JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Thursday, 3 Dec 2009

Home Repossessions: Discussion.

Chairman

Our first item concerns matters relating to the assistance and protection of home owners. I welcome Mr. Barry O'Flynn and Mr. Ignatius Beglane to this meeting. Members will recall that Senator Marc MacSharry wrote to the committee and requested that representatives of the group working for the prevention of family home repossessions be given an opportunity to outline its plans and concerns with regard to assistance and protection of home owners.

We will begin with a presentation from the group and this will be followed by a question and answer session. I remind members, those in the Visitors Gallery and witnesses appearing before the committee that their mobile phones should be left switched off until they leave the meeting. I draw everyone's attention to the fact that members of this committee have absolute privilege, but the same privilege does not apply to witnesses appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. Under the salient rulings of the Chair, members should not comment on, criticise or make charges against a person outside the House, or an official by name or in such a way as to make him or her identifiable. The committee cannot guarantee any level of privilege to witnesses appearing before it. I ask Mr. O'Flynn to make his presentation.

Mr. Barry O’Flynn

I thank the Chairman and members for their invitation to address the Oireachtas Joint Committee on Finance and the Public Service. Our group is composed of Ignatius Beglane, businessman, Cathal O'Donnell, chartered accountant, Dermot McDermot, solicitor, Senator Marc MacSharry and myself. I manage a credit union in Sligo. The views expressed in this report are personal to ourselves.

Our only objective when we met first in April was to find a way to assist the many thousands of families who face the very real threat of losing their homes through repossession by banks and building societies due to mortgage arrears. In August, we presented our document with recommendations to the Minister for Finance. A copy was also furnished to the leaders of all parties.

Nobody here needs reminding of the current position of the country. However, some headlines are worth repeating and support our position. More than 77,000 households are in arrears regarding an overdrawn bank account, credit card balance or mortgage, with mortgage arrears being the most prevalent. The live register shows an increase of almost 162,000 in the year to October 2009 and an unemployment rate of 12.5%. Another announcement is due today. Almost 14,100 households are dependent on mortgage income supplements. Approximately 1,000 new applicants a month come to that service. The ECB left its key interest rate unchanged last month and the indications are that this rate will remain unchanged well into 2010. I understand it will make an announcement again today. However, it seems absolutely certain that mortgage holders in Ireland will see an interest rate rise as banks and building societies seek to increase their margins to boost profits. An economic recovery is also likely to happen more quickly in Europe generally than in Ireland, which will also have the effect of increasing rates when we least need this to happen.

The High Court listing for Monday, 30 November listed 22 new applications from the following institutions: five from Start Mortgages; four from Stepstone Mortgages; three from KBC; three from GE Home Loans; two from Bank of Ireland; one from EBS; one from Leeds Building Society; one from Nua Mortgages; one from Springboard Mortgages; and one from Ulster Bank. Start Mortgages had a further 20 cases adjourned on the same day. This means in excess of 70% of the cases on Monday are by institutions not covered by the IBF protocol with MABS.

The protocol agreed by the Irish Bankers Federation and MABS and the recent announcement by ten mortgage lenders to give home owners more time to tackle arrears before taking legal action is welcome but not sufficient to address the problem. We strongly believe that it should not be left to the mortgage lenders solely to decide on protocols for this issue.

The repossession of family homes by financial institutions creates tremendous social, psychological and economic issues for borrowers and their families, and places further financial pressures on the State. Our objective is that the repossession of a family home due to mortgage arrears should not be allowed to happen without a detailed independent analysis of repayment capacity, an examination of the quality of the mortgage application and consideration of a range of alternative actions. If it comes before the court, an order should not be granted until the court is satisfied as to the following: the loan was properly granted and that responsible procedures, underwriting and analysis of the capacity of the borrower had been carried out; an independent analysis of the current position of the borrower to repay the debt has been carried out; and that this analysis suggested solutions to the court to allow the debt to be addressed by the borrower.

