Mortgage Arrears: Motion (Resumed) [Private Members]
The following motion was moved by Deputy Michael McGrath on Wednesday, 18 September 2013:
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."
Debate resumed on 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.” - (Minister for Finance).
I wish to share time with Deputies Finian McGrath, Mick Wallace, Catherine Murphy and Richard Boyd Barrett.
Throughout our history we have had a fractured relationship with land and houses, from the time of the plantations until the 19th century when we got to the point where more than 90% of the land was owned by only 5% of the population. We are experiencing similar difficulties today with mortgage holders, but the terms have changed. Then they were called evictions; now they are called repossessions. Then they were called landlords; today they are called the banks. Then it was rack rents; today it is unsustainable mortgages. However, the common denominator is families losing their homes. The Government amendment states the recommendations of the report of the interdepartmental mortgage arrears working group have been adopted as the most appropriate framework for dealing with this crisis, but if they were working, the crisis would not be worsening and in excess of 57,000 would not have been unable to pay their mortgage for a year and an increasing number would not be in mortgage arrears. The only conclusion is that they are not working.
There is no single answer to the crisis, but a comprehensive range of options have been suggested on both sides of the House and the people working closely with those in mortgage difficulty. I refer to organisations such as FLAC, Focus Point and the Society of St. Vincent de Paul. However, instead of this, the tactic used too frequently is a letter indicating legal action. There has to be genuine engagement between the borrower and the bank to find a sustainable and realistic solution.
Repossession might be an option for some, but only if it is negotiated. It is not the answer in all the cases where it is proposed because if repossession is seen as a sustainable solution, it will exacerbate the housing crisis. A flood of repossession sales will destroy current market levels and fuel opportunistic cash buyers who are just looking for investment bargains.
Strategic defaulters should not be tolerated, but there is a need for an independent investigation into and an independent assessment of the reality of this matter. I do not agree with the notion that the State's mortgage arrears crisis represents the greatest social challenge facing it because that confines the issue to mortgage holders. We have a major housing crisis. I witness this in Dublin Central, whether it relates to private rented accommodation, local authority housing, social housing or the increase in homelessness.
I listened to the Tánaiste's fiery words on the Order of Business as he expressed confidence about solving this problem. I hope they become a reality.
I am grateful for the opportunity to contribute to the debate. I support the motion, as it clearly sets out solutions to the huge problems and hardship experienced by families who are suffering pain because of the economic collapse. We have all met people who need our practical support. Now is the time to stand up for them during this debate; it is no time to sit on the fence. Mortgage arrears continue to increase, with 142,892 family home mortgage accounts in arrears at the end of June, of which 57,163 were in arrears for more than one year. The evidence presented by the banks during the recent hearings of the Joint Committee on Finance, Public Expenditure and Reform is that they relied heavily on issuing threatening legal letters to borrowers to meet their obligations under the mortgage arrears resolution targets programme in the quarter ending in June. That is the reality for families and why action is needed.
Every Oireachtas Member has an obligation to identify solutions and support the motion. I support the call for the Central Bank to report on the performance of the banks to date in reaching the resolution targets laid down. I also call for publication of the targets to be imposed on them in the conclusion of arrangements with customers in arrears. I fully support the establishment of an independent mortgage arrears resolution office to oversee implementation of sustainable mortgage solutions. The motion is about families and people, but, above all, it puts forward sensible solutions.
There is little doubt that the mortgage crisis is one of the major obstacles to economic recovery. The Government parties can speak about growth and recovery, but continuously falling living standards for the majority makes all talk of recovery sound a little bizarre. The people, through no choice of their own, have given billions of euro to Irish banks. In return, they are being failed by the banks, economically and socially. The mortgage crisis has worsened, not improved. The two characteristics that have most defined the performance of the banks in the past few years of the crisis are mismanagement and inconsistency. I have been shocked by the number of people who have contacted me to tell me about their problems with the banks. The inconsistency is frightening. Some people are being treated fairly, while others are not. Those who have equity in their homes but are unable to pay their mortgage are getting the rawest deal of all. Many of them are being threatened with repossession or being offered unattractive alternatives. They believe they are in a poor position. It is beginning to look like as if people would be better off being in serious negative equity, rather than having equity in their house if they are looking for a fair deal from the banks. Will the Government establish a framework to ensure consistency in the way the banks treat everyone?
I support the motion. We need stronger assurances from the Government and the Central Bank that borrowers will have basic, guaranteed rights in the mortgage arrears process. Each time we debate the issue the number of people in arrears has grown alarmingly. Solutions have been heavily lopsided in favour of the banks and the lending institutions. To date, there is an inherent power imbalance in all of the suggested solutions that strips away the rights of borrowers in basic negotiations.
The code of conduct on mortgage arrears published last June contains really worrying elements. I refer to forcibly moving people off tracker mortgages where no sustainable solution is available. Only the lender’s opinion counts and there is no balance between the two sides. The 12-months moratorium on legal proceedings was reduced. Unsolicited home visits by lending officials will be permissible. Banks and lenders control the communications process. People are being hounded by some of the lending institutions. They are already stressed out without that.
The precise definition of “sustainable solution” is defined by the lending institutions. We need a basic appeals process and basic income and living expenses. We have seen the What's Left survey carried out by the Irish League of Credit Unions. The situation must be completely reassessed. Better regulation must be introduced to prevent intimidation and unsolicited visits. The point has already been made about the huge waiting list. If a person’s house is repossessed he or she has nowhere to go. Solutions must be provided in cases where that occurs.
The members of the Technical Group were the first people to raise this issue and to table a motion in the Dáil in April 2011. Nothing has been done about the crisis since and it has become worse. People have been clinging on for the past two years. It is evident to me and many other Members that the crisis is coming to a head.
The Government’s strategy has demonstrably failed. The banks came before the Joint Committee on Finance, Public Expenditure and Reform and played us for fools. We got claptrap about them wanting to engage with people. From the evidence coming through my clinic door I know that the opposite is true; that people are trying to engage with the banks but the banks are not interested in engaging with them at all. They are just interested in sending out legal letters or making threats in order to squeeze as much money out of people as they possibly can.
I wish to underline the point Deputy Catherine Murphy made about the stupidity of repossessions. We will pick up the tab if people’s houses are repossessed because we will have to provide them with social housing. It will cost us to do that. When we say the banks have to take a hit and write down unsustainable debt the Government says we cannot do that because it would cost the taxpayer but it will cost us if people’s houses are repossessed because we will have to pay for the social housing or the funding of it. We must force the banks to provide sustainable solutions for people in the interests of mortgage holders but also in the interests of the wider economy. There is a simple solution, namely, to do what they did in Norway – write down unsustainable mortgages to the market value plus 10%. Nobody’s house would be repossessed and one would impose the solution on the banks instead of the banks playing us for fools and terrorising tens of thousands of ordinary families.
