Central Bank has now set performance targets for specified credit institutions requiring them to ‘propose’ sustainable solutions to 20 per cent of their mortgages in arrears of more than 90 days by end June, to 30 per cent by end September and to 50 per cent by end 2013;

notes that the Central Bank is building on this and will shortly indicate an end 2013 target for ‘concluded’ solutions and 2014 targets in respect of both ‘proposed’ and ‘concluded’ solutions;

supports the Central Bank in this work as it now commences an auditing process to assess whether the mortgage modifications proposed and put in place by lenders under this framework, are in fact sustainable solutions;

notes that the Insolvency Service of Ireland is now in a position to accept applications from authorised personal insolvency practitioners and approved intermediaries on behalf of debtors under the Personal Insolvency Act 2012;

notes also that a comprehensive mortgage advisory service and a mortgage-to-rent scheme has been put in place;

accepts that the vast majority of mortgage holders are meeting their repayment commitments and that, in the best overall economic and social interests of the State, such debtor discipline should be supported and that appropriate public assistance should be targeted only at those mortgage holders in genuine difficulty; and calls on the Government to continue and intensify its work across the relevant Departments and agencies to deal with this significant problem.”

I will be sharing time with Deputies Michael McCarthy, Áine Collins and Dara Murphy.

I welcome the opportunity to speak on this important issue and to set out recent developments. This Government inherited a severe mortgage crisis from the previous Fianna Fáil Government. Like the economic, fiscal and jobs crisis that we inherited, this Government has resolved to tackle the issue head on. We have prioritised actions to deliver real and sustainable solutions.

There is no doubt that families across the country are experiencing real and genuine difficulties in meeting their monthly mortgage payments. This Government is fully aware of the impact this is having on these families and their lives. As I have said on many occasions in the past, we cannot have a situation where so many families are living under the stress of mortgage arrears, are excluded from participating in the economy and from living their lives because they cannot pay their mortgage.

The Government is deeply committed to addressing the failures of the last Government in this area. The personal insolvency legislation was outdated and in need reform. There were no measures in place to help families who had excessive debt levels. The banks did not have the operational capacity and expertise to deal with the scale of the problem facing them. At an overall economic level, the previous Government did not do enough to address the drivers of mortgage arrears, namely job creation and the overall high level of indebtedness. This inaction has taken time to unwind.

In the past two and a half years we have taken a number of significant steps to address these problems and I would like to update the house on actions in this area. The measures that have been introduced are innovative and incorporate stronger protections for the family home than in other countries. We want to produce an environment where mortgage holders can pay for and stay in their home, and where those who have genuine difficulty in meeting their financial commitments are provided with an opportunity to resolve their problems and begin again to contribute to society. The framework is now in place for banks to reach solutions with their customers who are in arrears, targets are in place and we expect the banks to deliver.

The Members opposite will be aware of the Keane report. The recommendations of that report are the blueprint for Government action to address this problem. The great majority of its recommendations have been already acted upon and are being implemented. The resolution of this problem is a priority. At the highest level of Government we have a sub-committee, chaired by An Taoiseach and comprising all relevant Ministers in this broad area of public policy. In addition, a high-level steering group, chaired by the Department of Finance, is overseeing the implementation of the various actions across Government. All relevant organisations are members of this group, including the Central Bank.

The main conclusion of the Keane report is very clear, namely, that the Government should focus its attention on providing appropriate supports to people who have genuine difficulty in repaying their mortgage but that mortgage holders who have the capacity to meet their financial commitments should be encouraged, supported and indeed, expected, to meet those obligations. Most mortgage holders can and do meet their financial obligations. More than 80% of mortgage accounts are fully up to date on their repayments and that practice should be maintained to the fullest possible extent. In particular, the Government will not and cannot support any attempt by people to renege on financial commitments where there is a clear ability to meet those commitments. Nor can it agree to any general write down of debt for people with the capacity to meet the commitments they entered into. The costs of this would be too great, and the effect would only be to impose a wider burden on others in society. It would not be a fair nor an effective use of taxpayer resources to provide assistance to those who can afford to pay their mortgages.