MABS is already in place throughout the country to assist those in financial difficulty. It is ideally placed to assess ability to pay versus refusal to pay and to identify and propose mutually acceptable solutions within the ability of the mortgage holder. We recognise that additional resources were allocated to MABS by the Minister during the year. It is likely that they are creaking at the moment and that MABS is under serious pressure.

There are some recent developments that are pertinent. The Enforcement of Court Orders (Amendment) Act 2009 passed into law in early July to remedy the constitutional deficiencies of imprisonment of a debtor outlined in a recent High Court judgment. The purpose is to enable the court to hear the debtor in order to ensure it is satisfied whether he or she has wilfully refused to pay and that all other steps possible, including variation of the instalment order, have been taken to recover the debt. The court will not imprison the debtor unless satisfied that he or she has the means to repay and his or her failure to do so is due to wilful refusal. The burden of proof is shifted to the creditor to establish that the failure to pay is not due to inability to pay.

The Irish Bankers Federation and MABS have established a protocol for dealing with debt arrears. In August, the Northern Ireland Courts Service introduced a pre-action protocol for possession proceedings based on mortgage arrears in respect of residential property. The Financial Services Authority in Northern Ireland found that "while most lenders largely complied with good practice, some lenders were regarded as too ready to commence proceedings quickly." The Office of the Lord Chief Justice stated: "It therefore seems that there is scope in Northern Ireland for the increased formality and clarity of a protocol to help raise all litigants to a common standard of best practice currently achieved by many but not all lenders in possession cases." Part of its dispute resolution is to discuss options such as extending the term, changing the type of mortgage, deferring payment of interest or capitalising. All of these initiatives seek to differentiate between those who refuse to pay and those who cannot pay.

We propose the following solutions to allow the borrower time to address the debt: interest-only payments; permanently extending the mortgage period; rent back property from lender; a moratorium on payments; and fixed rates. The banks' position is that there are substantial penalties for breaking fixed rates to avail of lower current rates. We believe it is much better to address the problem and break the interest rate by lowering it than to default at a higher rate. It is also clear that a substantial number of new mortgage holders should never have been approved for the amount of money that they have borrowed. No order for repossession should be granted to these lenders. The terms of these loans should be amended to what the borrower can afford.

There is an urgent need for action now. It is imperative that a principle for dealing with repossessions similar to that enacted in the Enforcement of Court Orders (Amendment) Act 2009 for dealing with personal debt be introduced without delay. To complement this, a number of proactive alternatives such as those I have outlined should be agreed and made binding with all the guarantee-covered lenders at a minimum and also to include all mortgage providers operating in the State. The introduction of these measures will take work and commitment, but the cost is insignificant compared with the socio-economic catastrophe that, in our view, they would help to prevent.

Chairman

I thank Mr. O'Flynn for his presentation. We are all aware of what is happening and the solutions he has proposed are under consideration. We definitely need stronger solutions rather than just protocols from the lenders.

Senator Marc MacSharry

I thank the delegation for coming. I appreciate the committee giving them time. As members know, I am a member of the group and am associated with writing the submission. It is an extremely important situation. While the IBF protocol and the code of conduct for mortgage arrears are all in place and are morally admirable, in practice, last Monday there were 13 High Court orders for repossession, 11 for family homes. None of the orders was sought by institutions covered by the IBF protocol. Therefore, we seek a recommendation from the committee that the Minister introduce a statutory basis whereby an order for repossession cannot be obtained by a financial institution until it has been through an assessment by MABS under the kinds of recommendations acknowledged in this report and addressed in the Irish Banking Federation protocol.

Deputy Frank Fahey

I welcome the group. I thank Senator MacSharry for the initiative in working with the group and bringing its members before the committee. I apologise for my absence from last week's meeting with representatives of the banks even though I had asked for them to come in. I was sick in bed, albeit partly self-inflicted.

The issue has been discussed here and we have put it to the banks. By and large the banks have been more than anxious to meet people's requirements. Recently the Minister put in place a number of guidelines. People who do not engage with the banks and just ignore the situation are the ones who get into trouble. Anybody who makes an effort to communicate and explain their problems find the banks are quite reasonable, with the exception of organisations such as Start Mortgages, which should be put off the map as far as I am concerned.

