Leaders' Questions

The ongoing situation of people in mortgage arrears is unacceptable, given the scale of the continuing crisis and the hands-off approach of the Government and the Central Bank to the resolution of the issues facing thousands of families, whose entire futures are in jeopardy and whose lives are paralysed by the lack of sustainable solutions. Since Central Bank targets have come into play, approximately 13,000 letters have issued from the AIB, Bank of Ireland and Ulster Bank, initiating the potentially devastating prospect of eviction and repossession. That figure dwarfs all other potential solutions such as loan extensions, interest-only deals or split mortgages. Yesterday representatives of Ulster Bank appeared before the Joint Committee on Finance, Public Expenditure and Reform and acknowledged that over 4,000 owner occupiers were in the legal process and admitted frankly that up to 1,500 had a realistic chance of having their homes repossessed. The Taoiseach said some months ago that that was the last resort and something the Government did not want to countenance. The inconsistency of the approach, depending on the lender, is unacceptable. AIB, Bank of Ireland and Permanent TSB have dramatically different approaches with different outcomes. A person who borrows €200,000 in a split mortgage from AIB could be €57,000 better off than someone with the same mortgage from Bank of Ireland. The difference is extraordinary. It is not acceptable that a customer depends on pot luck, whether with Bank of Ireland, Permanent TSB or AIB, which determines that there is a massive difference in how that one option plays out. Eighteen months after the personal insolvency regime was introduced and all of the targets set by the Central Bank, the situation is not satisfactory by any stretch of the imagination and not sustainable for many families. It is time for a fundamental review of the approach to this issue and for the Government and the Central Bank to be far more hands-on, to take a more standardised and consistent approach to the issue of mortgage arrears.

I thank the Deputy for his question. There is no doubt that one of the harshest and dire consequences of the economic collapse from 2008 to 2011 was the indebtedness of many of our fellow citizens, particularly couples who could not afford to pay their mortgages. The Government has addressed this issue with the very strong assistance of the Central Bank. There has been agreement across the House on the approach where the Central Bank set quarterly targets to resolve the issue of impaired mortgages and these are being met. In round terms, sustainable solutions have been put in place for 54,000 households which cannot cope with their mortgage arrears. That is significant progress and I hope progress will continue. That is why I am so pleased that the Joint Committee on Finance, Public Expenditure and Reform has called in all of the main lenders this week and is putting them through their paces. Representatives of Ulster Bank came in yesterday. Representatives of Permanent TSB are in this morning. I understand it states it has offered new arrangements to 60% of its mortgage holders and it seems to be leading in exceeding targets. It is very important that they are met. We will continue to drive them and I know the committee will pressurise the lending institutions to ensure they keep to them.

The other side of indebtedness is the buy-to-let sector, in which the banks have made significant progress. Bank of Ireland claims to have offered solutions to 90% of its buy-to-let customers, while AIB claims it has offered solutions to 65%. It is one of the big problems impinging on couples’ personal lives, many of whom are young. It is a difficult issue and a drag and an inhibition on the economy because people coping with so much personal debt are not fully participating in it. We must continue to drive forward. There is a range of solutions. It is not pot luck. The Central Bank has set down a protocol, set the targets and agreed the range of acceptable solutions. There is a standardisation of approach across the banks. Within the range of options available to the lenders, one bank moves more strongly in one direction than another. There are variations within an agreed scheme. I acknowledge the seriousness of the issue, but steady progress is being made and with everybody’s help, we continue to drive forward.

The variation is stark. For example, on the split mortgage it is as wide as €57,000. It could not be acceptable that, depending on which bank gave the mortgage, one could be better off by €57,000 in the application of a single option on the split mortgage. It should not be reduced to how lucky one is to happen to have a split mortgage with AIB as opposed to with Bank of Ireland or Permanent TSB.

The Minister for Justice and Equality said he would review the personal insolvency regime after 18 months. There have been only four cases. It has had a negligible impact on the mortgage arrears crisis. The Central Bank targets seem to have led to an attack on the mortgagee rather than the crisis. It has led to a ramping-up of legal actions and up to 13,000 legal letters have been sent. They have a terrible impact on families who receive them. That aspect needs to be reviewed.