I now call Deputy Dan Neville. I understand he is sharing with Deputies Spring, Kevin Humphreys, Barry and Maloney.
That is correct. I welcome the opportunity to debate this issue. I wish to examine the situation from another angle. We have had much good debate on the economic side of the issue but I wish to refer to the psychological impact of what is happening in terms of how the banks manage mortgage holders who are in arrears. We must recognise that there is a serious human factor involved. There are many vulnerable people being dealt with by bank officials. We should not generalise as there are good people in banks but we have already heard about people being hounded and who have had unsolicited visits to their house by mortgage lenders.
The banks must be conscious of the psychological impact experienced by someone in mortgage difficulty or debt. Research going back to 1890 demonstrates that suicide and mental illness increase in times of recession. The World Health Organization has recognised that. It said that it should not come as a surprise that we continue to see more stresses, suicides and mental disorders during recession. The potential psychological impact of economic recession on public health is severe. The banks must recognise the impact on people who have lost their jobs, who have job insecurity, economic strain, loss of income and especially those who are under threat of having their home repossessed. One of the most important issues in terms of stress levels is the fear of the loss of one’s home.
The current restricted access to credit further reduces the well-being of society and increases mental ill-health problems. During a recession there is an increase in substance misuse, especially alcohol and drugs and an increase in the incidence of intimate relationship breakdown and divorce. That is an aspect of what is happening to the community we are discussing in terms of difficulties with the banks. Financial institutions should recognise that people who are recently unemployed are most vulnerable because research shows that the unemployed are more likely to suffer mental stress. Those who have mental ill-health in employment are more likely to lose their jobs than those who are not in that situation. The banks must recognise that they have a duty to those people in order to ensure that their mental well-being is taken into account when they are dealing with clients. They have a responsibility towards their well-being. We have heard anecdotally and factually that the way some people in banks handle clients has led to suicide attempts. There has been a big increase in attempted suicide and incidents of self-harm in addition to suicide. That is an issue that must be recognised.
Training is provided within the banks but it is not implemented sufficiently widely. I often see situations where training is given but if the manager is not committed or supportive of such an approach then it does not work. We have seen a similar situation in several other aspects of suicide and mental ill-health. One can give all the training one likes but if a manager is not committed then the situation will not change. The manager is in charge and staff are obliged to respond to him or her. All those working on the front line in mortgages should have special training. I wish to suggest two programmes that are available. One is the applied suicide intervention skills training, ASIST, programme. It is a two-day course in suicide first aid. It is suitable for all kinds of people dealing with the public, for example, health workers, teachers, community workers, gardaí, youth workers, volunteers and people responding to family, friends and co-workers. All aspects of society are covered. The banks should recognise that they have a role in ensuring that their staff are aware of such courses because it reduces the immediate risk of a suicide and increases the support for a person at risk. Completion of the two-day course allows people to recognise the risk factors of suicide and the level of mental stress.
More than 70 trainers have been trained to deliver the course nationwide. The banks should have trainers and train their staff.
The safeTALK course is available also. It is a half-day training programme that prepares participants to identify persons with thoughts of suicide and connect them to suicide first aid resources. These specific skills are called "suicide alertness" and taught with the expectation that the learner will use them to help reduce suicide risk in his or her community. Following the half-day safeTALK workshop, a person will be more willing and able to perform an important role for those with thoughts of suicide. I urge the banks to consider this and take advantage of the courses on offer.
It is wonderful to be back. I acknowledge the passing of Seamus Heaney who was a wonderful poet but also a peaceful patriot and a person many of us could look up to.
This is a welcome opportunity yet again. I thank Fianna Fáil for raising this matter in its Private Members' motion. As I have constantly said, there are two issues on which I will work tirelessly, namely, joblessness and the mortgage crisis that has been weighing so heavily on my generation.
Of the first two issues that need to be dealt with, the first is quite basic and I wish to bring it to the attention of the civil servants. It pertains to the fees prescribed by the Insolvency Service of Ireland under the statutory instrument passed on 30 August, the Personal Insolvency Act 2012 (Prescribed Fees) Regulations 2013. The third point on the charging of fees states, “The amount of €500 is prescribed as the fee payable for an application for a Protective Certificate in relation to a Personal Insolvency Arrangement”. The Minister needs to address this issue immediately. So many of the people I encounter daily do not have a bean to their name, not to mind €500 to seek the assistance of a personal insolvency broker. It is inappropriate and, despite what we heard from one leader of the Opposition this morning, the fee and the scaremongering to lead people into paying €5,000 to €7,000 are nonsense. It is also inappropriate that €500 is being sought from people who do not have it to their name.
There are a couple of problems that still need to be ironed out. We all have something to contribute and this is a welcome addition. I do not agree with the idea of a veto. I have examined best practice in Australia, New Zealand, Great Britain and Norway and a veto is not necessary as long as we have a position from where we can pressurise the banks. With Deputy Michael McGrath, I have concluded that any entity considering buying a bank will examine the mortgage book and engage in due diligence with a fine toothcomb. If the bank leaves a legacy whereby it does not have a solution, the book will be unsellable. Thus, the share price and value of the bank will be depreciated. Ultimately, the sole responsibility is to the institution, rather than the individual. As a public representative, I represent the individual.
Let me present a different angle. Using the BlackRock stress test, we identified a quantum of money that could be used for the purpose of recapitalising banks holding distressed mortgages. Every single bank should, on a pro rata basis, be made to draw down every single penny of the money available and more, if necessary. I realise it is a zero sum game and that comes back to the taxpayer. I insist that the model used be the tabular format that was used for mortgage interest relief in order that those who bought houses at the very height of the market would get preferential treatment. One would work backwards from there. This is important because different banks will treat people with different attitudes. For example, we have more influence on Allied Irish Banks and Permanent TSB as a result of the Government's shareholding. It is nothing I am proud of but it is there. We have a stakeholding of only 15% in Bank of Ireland. It has the ability, therefore, to apply a far more robust attitude to us. The last thing it wants to have is a contingent liability on its balance sheet such that it will have to write down more money for mortgages, thereby shrinking its profitability and compressing the share price once again. It is imperative that we get the banks to draw down and use every single penny identified to relieve my generation, get us out of this quagmire and allow us to be the people who drive the economy and society and help the old and the young. It is imperative that there be a definitive line in the sand. I do not want anybody to get a telephone call in 12 months demanding a chat and more money. I do not want such a call in five years time. I want a definitive solution, a line in the sand, to give people certainty.