The Government's strategy, therefore, is focused on those who are in genuine difficulty in repaying their mortgage. This is built around the four pillars for action as recommended by the Keane Report, namely engagement with the banks to develop appropriate measures for their customers in mortgage arrears; personal insolvency law reform and implementation; mortgage to rent schemes and; a mortgage advisory function. A key lever in this overall approach is the engagement by the Central Bank, in its capacity as statutory regulator, with mortgage lenders. Since the publication of the Keane report, the Central Bank has had ongoing and detailed engagement with the lenders on their mortgage arrears situation and resolution strategies. At an early stage in the process, it became clear that banks did not have the operational capacity and expertise to deal with the scale of the problem facing them. Also, there was a requirement for them to become more focused in the area of pre-arrears to stem the inflows into mortgage arrears in the first place. The initial focus of the Central Bank, therefore, was to ensure that the main banks were in a position to develop and deploy the necessary resources and strategies to address the problem. This admittedly took some time, but the decline in the level of early mortgage arrears suggests that the development and enhancement of operational capacity by the banks is bearing some fruit.

The key indicator of success, however, will be the development and application, where appropriate, of long-term solutions. Short-term forbearance can be a worthwhile response to people experiencing mortgage difficulty. However, the Keane report made clear that this will not be a sufficient response to mortgage difficulty and that it will be necessary to develop more restructuring responses to more long-term mortgage difficulty. Lenders must develop practical solutions tailored to individual circumstances for people in the most difficulty with their mortgage. Banks initially were slow to act on this and while they may have had to deal with operational deficiencies, it was not clear that they had a sufficient commitment to deal with problems in a durable way. It was less difficult for them just to keep rolling over short-term solutions. This, however, does not solve a more fundamental problem where the issue of the long-term affordability of the initial mortgage has arisen.

The Central Bank, therefore, decided that the time had come to require the main mortgage lenders to systematically work through their mortgage arrears book and to provide sustainable long-term solutions or otherwise resolve cases of mortgage difficulty. The time had come for the banks to deal with this issue in the best interests of both their borrowers and the banking system more generally. Last March the Central Bank set specific performance targets for the main banks - ACC Bank, AIB, Bank of Ireland, KBC Ireland, Permanent TSB and Ulster Bank - requiring them to propose sustainable solutions to 20% of their mortgage customers who are in arrears of over 90 days by the end of June, to 30% by the end of September and to 50% by the end of this year.

The Central Bank also made it clear last March that these were only the first round of targets and that further targets would be set for this and next year. I therefore welcome the announcement yesterday that the Central Bank has now agreed further mortgage arrears resolution targets with the troika. The main banks will now be required to propose solutions to 70% of their mortgage arrears customers by the end of the first quarter in 2014. Even more importantly, given that the primary objective is to put agreed and durable solutions in place, the first targets were also set for concluded agreements. These require the banks in question to have concluded arrangements with 15% of their arrears customers by the end of December 2013 and 25% by the end of March next year. This initiative should see the establishment of more obvious long-term restructured arrangements. The end of June Central Bank statistics show some progress on this. For example, 309 split mortgages on primary dwellings were in place at the end of June, compared to 144 at the end of March. A further 2,300 restructures were classified as "Other", which the Central Bank has indicated mainly comprises accounts that have been offered a long-term solution pending completion of a short trial.

As members of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform will be aware, the banks have indicated that since June they have proposed further long-term restructures to deal with mortgage difficulties. For example, based on information provided to my Department, around 1,800 split mortgages were in place at the end of July. I commend all the members of the committee on the very useful engagement they recently had with the chief executive officers of the four main banks. They helped in putting into the public domain very useful information on the individual banks’ progress in dealing with their mortgage arrears cases. However, members of the committee and Deputies will accept from the exchanges with the banks' senior management that it will also be necessary to have a thorough audit of the returns the banks are making under this process of mortgage arrears resolution targets, MART. While the banks have indicated they have all met the end of June target for proposed solutions, the evidence presented would suggest this needs to be very closely assessed, particularly to ensure the mortgage modifications proposed and provided are in fact sustainable.