The Minister spoke about cross-party consensus. My colleague, Deputy Michael McGrath, made the point at the meeting of the Joint Committee on Finance, Public Expenditure and Reform that it was very worrying that 30% of Ulster Bank’s customers who were in arrears for over 90 days were involved in the legal and repossession process. Deputy Ciarán Lynch who chairs the committee has said Ulster Bank is “very, very opposed to any debt removal that is based on people remaining in their home.” The central objective of the Government as articulated in the House, to protect people in their family homes, is falling apart at the seams. The banks have a very determined focus, in response to the targets, on starting a significant process of repossession. The first bank to appear before the committee yesterday stated that up to 1,500 family homes could be repossessed and that that was a realistic prospect. Is it not time for a more fundamental review of how the Government and the Central Bank have approached this issue, with a view to making the protection of the family home the number one priority in resolving and responding to the difficulties people undoubtedly face?

It is the clear objective of the Government that persons in mortgage distress should continue to live in the family home and that from the range of solutions available, solutions other than repossession should apply. It is also true that unless repossession is part of the legal system, there will be no mortgage market because nobody will lend unless there is legal potential to realise the collateral. It is part of the legal system. The Government’s relationship with each bank differs.

The Minister should take them on.

While Ulster Bank is regulated by the Central Bank, we do not have a shareholding in it. We do, however, have 99% of the shares in AIB and 14% of the shares in Bank of Ireland. I read in this morning’s newspapers what the chief executive of Ulster Bank had said at the committee yesterday. It was not as blunt as Deputy Micheál Martin represented it.

What he said was that the purpose of legal letters to many customers was to get them to engage, because solutions cannot be brought forward unless they engage. The purpose was not to proceed to repossession but to get engagement in the process when the letters that had been written previously were being ignored by customers.

I do not accept that.

Sorry; we are over time.

I am simply telling the Deputy what was reported. I assume it was an accurate report of the committee's proceedings.

I know of many people who have been trying to get in touch with the banks without success.

Please, Deputy; we are over time.

When the Deputy quotes people he should quote them in context and give the full quotation. Selectively quoting to make some kind of political point is not helpful.

The Minister for Finance should not have to read the newspaper to know what is going on.

It is the Government's policy that people will continue to live in their family homes and that solutions other than repossession will be put in place. It is also our policy that the lending institutions that have entered into agreements with the Central Bank will keep those agreements and meet their targets. To date, they are doing so, and 54,000 permanent solutions have been offered. We will continue to drive that agenda. I am delighted that the Joint Committee on Finance, Public Expenditure and Reform is scrutinising the progress being made by the lending institutions. Without being harsh on the lending institutions, I am glad that members of the committee are putting pressure on them to continue meeting their targets.

I am one of the members of the committee who is putting pressure on the banks. I do not get up in the morning to come to the Houses of the Oireachtas in order to be misled or lied to by senior bankers, as is happening in committee room 4. I have just come from a meeting with representatives of Permanent TSB, whom I asked about the bank's split mortgage product. They said they do not charge interest rates on the warehoused portion of the product. After I left the meeting I contacted a customer of Permanent TSB, who sent me a copy of a document the bank issued two weeks ago stating that interest would be charged on the customer's warehoused account at a rate of 4.1%.

The banks are running rings around this Government and it is time the Minister stepped up to the mark. He should stop hiding behind the Central Bank and its targets and start to rein them in. Last April the Taoiseach told this House that he expected a substantial contribution from the leadership of the banks in respect of pay and pensions. He further stated that it would be right to have such an expectation because these are extraordinary salaries. He made his comments in the context of the Mercer report and at a time when Bank of Ireland was holding its AGM. The Minister was to vote on Richie Boucher's salary. One year later, not one cent of the basic pay of top bankers has been cut on foot of the Mercer report recommendations. In particular, citizens of this State will be shocked to learn that, once again, the CEO of Bank of Ireland, Richie Boucher, has earned an obscene salary-----

I would prefer if the Deputy did not mention the names of people who are not here.

The CEO of Bank of Ireland is paid an obscene salary from a bank that has only been saved because of the sacrifices of the Irish taxpayer. We know the total package is €843,000. Bank of Ireland exists only because it was bailed out by citizens of this State. The cost incurred by the taxpayer has been immense. Despite all the hardships endured by ordinary hard-working people across the State, this bank continues to show contempt for them in the way it deals with repossessions and legal letters and its obligation to provide credit to small and medium-sized enterprises. Was the Taoiseach misleading the House when he made his comments last year, or was he misled?