I recently dealt with the case of a woman in Galway whose husband had died. A shark agent had filled in the mortgage application form and included an incorrect detail. The husband, when he was alive, was illiterate and did not obtain life assurance. The widow is now being asked to pay €2,150 per month on a mortgage of €200,000 and €40,000 in arrears. That is unbelievable. One can borrow €200,000 at present and make repayments of €800 or €900 per month. The company should be put out of business. I get a good response from every other bank I approach on behalf of constituents in that they are prepared to deal with them.

I agree there is no reason anybody should lose his or her house in the current climate. Whatever we can do to be of assistance to the group for the prevention of family home repossessions in getting this message across, both to the banks and the community, should be done. Does the group find that people who engage with the banks and request the restructuring of their repayments are facilitated?

I agree with all the proposals made. We will certainly put them to the Minister for Finance with a view to their implementation.

Mr. Barry O’Flynn

I thank Deputy Fahey. Irish banks have acted fairly responsibly during the years, as we are realistic enough to realise. Until recently, people would have had to have ignored everything and not appeared at meetings, etc., to have had their homes repossessed, but this is a new era. Yesterday an order was granted to Stepstone Mortgages in a judgment on a loan with an APR of 9.5%. Interest rates have decreased and the current rate is 3.5%, yet people are paying at a premium rate.

I would differentiate between the banks. The protocols are fine and there are many laudable aspects thereto that the IBF has agreed with MABS and that the Financial Regulator has agreed with the institutions. However, they should be stronger. The Financial Regulator's protocol states: "If a third repayment is missed, the lender may issue a formal demand for either the full amount due on foot of the mortgage or for possession of the property". Bearing in mind that the banks are being realistic in most cases, where there are protocols, there is evidence to show they are not sufficient. People need to engage with the banks and the courts and if they appear before the District Court or the High Court, there should be a brake on proceedings or on the action taken, as repossession serves nobody's interests.

The comment by the Lord Chief Justice in Northern Ireland is very pertinent. He said that while most lenders largely complied with good practice guidelines, some were regarded as being too eager to commence proceedings immediately. Sadly, we find this is also the case in this jurisdiction.

Deputy Seán Barrett

I welcome the delegation and sympathise fully with the case presented. It should be remembered that if some of the lenders are allowed to repossess homes – we are talking about homes, not investment or other properties – the unfortunate people concerned become a liability on the State. In this context, the State has a particular interest in this problem, particularly in terms of the lending that occurred in recent years. It is clear that sums of money were given to people at exorbitant interest rates that would be incapable of being repaid in any recession. There was crazy lending and borrowing. Not everybody is in a position to understand what he or she is signing up to. The natural step is to try to do all one can to purchase one's home. That is human nature and must be understood, but I agree it is our job to find a reasonable solution.

I am glad to hear Mr. O'Flynn recognise there are responsible lenders. I am sure the solutions being proposed by his group would, in most cases, not present a great difficulty to what we regard as proper lenders. It is the other lenders which are charging exorbitant rates and acted totally irresponsibly in lending the money in the first instance about which we are concerned. Therefore, they are not entitled to the same consideration as the more traditional or responsible lenders. It must be stated, however, that some so-called responsible lenders went overboard in trying to build up a book by giving loans of 100% and 110%. They will have to pay the consequences.

Our job, as politicians, is not to interfere with the market too much but to ensure people are treated fairly. I agree with Senator MacSharry in his suggestion that an institution should not take somebody's home without adhering to a strict set of criteria stipulating that everything possible should be done before a court order is granted. The request made is very reasonable and I do not have a great difficulty in supporting it. As a committee, we should make a recommendation to the Government that it take action to ensure our reasonable request is placed on an official basis, as distinct from a statutory basis. Thus, people will know exactly where we stand.