The Central Bank has provided guidance on the issue of a sustainable solution, but that can only be assessed and verified in any particular case based on the individual circumstances of the case. While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, there are some fundamental principles that must be respected. The affordability assessment of the borrower needs to be based on both their current and prospective future servicing capacity for all borrowings. Lenders need to apply a realistic valuation of borrowers' assets, particularly their property. Lenders need to use an appropriate interest rate when discounting future income flows, which should take account of the lender's cost of funds.

As we are essentially in a green-field situation, this first supervisory audit is likely to take some time and certain issues may need to be teased out. As the ongoing MART process evolves over the remainder of this year and into next year, however, it can be expected that this work will become more efficient and that greater clarity on the issues involved will be apparent to all sides. As this is a prudential, supervisory audit, the Central Bank will be fully independent in the performance of its work on this matter. However, this is a very important part of the Government's overall mortgage arrears strategy. The setting of performance targets and auditing of whether they are being achieved is a mechanism to ensure there will be a focus on the delivery of real and sustainable outcomes for genuinely distressed borrowers. Durable solutions must be offered for these families to offer them hope of emerging from their difficulties and moving on with their lives.

Moving on to the difficult topic of repossessions, the strong view of the Government is that, in respect of co-operating borrowers under the mortgage arrears resolution process, MARP, repossession of a person's home should only be considered as a last resort. The policy measures adopted by the Government make that quite clear. The code of conduct on mortgage arrears places an onus on the banks in respect of a co-operating borrower to explore all the options for alternative repayment arrangements to address mortgage difficulties before any legal action is considered. Any proposal to a co­operating borrower by a bank under the MART process will have to comply with the code of conduct. In addition, the Land and Conveyancing Act also provides an important power to the court to adjourn a repossession hearing to allow a personal insolvency arrangement to be proposed and considered as an alternative option to the continuation of repossession proceedings.

Regrettably, it will have to be accepted that not all mortgages, due to the individual circumstances, will or can within reason be made sustainable and that there will be circumstances in which a person will have to lose ownership of his or her home. In such cases it may be in the best overall long-term interests of all parties. Where appropriate in such circumstances, the mortgage-to-rent option is now available to allow a family, their lender and the housing authority to agree a solution that will allow the family to remain in their home as a social housing response to an unsustainable mortgage.

In circumstances in which a borrower does not engage with a lender to address a mortgage difficulty and, subject to full compliance with the code of conduct on mortgage arrears, the lender cannot secure a constructive engagement from the borrower, then there may be no other option for the lender but to commence legal proceedings. If the lender fails to take appropriate action in such cases, it may incur even more losses and this could have further costs for wider society. In that regard, I have a concern about reports that suggests that banks may be presented with obstacles to selling properties legally in their possession, either by way of a voluntary arrangement or upon the conclusion of the legal process and a judgment from the courts.

Where efforts to find a mortgage solution have failed or are not viable, it is unfortunately the case that in some instances the ultimate resolution will involve a sale of the property. In such circumstances, it is difficult to see that unsustainable cases can be better served by prolonging and extending the circumstances and indebted situation of the borrower, impeding properties' ultimate sale and restricting the normalisation of the property market by having such homes in a transient state. In my view, the wider interest is better served by enabling these limited cases of sale following repossession to proceed. The overall approach of Government is to assist people in genuine difficulty to remain in their homes where possible. This can and will be achieved in the majority of cases of mortgage difficulty.

Personal insolvency reform is another key area of action. The Keane report clearly stated without an effective insolvency system the mortgage arrears problem will not be solved. The radical Personal Insolvency Act was put in place at the end of 2012. It provides for three new statutory debt resolution frameworks to allow insolvent debtors and their creditors to resolve positions of unsustainable debt. This was considered to be the fairest and most efficient way of resolving debt difficulty having regard to the legitimate interests of both debtors and creditors. However, if all the relevant parties cannot come to a fair resolution to resolve the matter by way of a debt settlement arrangement or a personal insolvency arrangement, bankruptcy will remain as the ultimate appeal and resolution option. The parties also need to be aware that they will have less control in such a situation and the likely return to creditors will be lower. Accordingly, debtors and creditors will be incentivised to utilise these new frameworks.