I assume that Bank of Ireland will appear before the committee in the coming days. The Deputy can raise his points directly with the representatives of the banks. I do not know whether the CEO will be appearing but if he is, I am sure he will be anxious to reply to the points raised.

Bank salaries were capped at €500,000 by this Government. The arrangements for the CEO of Bank of Ireland were entered into prior to my becoming Minister and they were agreed by my predecessor. We have 14% of Bank of Ireland. It is, by and large, a privately owned bank, and shareholders of privately owned banks tend to award key staff. That is our position on that. The targets set in the Mercer report for savings in the cost base across the banks have been exceeded and it has been a very successful exercise. They used a portfolio of means to meet the targets and these do not all involve salary cuts, even though there have been significant salary cuts. The Mercer targets have been realised, when all the initiatives are taken into account, and the cost base of the main banks has been driven down substantially.

On foot of a freedom of information request to the Department of Finance, I received a copy of the advice given to the Minister in respect of last year's AGM. It was clear that his officials did not want him to vote for the remuneration package of the CEO of Bank of Ireland. They said it would be inappropriate given that he had not received responses on the Mercer report. The Taoiseach stated on that day that the salaries were extraordinary. He expected significant reductions from the leadership of the banks. One year later, we know that not one cent of the basic salary of €843,000 has been reduced. We know that people in Bank of Ireland and other banks have lost their jobs, but at the highest level, not one cent has been taken from salaries.

On 25 April, while this House is in recess, the Minister will have the option, on behalf of the Irish people, to cast a vote based on his shareholding in Bank of Ireland. He will have to vote on the resolution to endorse the remuneration packages. Yesterday he told me that he has not yet considered the matter. He needs to do what the Irish people expect from him and what he should have done last year. He needs to say that paying €843,000 to the CEO of Bank of Ireland is obscene at a time when the bank is not dealing with the mortgage crisis appropriately and when Irish people are struggling. As the Minister for Finance, he should not endorse such packages. I ask him to clarify for the House the position he will take in two weeks' time.

I replied to that question yesterday when I told the Deputy the position. I do not believe in gesture politics or idle symbolic gestures. The State has 14% of Bank of Ireland. How we vote on this issue at the AGM does not matter. It is going to go through anyway, and it sends a signal-----

The consideration I have to take into account is the kind of signal it would send to the wider investment community, which is anxious to invest in Ireland through the activities of the IDA and the purchase of property.

What sort of signal does it send to those who were crippled by the Minister's austerity policies?

It is an issue that has to be considered carefully and I do not want to do anything that would damage the reputation of Ireland internationally by seeming to interfere in a commercial entity. I will consider the Deputy's submission and let him know what we will do in due course.

Deputy Donnelly, please.

I thought symbolism was very important. We have not heard anything else over the past two days.

Thank you, Deputy Higgins. Unfortunately, I did not call you; I called Deputy Donnelly.

Give him a chance, a Cheann Comhairle.

Last week thousands of Irish Nationwide mortgages were sold to two US debt firms, Loanstar and Oaktree. We are told the firms bought mortgages that were in arrears. I presume that is because they believe they will get most of their profits from families whose mortgages are in arrears. We do not know the discount at which the loans were sold, but there are a lot of things we do know. We know that sales of this type around the world typically attract discounts of 70%. A mortgage of €250,000 would be sold for approximately €75,000. We know the special liquidator did not ask Oaktree or Loanstar for a binding commitment on adhering to the CCMA. We know there will not be oversight of their voluntary commitments. We know the families were not allowed to bid on their own mortgages. The Minister cited a PwC report on this but he refused to release the report to the Dáil. We have since received a copy of the report from the special liquidator. The Minister has stated that neither he nor any of his officials has had access to the report.

The end of the report is quite interesting in that it shows the criteria used to disallow the families from bidding for their own mortgages. What we know from those criteria is that the welfare of these tens of thousands of men, women and children was explicitly excluded from any consideration. Worse than that, we know that when I asked the Government if it would pause the sales process to see if we could find a process that allowed the families to bid and return the same or more money to the State, the answer from the Government was, "No." In short, the Government has sold these men, women and children down the river.