I believe and know we are doing the right thing. There are very few people who will argue that the ability to move towards personal insolvency is a problem. However, the person insolvency broker is paid through the institution. The affected individual needs to go in with a robust attitude, put the keys on the table, tell the bank it has a problem on its balance sheet and ask what it proposes as a solution. The broker will not be paid the same amount of money if he or she gets a deal outside the personal insolvency route. It is in his or her interests, therefore, to go in with a softly-softly approach to get the job done; therefore, we need to incentivise him or her to enter the process with a robust attitude, enforcing the idea that it is the banks' problem, that they have money to solve it and that they need to enforce the solution.
International best practice indicates that 70% of cases are dealt with outside the insolvency arrangements allowed. We are also told that 90% of the remaining 30% of cases, amounting to 27%, are signed off on by both the bank and the borrower. This has the potential to be enormously successful. I encourage everybody to engage with the process and consult the website www.isi.gov.ie. People should engage with their Deputies and solicitors. They should not get into a position where they will be be held to ransom for money for a consultation. It is incumbent on the State to get my generation out of the problem. I have stressed this with the Minister for Finance and the Minister for Public Expenditure and Reform and I have also gone to the Tánaiste. I will raise the matter with the Taoiseach. The Government should ensure the banks draw down every penny of the money allocated and pass it on in debt write-downs and providing relief. If we need more money, let us get more. This is one of the key issues for my generation. It is a matter of the liberation of my generation.
It is worth returning to what Deputy Maureen O'Sullivan and previous speakers mentioned about the housing crisis. Dublin is very much out of kilter. The housing crisis in Dublin constitutes a serious problem. There is some employment growth, but the cost of renting a two-bedroom apartment in many areas of Dublin is beginning to hit €1,800 per month. This is because little or nothing has been built since 2008. I am thankful there is employment growth, but the demand is increasing very quickly.
Nobody in this House is under any illusion about the scale of the challenge that ordinary families are facing in trying to stay in their homes and pay their mortgages. Deputy Arthur Spring articulated a very strong position on behalf of his generation. I am a few years older than him. During the 1980s I went through a period of unemployment. I had young children and was in negative equity. Interest rates were reaching almost 20%. That was when Mr. Bertie Ahern was Minister for Finance. It was a truly terrifying experience, which is why I can understand very well what Deputy Dan Neville was talking about in regard to the pressure on young people with families and in insecure employment. As with Deputy Arthur Spring, I welcome the debate, but, in all honesty, I must question the credibility of the proposers of the motion. We must remember why nearly 150,000 families with home mortgage accounts are in arrears. Some 97,000 are in arrears for over 90 days. This is because 250,000 people lost their jobs under the watch of the last Government, of which the current leader of Fianna Fáil was a senior member. What occurred was the result of the failures of that Fianna Fáil Government.
Since the Government came to power, we have been at work trying to right the ship of State. We have managed to get the finances of the State under some control.
We have managed to go back to the markets and raise money to fund public services. We are only months away from the troika leaving and Ireland regaining our economic sovereignty which was lost by Fianna Fáil when it negotiated a very poor deal. We have put in place the conditions for job creation and I have spoken to some of the 33,800 people who have been fortunate enough to get back into employment. This Government has created the conditions for growth in employment. The policies we have designed have delivered growth and are showing results. Initiatives such as JobBridge are successful and the reduction in VAT for the tourism sector has resulted in the creation of up to 15,000 additional jobs in the hospitality and food areas.
The establishment of the Insolvency Service of Ireland is a very important development. We are moving forward, slowly but surely. I do not agree with Deputy Boyd Barrett's point about the finance committee in the context of holding the banks to account. If one wants to attend meetings of the finance committee and showboat, that is fine but it will not bring anybody to account. If one is prepared to do work such as that done by Deputy Arthur Spring and others on the committee, in asking probing and difficult questions, one can assist in bringing about change within the banks. We will bring the banks under control and in that context, I welcome the recent announcement that a banking inquiry will commence shortly. It is a slow process but change is underway in Ireland. The Labour Party, along with its partner in Government, is committed to fixing the economy, getting people back to work and ensuring the reforms which did not happen over many decades under Fianna Fáil actually happen.
We must have at the heart of our policies the principle that families should be able to stay in their homes. Unsustainable debt must be recognised and solutions must be put in place. The range of options available under the personal insolvency scheme will allow people, over time, to address their problems. That is why we have piloted the mortgage to rent and split mortgage schemes, while extending mortgage interest relief. These schemes must continue to be implemented and the banks must meet their targets on sustainable solutions. I welcome the recent announcement from the Central Bank that the banks must offer sustainable solutions to 70% of those in arrears for more than 90 days by the end of March 2014. I will certainly be working with my colleagues and Deputy McGrath on the finance committee to ensure that we hold the banks to account.
I am grateful for the opportunity to speak on this very serious topic. It is a problem that has been with us for quite a while. I wrote extensively on this issue in February 2010. My aim at the time was to promote parked-percentage mortgages, whereby banks would split the debt into an affordable, sustainable amount for the distressed mortgage holder. This was fed into the Keane report, along with the contributions of many others, and came out as a proposal for split or parked mortgages. I met with all of the main banks on this issue, along with many other Deputies, and we spoke with them at length, expressing our genuine concerns about this. As everybody knows, the banks at that time were reluctant to move into this area. It was unknown territory for them. I do not think they actually had the skills to deal with the problem. As someone who has been involved in business for almost 20 years, I saw it as simply a matter of fact that a problem like this cannot be ignored.
Progress has taken time. As with anything that is new ground, it cannot be perfect straight away. People are demanding instant solutions but it cannot happen that way. At the start of this process, mistakes were made but things will improve as we go along. The Minister for Finance, Deputy Noonan pointed out that many people were asserting that we would never get out of the mess we were in. When Fine Gael went into government, there was only funding for six months and then the country was going to fall over the edge of a financial cliff ---
(Interruptions).
With respect, I have a point of order ---
The situation has changed ---
Excuse me, Deputy Barry, but Deputy Dooley wishes to raise a point of order.
Can I be facilitated with making an interjection and responding to what the Deputy has just said?
If the Deputy accepts ---
There is a facility, under Standing Orders, to do that.
Yes, but only if the Deputy accepts, as I understand it. I cannot allow it unless Deputy Barry is agreeable, as Deputy Dooley knows.
I am sure that Deputy Dooley would not like to make the situation worse than it already is. However, I will listen to whatever he has to say on his point of order.
I appreciate the Deputy allowing me to make an interjection. There is a lie or an untruth being peddled by the Tánaiste and other members of this Government, that somehow the Irish State only had enough funding, when the current Government came into office, to sustain itself for five months. That is an absolute untruth.
Whether it was five or six months is not the point. There was a memorandum of understanding in place with the troika which guaranteed funding right up to the end of this year. That was in place when the Government took office. Will the Deputy accept that as a point of fact and get away from the notion that there was not enough funding to sustain the State for a longer period-----
It is said that when one is explaining oneself, one is losing.
Deputy Barry would know a fair bit about that.