Some concerns have been raised about the cost of personal insolvency practitioner, PIP, fees and whether this will prevent some debtors from utilising these new debt resolution frameworks. Generally, PIP fees will be deducted from the amount of money an individual debtor is calculated as having available to pay his or her creditors during the term of the arrangement. Several practitioners and prospective practitioners, however, have indicated they will not charge an up-front fee for an initial consultation. While the Insolvency Service of Ireland does not have the power to set the fees of PIPs, it has indicated it will monitor the position, keep it under review and advise the Minister for Justice and Equality as necessary.

The Government is focused on what it needs to do to deal with the mortgage arrears problem. This is the primary target and responsibility on which the Government has to deliver this year. The banks, the Department of Finance and the Central Bank know that. Whether additional measures will be required is, obviously, an issue that we will keep under review. That is the sensible course of action. However, we need to get to a point at which individual mortgage arrears cases are moved on and addressed. The appropriate suite of resolution options is now available. It is now a matter for the banks to deliver. The Central Bank and the Government will be monitoring the situation closely to ensure sustainable solutions are found.

I recommend the amendment to the motion.

I welcome the fact that we are discussing this issue on the first day back from the recess. Nobody is under any illusion as to the scale of the crisis that has occurred, the extent of which is still being sorely felt throughout society, not least by those who are held over a barrel by the banks. I agree with the Minister when he pays tribute to all members of the finance committee who dealt with this issue during the recess, particularly those who questioned the heads of the banks in recent weeks.

I will not go into the historical analysis. We are all well aware of how and why it happened and why it should not have happened. We must acknowledge what has been done but we must also reflect on the exchanges between the CEOs of the banks and the members of the finance committee. Sending out legal letters threatening legal action is not a remedy or a proposal to constructively engage with people who are in debt. I acknowledge the creation of the Insolvency Service of Ireland and the guidelines from the Central Bank but the Governor of the Central Bank needs to bring those bankers in and knock heads together. They have caused mayhem and misery in most households in this country. They were bailed out by the Exchequer. They got away with blue murder and it is high time they were hauled over the coals. The attitude of some of them at the finance committee hearings was deplorable, sending out threatening letters and pretending that was a realistic engagement in terms of trying to restructure the debt.

Many people would qualify for insolvency and would have a comprehensive slate of advice available to them because of initiatives introduced by Government, but there is a significant cohort of people who are just about paying the mortgage and who have no money left for anything else. Although the arrears issue is very significant, we must widen the debate beyond arrears in terms of requiring the banks to enter into realistic and constructive arrangements with people. The solutions offered by the banks are inconsistent, for example the split mortgage. Some banks are not applying interest on the split portion, while others are. It is not being realistic to halve the mortgage and then lump interest on the other half. It is not even kicking the can down the road; it is kicking the can around the room. There must be uniformity in the banks' approaches. There must be a realistic rearrangement of some of the arrangements that people are involved in.

It has a wider dampening effect on the economy. If most of somebody's household income is going to a bank there is money left for little else. It is extremely frustrating for Members of the Oireachtas who deal with constituents who are in trouble with their banks. It is extremely difficult for the ordinary citizen to look at what has happened and balance it in terms of senior bankers who destroyed the economy and who still have not been brought before the courts of law. Meanwhile ordinary domestic households are doing their damnedest to stay alive and keep their heads above water with no meaningful dialogue with the banks.

I acknowledge what has been done, but there is a significant job of work still to be done. Can we get the Governor of the Central bank to pull these people in, knock their heads together and work out sensible and constructive arrangements so we can get this country back to where it should be?

Every member of this House recognises that the mortgage crisis and the huge level of indebtedness is the next big problem that must be solved. Fianna Fáil now seems to have all the solutions but it must never be forgotten that it was Fianna Fáil that caused this problem in the first place by its inability and unwillingness to rein in the housing and building boom because of its close association with developers. It must also be remembered that this is not the first time a Fianna Fáil Government has brought this country to the verge of bankruptcy because of its close association with questionable business interests. Initially this was done through the establishment of Taca, a secret society of friends of Fianna Fáil which continued for many years and in many forms such as the infamous Galway Races tent. From 2000 to 2006 Fianna Fáil put the interests of these friends ahead of the interests of the country creating unaffordable budget deficits and robbing this country of its sovereignty, resulting in Ireland's entering a bailout programme. It also pushed up the cost of development land and houses to an unsustainable and unaffordable level which has created massive negative equity.