At some stage the committee should examine the activities of some lenders not within the scope of this topic and make recommendations as to the standards that were or were not applied and the changes that should be made to control irresponsible lending. A definite period should be established in which there would be an opportunity to address matters before legal obligations arose, having first been provided with advice one might not otherwise be in a position to obtain. We should consider this issue urgently or the lenders in question will continue to practise in the way they have practised up to now. Let us be honest about the fact that, in most cases, they were doing business because their clientele included those who had been refused loans when normal lending standards were applied. With the benefit of hindsight, we can say there was a failure in this regard. It should not be allowed to happen again.

Deputy Michael McGrath

I welcome the delegation and thank it for its work. I also thank Senator MacSharry for preparing an excellent paper that will certainly help to inform Government thinking on this issue, which is only emerging. The picture will change in the months ahead. If the ECB interest rate increases, there will be a significant increase in the number slipping into serious arrears and getting into trouble with their mortgages.

There are a number of issues to be addressed. I agree with Deputy Barrett that the main banks certainly lent irresponsibly and in many cases did not apply the necessary stress tests or carry out thorough assessments of people's ability to repay their loans. In the main, the principal institutions have been responsible. They have pursued those who have slipped into arrears, but that is not to say that in certain cases they pursued people inappropriately.

The real problem, as Deputy Fahey stated, is with some of the sub-prime lenders. I have experience of Start Mortgages in respect of a young man in Cork city who contacted me recently. He is only in arrears to the tune of the repayment for one month and already receiving aggressive telephone calls at 8 p.m. or 9 p.m. and at the weekend. This is highly inappropriate. There is a need for us to formulate a coherent policy. The suggestion there be a statutory requirement for an independent assessment of one's ability to repay prior to sanctioning repossession of one's home should be taken on board.

The loss of a home is devastating for a family. This paper, which contains some positive suggestions, will help inform the Government's thinking in this area. Where people are in a hopeless situation, interest-only payments or extending the term of the mortgage will only delay the inevitable and postpone the pain. Suggestions such as the bank taking an equity interest in property and renting it back to the borrower may have to be pursued. Imaginative ideas which will allow people to remain in their homes with the loan restructured by way of the bank taking an equity interest should be actively pursued. The concrete proposal of a statutory requirement for an independent assessment, perhaps by a MABS report, of a repossession being sanctioned is a sensible suggestion which I support.

Deputy Richard Bruton

I welcome this submission. Has the Northern Ireland regime introduced this core notion of a loan not properly granted not being enforceable by repossession? Is there any other precedent for this? How have the courts assessed the issue of a loan that was improperly given out? Most of the mainstream banks and building societies would claim they followed reasonable practices. Have courts overturned these or is it the twilight lenders who could be affected by this process?

If 35,000 people face repossession, only a small proportion of them will be with sub-prime lenders. Will NAMA have a role? Under the legislation, the Minister can designate a category, such as houses at risk of repossession, as a loan category. These would be acquired by NAMA at a substantial discount from the face value. Could that be used as a vehicle in which the banks would have to crystallise their losses on these loans with NAMA in possession of loans at substantial discount from their face value? Even at that face value, they might not be commercial and the House was keen to see NAMA run on a commercial basis.

How would a scheme where the banks take equity in private homes work? In most cases, the mortgage would be far higher than the house value and, in a sense, the bank owns all the equity. Will the bank just become a landlord and forgive the debt?

This is an issue that will burst upon us. At the moment there is a slight abeyance because redundancy lump sums are carrying people through. Some new thinking needs to emerge in this field. If there is a legal precedent, with no question of it being unconstitutional due to rewriting the rules after the event, it certainly sounds an interesting approach.

Mr. Barry O’Flynn

In Northern Ireland such a protocol was introduced in August but I do not have any concrete examples of cases that have come before it. Yesterday in the High Court, Mr. Justice McGovern in a case with Ulster Bank declined to grant an order of possession against a man who borrowed €80,000 on a property in Donegal with €23,156 outstanding. The plaintiff did appear in court to plead his case. If people do not engage with the courts system, the judge probably has no alternative but to grant the order. Much of this will come down to the Judiciary taking a view as to what is reasonable and if people demonstrate they did their best within their means.