I might but I certainly know that when one is wrong, one puts up one's hands and does not deny the facts. I thank Deputy Dooley for his positive engagement.
The Deputies on the other side are trying to rewrite history.
Deputy Dooley was simply stating a fact.
Solving this problem will require positive engagement with all mortgage holders. Those in arrears who do not contribute or engage are leaving themselves open to the threat of repossession. That fact cannot be avoided and mortgage holders must recognise it. There is not a person in this country who does not have some iron in the fire with respect to financial debt, which was also a trademark of the previous Government.
(Interruptions).
This is the soft landing, Deputies. This is the soft landing that Fianna Fáil promised. This soft landing is damned hard. The Deputies might like to argue about funding for five or six months but this is the landing their party promised would be soft. If the Deputies do not understand it they should go back and look at a particular apartment block in Cabinteely in Dublin 22, where in 2007 and 2008, people were discussing how it would continue go up in value. Such notions were being fed by talk from the previous Government. I was not going to engage in a slagging match, but if the Deputies across wish to, we can certainly do that. However, it will do nothing for the mortgage holders who are in distress. If the Deputies wish to throw slander across the House that is fine but it will do nothing, apart from making them feel happy.
There is also a problem with regard to core and non-core debt. We should not forget that many businesses in Ireland have a debt anchor based on property. Mistakes were made. Businesses with good cashflow bought into the property boom. The banks are continuing to provide existing credit facilities to them, for which they are grateful. However, businesses need to expand to survive and that is why their non-core debt anchors must be addressed, especially in the context of jobs. The issue of equity must be considered.
I agree that the targets must be met and also that there is no one solution for everybody. I acknowledge the Personal Insolvency Act although I would hate to see situations getting to that point. We should try our best for those people who genuinely make an effort to engage. Engaging is what it is all about now. It is not about judging people but about trying to improve their situation. However, if people do not engage, that is a different matter. Furthermore, if people are not paying mortgages on second homes, such properties will have to go.
In conclusion, there is no short term solution for what is a long term problem. Mortgage arrears will remain a problem for some time but constructive engagement is the only way forward.
I have read and re-read the motion before the House and I welcome this debate because as Deputy Michael McGrath's motion suggests, no-one has all of the solutions.
All of us should participate in finding a resolution to this issue. While I welcome the sentiment of the motion, I would differ slightly with Deputy Michael McGrath. He referred to the mortgage crisis as the greatest social issue in the country but I would suggest unemployment is in these historic times when the country has been bankrupted and we are at the mercy of English and German taxpayers as we try to keep the day-to-day operation of the State continuing. No one has a monopoly of wisdom on job creation, dealing with mortgage arrears or stopping emigration. For that reason, we should tease everything out.
The mortgage crisis is unprecedented because it has never happened before during our independence from the British Empire. We now deal with issues as independent parliamentarians and we can no longer blame Cromwell, the Vikings or the Normans. We must take responsibility ourselves for what happened. We also have to take responsibility for the solutions to these issues.
The mortgage crisis comes in different levels. Both sides of the House have cited how mortgage arrears affect people not only physically but psychologically. As working politicians, all of us will have dealt with people affected. Every Member, unfortunately, will know of individuals who had to voluntarily surrender their home because of arrears. That is not an easy course of action, particularly if there are children in the household. It can be a difficult and traumatic experience. Unfortunately, I have had to deal with a few of these cases.
While not trying to be partisan but with some sense of pride as a Government supporter, it must be acknowledged that there have been no evictions from homes. This is a good point given the state in which the country is. I have put this point to some of the other free bird Members who claim we do not hear about evictions. If evictions were taking place, there are sections of the Opposition who would let us know about it every day of the week. I have listened to some Opposition Members use the word “eviction” with glee because it conjures up an image from our history. I can only conclude that they are not interested in solving the issue of mortgage arrears. Using terms like “eviction”, it would seem they would like evictions to happen to make some political gain. Until they actually see a re-enactment of the Derryveagh evictions of 1861 when families were thrown out of their homes on to the roadside, they will not be happy. It goes back to my point about people being careful about their language and accepting matters as they are. We should not see anyone evicted from their homes. I am not diminishing my responsibility or the Government’s but we should not wish for evictions to make some political gain.
There are many issues that need to be solved. The mortgage crisis, as cited in Deputy Michael McGrath’s motion, has to be faced up to. It is important that all the agencies and different solutions referred to in the motion are addressed. Hopefully, we will not see families losing their homes. Such losses are what we must aspire to prevent. It is a long road we are on in resolving the mortgage crisis. While I do not agree with some parts of the motion, I acknowledge that no one has a monopoly of wisdom in dealing with this unprecedented crisis in the history of this independent State.
I call on Deputy Calleary who is sharing time with Deputies Cowen and Dooley.
I thank my colleague, Deputy Michael McGrath for once again putting this issue on the agenda in a constructive fashion which he has done over the past two and a half years. Since the Dáil last debated this issue, we have had presentations at the Oireachtas finance committee on this matter. It is too early to make a call on the impact of the personal insolvency legislation. As we have stated, when we do have figures on its operation, we will not see it having the impact it could have if it had been more independent of the current banking system and if borrowers had been more empowered to benefit from it.
Over the summer we had some positive economic figures in employment and this morning the positive growth figures which should be acknowledged and which suggest some green shoots of recovery. While Ministers can run around claiming the credit for these figures, the elephant in the room is mortgage arrears. If this is not tackled, we will never have an economic recovery. This morning’s Central Statistics Office figures once again show personal expenditure figures are under considerable pressure. This has an impact on our domestic economy, retail and services sector. While they are suffering, they are not in a position to create jobs.
Why is this? Setting aside the second homes to which Deputy Barry referred, 142,892 family home mortgages were in arrears at the end of June. Of this, 57,163 were in arrears for more than a year and nearly 28,000 of them were in arrears for more than two years. These families cannot participate in an economic recovery because they do not have the means to pay their mortgages, never mind getting involved in supporting the recovery of our economy. The notion of a sustainable solution as part of the mortgage arrears resolution target programme sounds great. However, as we all knew when it was announced in haste in Government Buildings earlier this year, the banks claiming credit for sending letters to distressed mortgage holders is not the answer.
This summer I have been inundated with cases of what some banks believe are sustainable solutions. I have the case of a gentleman in his early 70s who remortgaged his house to assist his family. When he fell into arrears of €450, he received a letter from his bank advising him to sell his house. This was the only sustainable solution they could put in front of him. He was told he could pick his own auctioneer subject to the bank’s approval. That is not a sustainable solution for a man of that age. The chief executive officer of the bank claimed at the Oireachtas finance committee earlier this month that this case was part of its solution to this issue.