Having clearly stated the origins of the problems we must move on to solving the problems. There is no easy or quick-fix solution. Every action taken is a double-edged sword. Every mortgage written down reduces the capital ratio of the bank. Many people say the banks have already been capitalised by the taxpayer to achieve this, but if this is not done in a careful way the banks will require extra taxpayers money to maintain their capital ratios. The banks will, rightly, face another stress test next spring. The European stability fund is not operational yet but we hope it will be sometime early next year after the German elections. Until this is achieved there will have to be a balancing act between the amount of mortgages and debts the banks can write off and their requirements to maintain proper capital to stay within European guidelines. Otherwise the taxpayer will have to step in again to bridge the gap.

To clearly understand the extent of this problem it should be noted that the outstanding balance on residential mortgage accounts in arrears over 360 days was over €11.4 billion at the end of June 2013. In the buy-to-let sector the number of accounts in arrears of more than 90 days was 29,369 and the outstanding balance on these accounts was €8.6 billion at the end of March 2013. There is no magic bullet and each case would have to be looked at on a case-by-case basis.

As a nation we intend exiting the bailout programme this year. We are on course to achieve this, but, to be successful, the market assessment of creditworthiness is crucial. We must be very diligent to ensure our level of personal debt does not interfere with this process and work with our European partners to establish the ESF, which will complete the separation between sovereign debt and banking debt. This Government, during the first half of its term, has concentrated on dealing with our huge sovereign debt, which we inherited from Fianna Fáil. We renegotiated the troika deal, ended the bank guarantee and rebuilt Ireland's reputation in Europe and globally. During our very successful Presidency of the EU we advanced the policy of separating bank and sovereign debt which will, hopefully, be quickly finalised after the German elections. Meanwhile this Government has begun the process of dealing with the crisis and key policy issues such as the Personal Insolvency Act, the Insolvency Service of Ireland, a set of Central Blank targets, the review of the code of conduct published by the Central Bank, the mortgage-to-rent scheme, split mortgages, sale by agreement and trade-down mortgages have all been implemented.

We are very disappointed with reports from the banks to the finance committee. It is obvious from their response that many banks relied on letters threatening repossessions in the solutions offered to customers to meet their targets. This is not good enough and I am glad to see the Central Bank is working with the banks to ensure 15% of their customers in arrears must be dealt with by the end of this year and 25% by the end of March. There are inherent dangers to this approach. We can already see how the buy-to-let business sectors the banks are going after low-hanging fruit and calling in loans where assets exceed the borrowings, not allowing the insolvency solutions time to work through. I am confident this Government and the Minister for Finance, Deputy Noonan will get this balance right.

My colleague very capably pointed out the hypocrisy of parts of this motion from Fianna Fáil. Having attended last week's finance committee hearings as a member, there was cross-party frustration with the banks. They came in and they had all achieved their targets. One of the main criticisms I have of this motion, and even this debate which, as the Minister said, is ongoing, is that many of the questions we had after last week will be answered next week when Professor Patrick Honohan of the Central Bank comes before us. The banks, which have different products, are also using different solutions and definitions. It proved impossible for the finance committee to compare the apples and oranges that were put before us. I welcome what the Minister for Finance, Deputy Noonan said about the ongoing audit process the Central Bank will be undertaking. Along with the political failure there was also a very severe regulatory failure in our country and that cannot be allowed to be repeated. I hope we will get some answers to those questions next week from Professor Honohan.