I have met some of the families whose mortgages have just been sold to Lone Star and Oaktree. These are people who could have refinanced their mortgages at whatever discount has been given to these US debt firms but now will not, and many of whom will end up being evicted. What does the Minister say to these tens of thousands of men, women and children? What does he say to a family whose mortgage of €250,000 has just been sold to a US debt specialist for €75,000? How does the Minister explain to them that their interests were in no way considered in deciding not to let them bid on their own mortgages?

IBRC was liquidated by a special liquidator who was empowered to do so by special legislation that was brought through the Houses of the Oireachtas and the liquidator acted in accordance with that legislation. His primary mandate was to realise the best possible price for the assets he was disposing in the interests of the State and of the Irish taxpayer.

In that context, he made a decision to sell loan books rather than individual loans. That is the advice he got, I understand, from the document that Deputy Donnelly has referred to, and in doing so he succeeded in having a successful sale from the liquidator's perspective. He did not infringe on the rights of any mortgage holder. They have not been disadvantaged in any way by the transfer of their loans to a different owner. He also got assurances from both Lone Star and Oaktree that the protocols that have been put in place by the Central Bank for relationships between lenders and mortgage holders would be honoured.

I stated yesterday here in the House that we are preparing legislation to give a legislative base to that. I have sent the heads of the Bill to the Central Bank. I was not in a position to discuss the heads yesterday here in the House because they have not yet been legally proofed by the Attorney General's office, but I intend to have an ongoing dialogue in the finance committee and I will report progress on putting the statutory base under the formal commitments that have been given by the loan book purchasers.

The problem with all that is the Minister wrote the legislation that has determined all of this. He wrote and forced through here late at night the legislation that stated the Government would not consider the interest of the citizens. The Minister stated in reply to Deputy Pearse Doherty that he does not want to send out a signal to the international markets, to which the Government appears to be in thrall, that there is anything wrong here, yet he has no issue with not sending out a signal to the Irish citizens who elected him and whom he is meant to be looking after.

The Minister's position seems to be that we should hope everything works out and they voluntarily comply, but the policy is all about choice. These are the choices the Minister has made: do not consider the interest of the mortgage holders; do not provide the PwC report to the Dáil; do not ask the debt firms for binding commitments; do not provide oversight for how they behave; do not legislation to ensure they behave; do not let families bid on their own mortgages; and shroud everything in secrecy.

I am holding up what we got from the special liquidator. We managed to get a few pages with words on them, but most pages, I am sad to say, look like big black squares.

We are not entitled to display documents in the Chamber.

I am sorry, a Cheann Comhairle.

Outrageous. Democratic revolution.

What they did not redact was the criteria that were used based on the Minister's legislation. The criteria used were size of the loans, timing constraints, likely credible interest, risks associated with execution of the model, level of interest at the sectoral sector, estimated equity value and performance of the underlying business. In all those wide criteria, nowhere has crept in the interests of the tens of thousands of men, women and children involved. Why, as Minister for Finance, does Deputy Noonan stand over a process that was able to consider many different criteria but somehow was not able to consider the interests of Irish citizens?

Deputy Donnelly's strong advocacy illustrates one of the main problems with the approach taken by the generality of the Opposition to all these and related matters. Nobody stands up for the taxpayer anymore. Everybody stands up for the individual who has a difficulty. The proposition always being put is that the individual who has a difficulty must be relieved by taking funds from the generality of taxpayers to relieve it. That is the position.

A Deputy

It is not.

It has been the position widely advocated on mortgage relief as well. The job of the liquidator is to ensure that he gets the best possible price for assets so that the taxpayer is not asked to contribute more to fill some kind of black hole-----

The State has already taken the cut.

-----if the liquidation does not produce full value. That is the position. It is much easier to present the individual case, but there is a general case as well which I am obliged under law to protect, that is, the protection of the generality of taxpayers so they do not get another bill.

What about the citizens?

That is the nub of the position----


-----and all the advocacy in the world will not remove that.

The liquidator was independent in the exercise of his functions. Those who participated in the debate when we brought in the legislation were very anxious that there would be no political interference with the liquidator, and rightly so. The liquidator is carrying out his mandate in accordance with law.

It is also true to say no single mortgage holder is worse off because Lone Star or Oaktree has his mortgage than he was when his mortgage was inside in IBRC. He is no worse off, but Deputy Donnelly is making a case that he should be better off and that the taxpayer should pay for it. That is the case Deputy Donnelly is making.