While we constantly talk in this House of the need for people to reskill and reimagine themselves, I have another case of a man who was employed in the construction industry who reskilled to work in financial services. He started at the bottom rung and worked his way up this sector. However, while he was reskilling he did not have the capacity to pay his mortgage. He engaged with his bank during that time but matters slipped. He recently received a letter from his bank informing him his case is now with the bank’s solicitors who are moving towards repossession and he cannot engage with the bank.
They are typical of these so-called sustainable solutions. They are not sustainable. Deputy Maloney and other speakers referred to the threat that is used on people, which opens up the other side of this debate away from the macroeconomic figures into the personal stress and distress that has been caused in houses around the country by the banks' push to get the figures so they can come in here and say they have offered 56,000 or whatever number of solutions. However, behind each of those letters is a personal story of distress. Deputy Michael McGrath has consistently proposed a different way of doing this. Bank loan books need to be addressed, but doing it this way is wrong and will not resolve the situation. Deputy Maloney is right. There are many ideas floating around here that can reach where we need to be, but in a different and fair way and that is what we are all about.
Over the summer there was much talk, particularly at the committee hearings, about strategic defaulters. There are those who are deliberately not paying their mortgages in the hope of not having to pay them, but the level of debate it is getting does not reflect the number of people who are making this choice. It strikes me that the banks throw this out there so we can talk about it rather than discussing the real distress to people and families and seeking a sustainable but fair solution to the position in which they find themselves. We heard it again this morning from the Tánaiste. Unfortunately, reeling out figures on sustainable solutions creates a disconnect from the reality of the stress and distress on the ground.
If we are to see economic recovery, this issue must be dealt with. While that level of debt burdens those 143,000 households we cannot move on. If we are to recover socially and recover our sense of collectivity and pride as a country, this issue must be dealt with. We cannot abandon 143,000 families to the wolves of the financial markets, the whims of bank lawyers and the targets of the Central Bank, which have no knowledge of what it is to receive one of those letters. It might be good for the banks to come before the committees and roll out these statistics but it might be worthwhile for the committee to hear from some of those receiving the letters to see the reality of it. This issue must be addressed with a lot more urgency, thought and feeling.
When the Dáil resumed this week, many journalists and commentators asked us what dominant theme we expect to engage with this term. We all said the mortgage arrears crisis stands out, along with the budget, the Seanad referendum, Dáil reform and the preparation for local and European elections on the part of our respective political parties. They are all intertwined with and underpinned by the mortgage arrears situation. It is the major, pivotal and most pertinent issue. The success or failure in dealing with it has an undoubted domino effect on all the other areas mentioned.
An example of that is education, discussed during Leaders' Questions earlier this morning. When I, and others, spoke to our constituents over the summer and previously, one thing was very striking. People are experiencing not only fears about the financial situation caused by the mortgage issue but about their ability as parents to pay for and educate their children, whether at primary, secondary or third level. From speaking to students and the work force we know a primary degree in the present situation is, in many cases, no longer sufficient to enter the work force. A masters degree is the goal of many students and the costs associated with that are excessive. The Government's cuts in all areas of education, not to mention the issues raised this morning, lead us to believe that education and areas such as mental health must be ring-fenced in the budget. This will be in our document.
Deputy Neville mentioned, as he has done on many occasions, the effect this crisis is having on the mental health of individuals and society in general, and similar comments have emanated from many other members of the Government. That, coming from a member of the Government, must reinforce the intention of the Minister for Finance and the Government to ring-fence funding in that sector to protect the most vulnerable.
The question of housing is causing great grief and consternation among our constituents. If one were to carry out a survey of all Deputies one would find that there has been an obvious upsurge in representations on housing as people seek replacement homes. The conventional methods of dealing with this are practically defunct. There have been no innovations, new initiatives or new thinking by the Government and those charged with responsibility in this area. That is very obvious when one hears people saying there are local authority housing units idle in estates in my county and in many others. Yet local authorities lack the funding and resource capabilities to make those houses suitable for people to take hold of. Does that not say the Government must find ways of generating funding to address these issues?
Earlier Deputy Healy-Rae and others mentioned the need for a new tenant-purchase scheme to allow those who might be able to afford it to take advantage of the fallen prices and give much-needed business in the financial sector that is affordable, real and can have a positive effect on the demands of society in that area, but to no avail. The Government could also examine ways contracts could be innovative in a way which would allow incoming tenants the option of making those houses suitable for their use because allowing houses to lie idle helps nobody and efforts must be made in that regard.
Another issue that will form much of the debate inside and outside the House in the coming weeks, and which we have been discussing, is the Seanad referendum. The Taoiseach charged the Minister for Jobs, Enterprise and Innovation, Deputy Bruton with the responsibility for fighting that campaign. Where would you get it? How crazy is it to think that at a time when the needs in that sector are so great, combined with the needs of the education sector, the Taoiseach has sacrificed that Minister to fight a referendum campaign to abolish the Seanad?
Of course, he is fighting a referendum on a pet project that the Taoiseach initiated in 2009. The Taoiseach will win in any event because it will be his victory if the referendum is carried and the poor Minister, Deputy Bruton, will be blamed if it is defeated. I am reminded of Deputy Charles Flanagan's predicament during the Presidential election. There is a common thread.
A reformed Seanad might have been in a better position to critically analyse the insolvency legislation recently passed by this House. As was made evident during the passage of the legislation on the property tax, the cuts to child benefit and the other attacks on the most vulnerable, it is the norm for this Government and its massive majority. The ESRI's independent assessment found that the last two budgets were far more regressive than the last budget introduced by the Fianna Fáil-led Government, which took twice as much out of the economy. The Taoiseach pointed out yesterday that the Government does not engage in debate. Its own way is the only way in town. If Carlsberg did autocratic government, it would do it the Fine Gael and Labour Party way. It is not Frankfurt's way or anybody else's way.
The Opposition may be proved right next May or June. The Government may then appoint an independent mortgage resolution office which can inform the Government about what is as plain as the nose on my face, namely, the failure of any insolvency regime that offers a veto for the banks. That may benefit Opposition parties or condemn the Government to a disastrous electoral defeat, but our success would be at the expense of distressed families in every town, village and city on this island. That is a legacy none of us want, least of all the Government. The Taoiseach continues to high-five around the country in his happy-clappy way. It is incumbent on Government backbenchers to get the economic council into a room and make it watch a rerun of the proceedings of the Joint Committee on Finance, Public Expenditure and Reform earlier this month. Perhaps it might then see sense and begin to hold the banks to account or establish an independent mortgage resolution office. We might finally get a clear understanding of what a sustainable resolution would comprise. Sustainable resolutions might involve split mortgages, reduced interest rates or debt for equity swaps. A sustainable resolution is not represented by a bank issuing proceedings to take the house from someone who cannot afford to pay his or her mortgage.