I welcome the Minister's commitment on targets for concluded negotiations between lenders and borrowers. That is what we are striving to achieve, but it is only the second round of targets for the banks. Considering the less difficult options is a human response to being given a target. Nobody in severe mortgage arrears could be described as being in an easy situation, but we are approaching the point in 2014 when we will be left with the most difficult cases. I would like the Central Bank to make an assessment of the number who will never be able to pay their mortgages. A broad range of solutions is available, including forbearance or deferral for persons currently out of work. Clearly, some people have invested in mortgage properties and cannot continue to keep them. There will be a cost to society if we have to provide housing for people who cannot afford their mortgages. The targets for dealing with the latter group will be most important in determining how we reach a solution. We will find out next week whether the Central Bank has put in place the rules that will allow them to audit the progress made to date.

I will be moving an amendment to the motion.

The Deputy may speak to his motion, but he cannot move it until amendment No. 1 has been disposed of.

While previous speakers spoke about hypocrisy, there cannot be enough debate in the Chamber about the mortgage arrears crisis. The more we debate the issues involved, the more we can come up with solutions. There is no perfect solution, however, because the crisis is too big, but by focusing on it I hope the Government and the Central Bank will be encouraged to act. It is welcome that the motion has been tabled on the first day of the new Dáil session.

A couple of weeks ago I was lighting a fire in my house with some old newspapers when my attention was caught by a half-page advertisement placed by Sherry FitzGerald. The advertisement contained a picture of a young girl of about five or six years who was sitting on a swing with a big smile. The headline read "investing in the next generation" and it was proclaimed in bold lettering that in 25 years the girl could need €329,000 to make a deposit on a new home and suggested that if property continued to perform in the way it had over the previous 25 years, the average price of a new home in Dublin would be €3.29 million. The advertisement went on to argue that, while there were no guarantees in life, the economic indicators suggested residential property would continue to be a safe, sound and lucrative investment.

I refer to this advertisement because it is important to put into context what was happening eight years ago. Although we lived through that period, when we look at current property prices, the collapse of the economy and the issue of mortgage distress, we can forget that people were bombarded with this type of advertising to persuade them to get on the property ladder. These advertisements exploited their fears. Three years after that advertisement was published, 3.3% of family homes had mortgages in arrears for more than 90 days. When the Government took office in March 2011, the figure had almost doubled to 6.3% and it has increased to 12.3% in the first two years of the Fine Gael-Labour Party Government. There is no doubt that the Government and its predecessor buried their heads in the sand and ignored the problem. The reports were commissioned and ignored. The crisis has escalated to the point where it has gone out of control. We need to consider the future for the families who cannot sleep at night because of the fear of repossession or simply not being able to pay their way in life. I am aware of families in which husbands have emigrated in order to earn a better income that will allow them to afford their own house. I have met couples who have emigrated to Australia because they can find better jobs with higher incomes to repay their mortgages in Ireland and allow them to return in five or six years time when the economy picks up.

When the Minister announced the targets last March, I stated in this Chamber that while I was not convinced they were the right solution and that we needed to take a carrot and stick approach, I hoped they would work. However, they have not worked thus far. We will resolve the crisis at some stage, but will it be this year, next year or 2016? In the meantime, all of that mental anguish and suffering will continue. The economy will also be affected because spending power will remain constrained.

When the fourth quarter figures were published, the Minister expressed disappointment at the banks' inaction. There is no doubt that the targets he set have since resulted in action on the part of the banks. However, the action took the form of 14,721 letters from the four main banks threatening repossession. That is how they have met their targets and they boasted that they had surpassed them. They fiddled with the figures by using the threat of repossession on a massive scale to fulfil the targets set. When I put this question directly to a senior representative of one of the banks, he replied that a board of a bank would take the easy option when it was faced with serious regulatory sanction. The easy option in this case is repossession. It is galling that the Minister has not stated letters threatening repossession of family homes do not represent a sustainable long-term solution which meets the targets set. Given that the Minister of State at the Department of Finance, Deputy Brian Hayes, has said they are wrong, it is regrettable that the Minister has not made similar comments.

Some of the people who have received letters have not engaged with the banks for lengthy periods. That is wrong. However, others have engaged with the banks. Yesterday I received a letter that Permanent TSB had sent to one of its customer. I outlined examples to Permanent TSB in regard to how it was asking for the voluntary surrender of houses on the basis of arrears of €300. Permanent TSB told one customer who had arrears of €1,000 that a voluntary surrender of the family home would be the best outcome. That is how it is meeting the targets. Yesterday we heard from a Deputy that Permanent TSB had issued a letter to somebody who was €100 in arrears.

These are examples of what they are doing. It is a tick-the-box exercise.

When he announced this plan with Matthew Elderfield, the Minister stated progress would be monitored closely by the cross-Government mortgage arrears steering group and the enhanced Cabinet committee on mortgage arrears and credit availability and that the Government would take any further action it deemed necessary. This evening, the Minister praised the members of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform for getting information from the banks, and I believe we did a good job with regard to trying to get as much information as possible from the banks. He also stated there is a requirement for an audit. We know there is a requirement for an audit; it was announced in March. What astonishes me is that the Minister told us in March the committee chaired by the Taoiseach on which the Minister and the Central Bank sits would monitor this closely. Did the Minister have to wait for me, Deputy Michael McGrath and other Deputies to extract from the banks that they met the target through issuing 14,721 letters threatening repossession? This is not the confidence he portrayed when he made the statement in March that not only the steering group but the Cabinet committee would monitor this closely, and that the Government would take any further action it deemed necessary. The Minister is completely and utterly impotent on this issue and his failure to state that issuing these letters is not a way to reach the targets is simply wrong.

Earlier we heard Government Deputies giving out that issuing threatening legal letters is not a long-term sustainable solution, but we also heard the bankers very clearly tell the committee that the Governor of the Central Bank told them it was okay. We are in a charade; the Minister of State goes on the radio to huff and puff and say it is wrong, while the Minister with the calm cool head who judges his words very carefully will not say it is wrong. I am sure he knows the Central Bank told the banks the letters issued by AIB, Bank of Ireland, Permanent TSB and Ulster Bank are allowed under the code of conduct. The Minister should be truthful and up-front with Members of the House about this. If the Minister does not know, he should send a very clear message to the banks today stating it is simply wrong. They were very bolshie and stated the Central Bank told them it was acceptable.

On one occasion when he came before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, Mr. Honohan stated if targets are set the banks will find a way to meet them, and this is what they have done. One problem with the targets is that they lack ambition. The target for the end of next March is that 25% of those in arrears for 90 days or more will have a sustainable solution offered to them, agreed and completed. This seriously lacks ambition. A year from the day the Minister addressed the more than 140,000 people in mortgage arrears and stated targets were being set and that the Government would crack down on the banks and monitor the situation, the Minister's biggest ambition on mortgage distress is that 75% of them will not have concluded an agreement with the banks. This seriously lacks ambition.

The problem is that because the Minister allows repossession as an option, the banks will take the easy option and repossess family homes and buy-to-let properties. They will take the easy option and will not engage with those who are genuinely struggling to pay their mortgages, who know they are unsustainable and want one of the solutions available. Numerous people have come to my office or phoned me from throughout the State to tell me they have phoned the banks but could not get a response. What is happening is unbelievable. I am aware of letters that state that the bank has examined a person's circumstances and wants to repossess. The person is told he or she has 30 days in which to take independent advice, for which the bank will pay €200. This is absolute nonsense if a person is in arrears of €300. When such a person finally gets to speak to the bank he or she is told the bank will do another type of deal. Many such letters are sent in error and I believe the audit will show this. Families are being put through mental torture; the banks holding the title deeds of their houses, where they have children, tell them they must agree within 30 days to vacate and sell their houses. It is absolutely pathetic and the banks are making a mistake.

The strategy on which the Government has embarked has serious problems. Interest should not be charged on split mortgages and the residual debt needs to be written off. Sinn Féin has been very consistent on this. There must be partial debt write-down for people who simply will not be able to pay their full mortgages over a long period. We must allow people a clean break. Personal insolvency practitioners have clearly stated on the radio that if the only debt a person has is a mortgage with AIB or Bank of Ireland, this person should not to go to them because they are for those with multiple debts with various institutions. The problem is that people with mortgages have been left at the mercy of the banks. Even after a few weeks it is clear there is a need for a public personal insolvency service, which should have been established from day one. The Minister should continue to monitor the situation and allow this. The Sinn Féin amendment includes the introduction, even at this late stage, of an independent mechanism which could arbitrate between the banks and mortgage holders and make and impose adjudications. It is clear from all of our discussions and everything we have seen from the banks they will do the bare minimum.