The Government has a responsibility to get to grips with this situation. It gave out about light-touch regulation and the bank guarantee for long enough. It now has an opportunity to address the issue. In regard to the political charges made against us today and in the past, it has put in place a politically charged inquiry. Members of my party, whether current or past, will meet our responsibilities in that regard and answer all the questions we are asked, notwithstanding the benefits the Government hopes to gain coming into the election. Apart from the political game it continues to play, it has an obligation to meet the most pressing demand put on it by the Irish electorate - that is, the mortgage situation.
The Deputy should conclude.
It is time to get down and dirty with the banks. The insolvency legislation refers to sustainable resolutions, but the Government does not appear to know what that means.
Deputy Cowen had a good innings.
The Government has also had a good innings and it is time it played the game properly. We can play politics when the inquiry commences but the people who have been affected must be helped.
He has a neck to come here and say that.
I have a responsibility to those who put me here to explain the difficulties they face because of the Government's lack of action.
I have listened as Deputy Cowen's colleagues made constructive suggestions, but his claptrap does not suit him.
It is claptrap and rubbish.
Can we have order for Deputy Dooley?
Fianna Fáil was in bed with the banks. I will not listen to that sort of nonsense. I have listened to speakers from every side of the House but that is political rhetoric.
We should leave bedfellows out of this. I welcome the opportunity to contribute to this debate. The motion tabled by my colleague, Deputy Michael McGrath, calls for a serious debate that can allow us to identify solutions to the crisis of mortgage arrears. As others have noted, there is no distilled wisdom or solution on any of the benches of this House. I hope we can have a reasonable debate that allows people to bring forward ideas. All of us deal with this issue in our constituency offices. The names and amounts vary but the principle is the same. People are unable to meet the payments demanded from them by their financial institutions.
The State has recapitalised the banks so that they are in a position to deal with the crisis. If further capitalisation is required we should address that issue, but we must begin from the premise that a viable and sustainable economy cannot be created if we burden people with unmanageable debt. There is an onus on all of us to find a solution to that problem. The first approach should not involve taking a house from such an individual. I take Deputy Maloney's point about the emotive language of eviction and agree it is overused by some. However, it is a real and significant fear for the people who present to my office on a weekly basis. While they are attempting to pay what they owe, they are not real participants in our economy.
They are not living; they are barely surviving, and in some cases the basics in the household are not provided and children are not appropriately dressed or fed. This is a striking situation to which we must find a resolution. I believe the only way to do this is that set out in our motion, which is a legislative approach. I will not get into tit-for-tat, but the Government made many promises prior to coming into office and has made many promises since. At the time it was going through the House we stated that the insolvency legislation would not work, and I do not believe it will. Last week an insolvency practitioner clearly indicated that from his perspective people would be treated differently based on their class in society. It is an appalling vista if the legislation brought forward by the Government allows this to happen. What is critical is to have an independent arbiter between the borrower and the lender with a set of rigorous guidelines, set down by legislation if necessary, who succeeds in arbitrating effectively between both sides and brings forward a solution which is fair to the individual concerned, the financial institution and, ultimately, the taxpayer, but which is also consistent. We cannot have a somebody getting a better deal because he or she lives on the right side of the road or happens to be from a particular professional class and therefore an accommodation is better for such a person than it is for a blue-collar worker. We cannot allow this to happen in a democracy.
Of course banks must be profitable, and they will be. For a cohort of people this is a real crisis, but there are others, such as younger people coming into the labour market, for whom this will not be a problem. Property is much cheaper and they will borrow in a completely different environment. They will provide an adequate resource for these financial institutions to get back on their feet. We must have a suite of measures which manages the bubble in the middle which needs to be solved. It is only with viable families - living appropriately, paying their way and managing their budgets - that ultimately we will have a viable economy. It is incumbent on all of us to try to find a resolution.
As a member of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform I listened to some of the bankers, and I am concerned that they are overly profit-driven. It is true that financial institutions need to reach a break-even point, but some of those in the upper echelons of the banks came in when the banks were broke and they are trying to resolve the balance sheet while aiming towards a bonus when they get the banks back to the marketplace. This should not be the immediate requirement of the State. Of course the banks should be brought to a break-even point, but this should be done in a way that meets the needs of those who have borrowed to an extent they cannot pay back. We must resolve this, but it must be sustainable. We cannot just look at getting banks back to a good shareholder position.
I would like to share my final two minutes with Deputy Peter Mathews.
On a point of order, Deputy Dooley stated to one of my colleagues that the country did not have five months' credit, but for record of the House, this is incorrect.
That is not a point of order.
A line of credit was put in place which involved bringing in a foreign body to rule the country and required us to reduce our deficit and budget. It is inappropriate to state that we had money. We had external lines of credit.
Which we still have, as the Government signed up to them.
I thank Deputy Dooley. It can be shown very simply that the financial crisis and the mortgage and SME crisis that came out of it were caused by six years of dereliction of duty by the banking sector. It is mathematically provable the asset price bubble could only have happened with the credit bubble organised by the banking system, and two thirds of the price bubble is on account of the banks. If they caused the problem they should solve it, but they are not doing so. There is no direction from the Government, or any party in the House, to make them do so. It is about time we parked all partisan politics and stopped taking peripheral actions and having national pedicures and manicures with silly referendums on abolishing the Seanad. We should be concentrating on the heart surgery needed in the banking system, so that the 1 million people in households affected by the financial distress caused by mortgage impossibilities are dealt with, and the same is true for SMEs. It is appalling that there has not been transparency, energy or effectiveness. Recovery inspectors should be going to all of the banks and forcing them to do the work. It must be done on a bespoke case-by-case basis and there is no avoiding this. Legislation does not ever solve a problem; one cannot legislate for brain surgeons to carry out brain surgery, and one cannot legislate for banks to carry out recovery work. It must be done pragmatically by people who understand it and who know the language of finance.
On behalf of the Government, I will respond to the motion on mortgage arrears. The debate over the past two days has highlighted the crucial importance, for both social and economic reasons, of addressing this very serious problem. Thousands of over-indebted households are now trying, as best they can, to deal with the economic legacy left by the previous Administration.
Central Bank involvement is fundamental to the resolution of the mortgage arrears crisis. It has the power to require banks to finally start addressing the mortgage arrears cases on their books. It will no longer be acceptable for banks to apply short-term solutions to cases in which there has been a fundamental and long-term change in the position of the borrower. Durable long-term restructures will have to be applied where appropriate. The Central Bank has now set a rolling plan to require the main banks to propose sustainable solutions to 30% of their arrears customers by the end of this month, to 50% by the end of the year and to 70% by the end of March next year. The first targets for concluded solutions have also been set, at 15% by the end of this year and 25% by the end of the first quarter next year. It has been suggested these targets are insufficiently ambitious. While there is a certain sympathy with this sentiment, the most important requirement is to get the process under way and have it operating in an effective way. It can then be expected to pick up steam as the process continues. There will now be an incentive for banks to provide reasonable offers. If the offers made are reasonable I expect they will be broadly accepted by customers. In this regard, for co-operating borrowers the code of conduct on mortgage arrears requires mortgage lenders to explore all of the options for an alternative repayment arrangement. In addition, if a borrower is not satisfied with a bank's proposal, the new statutory insolvency frameworks are now available where appropriate. The fact that the Insolvency Service of Ireland is now in a position to accept and process insolvency applications is very much welcome.
The Central Bank audit process will be crucial to ensure the banks propose sustainable solutions to mortgage holders. This is an essential part of the overall mortgage arrears resolution process. While the banks state they have met the first targets for the end of June, this must now be independently assessed and verified. It is expected the Central Bank will complete the audit of the first returns under the mortgage arrears resolution process as soon as possible and will disclose the outcome of the audit process.
On an overall level, two fundamental principles underpin the overall Government approach. Most importantly, there is a need to ensure that co-operating mortgage holders who are experiencing real difficulty are, where possible, assisted in remaining in their homes. However, any framework and range of supports for mortgage holders must be able to distinguish between those who cannot afford to pay the mortgage on their primary home and those who choose not to pay.
The principle of a fresh start for people facing genuine difficulty in dealing with their mortgage commitments is very necessary. We cannot leave a significant number of families in limbo because they have no certainty about their future financial situation. However, neither can we allow situations to arise in which people who have the capacity to repay their debts renege on their commitments. Any reduction in repayment discipline by debtors who have the clear capacity to meet their obligations will only impose further costs on the wider population.
The Government is dealing with the mortgage crisis it inherited. It has now developed and provided a suite of measures designed to address the problem of over-indebtedness. This strategy will, over the coming period, deal with unsustainable debt situations and do so in a way that is as fair as possible to borrowers and lenders, but also in a way that seeks to minimise the costs involved for wider society.
Issues and queries raised at the clinics of public representatives are generally a good barometer of the concerns of individuals and families throughout the country. Day in, day out, we encounter the many distressed individuals and, in so many instances, heads of households who are experiencing inexcusable and totally unacceptable delays in the processing and finalisation of social welfare claims. In many instances, such households have no income. Such delays cause much stress for families and need to be addressed by the Minister, Deputy Burton. Unfortunately, no progress has been made by the Minister in improving those times. Within the broader public service, there are sufficient resources to deal with social welfare issues and ensure the appropriate personnel are in place to deal with the processing and finalisation of applications so that they are completed within an appropriate period.
I mentioned these concerns for individuals because they arise predominantly from the dramatic changes to household incomes arising in large part from the lack of employment opportunities and loss of jobs. More recently, we have all met constituents who are in difficulty with mortgage arrears. In many instances, the cases I have come across are entwined with the lack of employment opportunities, and a house that previously had two good incomes might now have none, unfortunately. Such concerns cause great stress to households, whose members fear for the future of their homes. It is a fundamental, strong and very valid viewpoint within Irish society that keeping people in their family homes is an imperative in maintaining a good and progressive social policy, and it also evidently makes good economic and financial sense.
The statistics speak for themselves in regard to the mortgage arrears crisis, which is the greatest social challenge facing the State and our people. From a societal point of view, and also in regard to economic recovery, we need quick and substantial progress in tackling the mortgage crisis. Since early 2011, the numbers in arrears have doubled and more than a quarter of all mortgages are not being paid in accordance with their original terms. It is obvious there are particular difficulties for the 28,000 families whose mortgages are in arrears for more than two years. The importance of this Private Members' motion is also demonstrable in the figures made known at the end of June of this year, which show 142,892 family home mortgage accounts in arrears, with 57,163 of those in arrears for more than a year.
The public at large were shocked to learn through the recent presentations at the Oireachtas finance committee that the banks had issued more than 13,000 legal letters threatening repossession. The discussions at the committee pointed once again to the need to strongly reduce the power of the banks through the establishment of an independent mortgage resolution office or by legislative means, which would mandate the type of resolution the banks would have to offer in certain circumstances. Surely, threats of repossession cannot be regarded as a sustainable solution under the Government's mortgage arrears resolution targets programme, which should have a clear outline and definition of a sustainable solution.
I referred earlier to the need to establish an independent mortgage arrears resolution office whose remit would be to oversee the implementation of sustainable mortgage solutions. I commend our party spokesperson, Deputy Michael McGrath, for putting this motion before the House, and we had a similar type of motion a few months ago, which shows the importance the House in its entirety attaches to this issue. Deputy McGrath has been calling for the past six months for the Central Bank to set out its targets in regard to the conclusion of agreements in respect of customers in mortgage arrears, and, as a party, we welcome the recent Central Bank announcement, belated as it was. I believe many benefits would accrue from measures proposed in the Fianna Fáil Party's Mortgage Resolution Bill, which would remove the power of veto that has been handed to the banks through the personal insolvency legislation. The Bill provides a number of options that could be included in the legislation - for example, split mortgages, interest-only payments for up to four years, extending the period of the mortgage, repayment holidays and debt for equity swaps. Many of the voluntary organisations, such as David Hall of the Irish Mortgage Holders' Organisation and his colleagues, have been doing good work in advocating for and representing people who are under stress and distressed as they find themselves in severe financial difficulty.
In conclusion, I again compliment my colleague, Deputy Michael McGrath. I note Deputy Mathews was very unhappy that he did not have another 30 seconds to finish his comments. I know from him that he wanted to put on the record in particular his viewpoint that the banks need more capital, and that the European authorities will have to step up to the plate in making that capital available. Deputy Mathews has been consistent and very strong on that issue.
I welcome the opportunity to speak on this very important motion. This is the most serious issue to face society in recent years. When one looks at the context of where we are, I am very disappointed with the response of Government to this difficulty. We can argue about the legacy and how we got where we were, but the issue-----
Yes, we can and we will. The issue is that there are now 147,000 people who are in arrears for more than a year, which is simply not a situation we can allow to continue. However, when one looks at how we are addressing it, the difficulty I have is that the Government is almost suffering from Stockholm syndrome when it comes to the banks, in that its expressions of sympathy and empathy lie with the banks. Clearly, what we should be trying to find are sustainable solutions as defined by somebody who is independent.
In the context of the recent finance committee hearings, we now have a situation in which threatening letters are considered sustainable solutions, not only by-----
-----the banks but also by the Central Bank, which has approved such a course of action. This was clearly stated in the hearings of the finance committee. I find it completely unacceptable that banks are sending threatening letters in order to meet the targets that have been laid down by the Government and the Central Bank, and that they see this as the way to address the issue.