The banks have taken the Minister on a merry dance, or perhaps the Minister, along with the banks, is taking us on a merry dance. He stood here and told us all about the Mercer report and said the bankers would pay. I asked all four banks and not one of the 2,700 officials in any of the four banks who earn above €100,000 has taken one cent of a reduction in base salary. Changes have been made across the board to pension schemes and there have been large redundancies, which have reduced the payroll by the 6% to 8% target set by the Minister, but not one individual at the very high levels, including Mr. Boucher, has taken a pay reduction. This is simply wrong. We discussed this at the same time as the Government discussed public sector workers taking pay cuts through the Haddington Road agreement. I am sure the Minister will also dish out pain in the budget next month.

There is a gloomy sense of déjà vu about this motion because there is so little sign of a solution to the problem which has been haunting us for many years. Not only the previous Government but also this Government have been extraordinarily dilatory in attacking it when it was recognised a long time ago by virtually everybody. This is because those dictating the pace have consistently been those who caused the problem. This morning it was reported in the media, and I believe it was mentioned in the Minister's speech, that the Central Bank had issued new guidelines, deadlines and targets for mortgage arrears solutions. My guess is that the Governor of the Central Bank saw the meetings of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform last week and freaked. He saw the truth that this problem is nowhere near resolution, that the targets would not be met and that once again a big fudge is going on. He also saw the Government appears to be fairly passive in the face of what is happening. Deputy Pearse Doherty touched on this when he said it was good that the committee had extracted some information from the bankers who came before it last week. It was vital that it did so. It was bad news for the Governor of the Central Bank, however, because it indicated that the bankers were making monkeys of him and the Government. The lesson of what has happened will be seen when the Governor comes before the committee next week.

There is a spectator in this particular saga, and on the whole the spectator is, unfortunately, the Government. The Government has been responsible for not pushing the solution to the mortgage arrears fast enough, for delaying, for depending on reports and quoting reports, for allowing the banks to tell it lie after lie about mortgage arrears and for allowing phony solutions.

The latest is one that virtually everybody on all sides has mentioned here tonight. While I am not a member of the finance committee, I was staggered when I was there last week to hear the chief executive of AIB say that one of these sustainable solutions is to send out a legal letter. It then emerged that 14,000 legal letters were sent out - problem solved. He did not really expect anybody to believe it but, unfortunately, he had already told a bit of a porky a few weeks earlier, which he had to justify, because he had said that 20% of those in arrears were strategic defaulters. When he was asked to produce evidence for it, there was none. It is very difficult if we are continuing to allow the banks to set the pace, to set the agenda and to tell us what is happening when they are not going to tell us the truth, particularly if they are not being challenged enough by the Government. I do not know, nor does the Minister nor anybody else, what percentage of those in arrears are strategic defaulters.

The Deputy has one minute remaining.

However, I guess the banks are simply saying that anybody who does not pay and is making a choice not to pay is a strategic defaulter. In other words, if they do not pay their health insurance, put food on the table or pay for other necessities such as the petrol in their car, that is okay, but if they choose to pay for the petrol in their car or pay for necessities when they have a choice, they are strategic defaulters because they chose not to pay their mortgages. I do not know what happens if they choose to pay their property tax and not their mortgage - are they then strategic defaulters?

Many of these strategic defaulters are people who have a choice as to whether to go into debt to one creditor or another creditor. Let me put it very squarely in the time I have left: I do not blame those people in arrears who get a legal letter from their bank telling them to come in and see the bank if they do not engage with the bank. Why would they be enthusiastic about engaging with those who have stung them before and are now threatening to sting them again?

I ask the Deputy to conclude.

I have just one more sentence. It must be remembered that the blame for this crisis lies principally in one place, and those individuals and those institutions who should be shouldering that blame are the ones now being put in charge of its solution.

Debate adjourned.
The Dáil adjourned at 9.05 p.m. until 10.30 a.m. on Thursday, 19 September 2013.