We cannot have a situation in the coming years in which there is continual drift just because there is a fear that if proper solutions are put in place the banks might need further capital. Let us be quite clear. That is one of the main reasons the Government has been very soft in addressing the issue with regard to AIB in particular. That is, it is very concerned that AIB might need a further injection of capital. The question that arises, as referred to by Deputies Mathews and Smith, is where that capital will come from. Will it come from European funds or will the State be left to pick up the tab again? I believe the Government has taken that decision.
It is adopting a "softly softly" approach because it does not want to upset the banks' move towards profitability and the State's return to the markets. That approach, however, is at the expense of the 150,000 people who are experiencing huge difficulties in meeting their mortgage payments.
The issue is finding sustainable solutions and the concept of sustainability must be defined by an external independent agency. Let us be clear about this. The Central Bank is not as independent as we would like it to be. After all, it is the licensing authority for banks in the State and oversaw the lending practices of those institutions in the past. We must have an independent oversight entity which can ensure these issues are addressed in a fair way.
The vast majority of people want to pay their mortgage. There is an unknown number of strategic defaulters, with the banks claiming this cohort makes up 20% of all those in arrears. There must be an independent analysis of that claim. It seems clear that the banks are intentionally putting out that figure in order to drive a wedge between various groups in society, including those who are meeting their mortgages payments, those who are unable to do so and those who refuse to do so. The claim that the latter make up 20% of all defaulters must be independently assessed and verified. I am not confident that the Central Bank or the banks are capable of independent and unbiased oversight in this regard.
A mortgage resolution office as proposed by Deputy Michael McGrath is the obvious course of action. However, the Government, with the support of others, has decided that the easiest way to address the issue is to allow the banks the whip hand. These institutions are already compiling a profile of properties in the State which, although the owners are in arrears, have some equity. In other words, the banks have concluded that the best way to address their impaired balance sheet is to go after homes with equity but where the mortgage is in distress. They are profiling as we speak, focusing on areas where property prices are holding up reasonably well. Threatening letters will be sent to many families in distress in certain parts of this city because their homes are worth something. We must have independent oversight to address these problems, but we will not get it from the Central Bank or the banks.
I thank all Deputies who contributed to the debate last night and this morning. I fully accept that some mortgages are beyond rescue and that there must inevitably be an increase in the number of repossessions or voluntary surrenders. Nobody is suggesting otherwise. In fact, some mortgage holders would be better off as a consequence of such action because it would allow them to start afresh.
I acknowledge, too, that the banks must be cautious in safeguarding the capital they have been given by the taxpayers of the State. That is an indisputable fact. I also accept that there are people who are choosing deliberately not to meet their mortgage payments, those who have been described as strategic defaulters. We have called for an independent assessment to ascertain the extent of such practice. It would be very simple for the Central Bank to conduct sample testing of mortgage accounts in arrears and provide independent verification of the scale of strategic defaulting. That would be very helpful to the overall discussion.
However, none of these facts represents an excuse for the banks not making every conceivable effort to rescue mortgages that can be saved. The bottom line is that the vast majority of mortgages in arrears can be rescued if the will is there to do so. The Minister said last night that repossession of the family home should be the very last resort. However, we had categorical confirmation at the meeting of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform two weeks ago, at which Deputies from all parties contributed constructively, that it had not been the initiative of last resort for the banks. I am aware of cases, for example, where no forbearance was offered by the banks and the first action they took was to issue a threatening legal letter. The reality is that the banks have made a mockery of the targets set. Up to 15,000 individual mortgage holders in arrears have had legal letters issued to them or already had proceedings initiated against them. It is a matter of concern that the Government has not responded more strongly to the evidence given by the banks two weeks ago. I am sure that neither it nor the Central Bank anticipated, when the targets were set last March, that the banks' response would be to rely heavily on the issuing of threatening legal letters. Their representatives claimed at the finance committee that they had exceeded these targets. When we probed that claim, however, it became clear that they had been relying on these letters in order to do so.
Any mortgage arrears case which results in the property being handed back to the banks is not a sustainable solution to the distressed mortgage problem; rather, it is a termination of that mortgage. I have acknowledged that there will be cases where a mortgage will have to be brought to an end. In the vast majority of cases, however, such a response is not necessary. It is simply not good enough that we do not have an agreed definition of sustainability in the context of solutions for individual distressed borrowers. It remains a matter for the banks to decide whether an offer is sustainable. It is not good enough that the Central Bank has not even begun its audit of the banks' performances against the targets to the end of June. It should have commenced that audit in July. It is not good enough that the pressure for targets to be set for concluding agreements has come from the troika. RTE broke that story last week and we have since had confirmation of it from the Central Bank. It is not good enough that the banks are treating people inconsistently, as we have seen in the case of split mortgages, for instance. It is not good enough that we do not have a definition of strategic default, nor an independent verification of the extent thereof. It is not good enough that borrowers are not legally entitled to a solution to their arrears problem where they meet certain criteria. It is not good enough that people who are most in need of the new insolvency service will potentially be denied access because of the structure of the fees being charged by insolvency practitioners.
What is needed are long-term sustainable solutions such as permanent interest reductions, split mortgages and debt for equity deals. I made the point last night that however bad the situation was - it is very bad- it would get a whole lot worse if the ECB decided to increase its main refinancing interest rates. When the thousands of families relying on historically low tracker mortgage rates begin to experience that hike, we must have a proper architecture in place to handle the ensuing crisis. We do not have such an architecture at this time. The Government and the Central Bank must do more in that regard.
I thank Members for their contributions to this useful debate. We will have many questions for the Governor of the Central Bank, Professor Honohan, when he appears before the finance committee next week.
Amendment put:
The Dáil divided: Tá, 77; Níl, 48.
Tá
- Bannon, James.
- Barry, Tom.
- Breen, Pat.
- Burton, Joan.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Conway, Ciara.
- Coonan, Noel.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Daly, Jim.
- Deasy, John.
- Deenihan, Jimmy.
- Doherty, Regina.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Ferris, Anne.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Flanagan, Terence.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Heydon, Martin.
- Hogan, Phil.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lyons, John.
- Maloney, Eamonn.
- McCarthy, Michael.
- McGinley, Dinny.
- McLoughlin, Tony.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Neville, Dan.
- Nolan, Derek.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Reilly, Joe.
- Penrose, Willie.
- Phelan, Ann.
- Quinn, Ruairí.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- 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.
- Calleary, Dara.
- Collins, Joan.
- Colreavy, Michael.
- 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.
- Healy-Rae, Michael.
- Higgins, Joe.
- Keaveney, Colm.
- Kelleher, Billy.
- Kirk, Seamus.
- Kitt, Michael P.
- Mac Lochlainn, Pádraig.
- Martin, Micheál.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Moynihan, Michael.
- Murphy, Catherine.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Smith, Brendan.
- Stanley, Brian.
- Tóibín, Peadar.
- Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.
Amendment declared carried.
Amendment No. 1 not moved.
Motion, as amended, put and declared carried.