The percentage of sub-prime mortgages in the overall market is modest. It is disproportionate, however, in the number of court proceedings concerning such mortgages. They certainly do not need to be asked twice. Deputy Michael McGrath referred to a man who was one instalment in arrears and how the penalty interest was racked up severely, making it practically impossible for the borrower.

I understand the point about taking equity where there is no equity. NAMA would be a positive option to address the loan as a non-repayable one. What we are asking is that the owners of the house would be allowed to live in their family home and given time until their situation improved.

There are, however, cases of a €300,000 mortgage on a house which now has a market value of €125,000. The largest loan made by the Sligo Credit Union is €35,000. How could the banks have possibly approved some of these loans? Some of them just do not stack up. It could be demonstrated that the loan was never good from day one. Whether it is through NAMA or the banks and the family can only afford €600 a month, then they should be allowed to retain their family home.

We saw the harrowing situations for home owners with the floods last week. Repossession is a similar situation where people find themselves as desolate and exposed as those unfortunate people who find their home ruined by flood waters. What is achieved by turfing people out on the street or taking the keys and telling people they are out? The State rehouses them and it solves nothing. If mistakes have been made on day one, the maths will determine what a person can afford and that he or she should stay in the house until such time as the situation or the market improves and equity comes back into the equation. Our main concern is that people should retain their homes for the sake of their children, families and their well-being. The alternative just does not make sense at this stage. I hope that answers the questions.

Deputy Richard Bruton

If we have to draft new legislation to enforce this, I am not a lawyer but I am not sure as to whether it would be constitutional to re-write conditions, or whether a test of reasonableness could be put into law and would be robust. The committee can find out what is being done in Northern Ireland.

Senator Marc MacSharry

The core of what people want is to keep people in their homes. Everybody seems agreed on that, and while Deputy Bruton is not a legal expert, neither am I. Financial institutions throughout the world have proven extraordinary expertise and are able to design financial instruments to make money. I have every confidence that they are able to design appropriate measures along the broad guidelines outlined in this proposal to meet their needs while at the same time ensuring that people could remain in the family home. What we need is a basic statutory commitment to the effect that a court order is not achievable until a range of alternatives are considered. They may not be exclusively what the witnesses have in mind, and might even be designed by the financial institutions.

Deputy Chris Andrews

I have found the presentation very informative. It is important to differentiate between the larger banks and the likes of Smart Mortgages, the latter of which are nothing less than loan sharks which continue to prey on vulnerable people. One solution is the permanent extension of the mortgage period. At one point most mortgages were over 20 or 25 years, but that period, along with 100% mortgages, has been extended to 40 years. When that started to happen I thought it was an enormous burden on everybody concerned. However, extending that further means that people would be apprehensive about pushing the burden of repayment on to their children or whoever follows them. Where is the line to be drawn, at 40 years, perhaps, or 80? I should be interested to hear Mr. O'Flynn's views in that regard.

As regards the repossession figures for AIB and Bank of Ireland, has Mr. O'Flynn the statistics since the start of this year? How many repossessions have occurred involving AIB and Bank of Ireland?

Mr. Barry O’Flynn

I do not have the figures, but I suspect they are quite low. We realise that banks exist for one purpose, namely, to make money for their shareholders. However, most of our banks have acted relatively responsibly and the granting of a repossession may not mean that it will happen, even though an order is given. I do not have specific numbers for this year, but our fear is for the future rather than what has occurred in the last six to eight months. At lunchtime today the ECB is to announce that interest rates will remain unchanged in the short term. Permanent TSB last had an interest rate increase last April when there was no ECB increase. One of the major things to adversely affect people who are already stressed, financially and otherwise, would be an increase in mortgage rates simply to regain profitability in banks where ECB rates have not risen. If the cost of such an initiative is people losing their homes, that is unacceptable.

I do not know where the line should be drawn as regards a mortgage term. I am 46 and I am lucky by virtue of my age that I bought a house in 1991 or thereabouts. I am no more clever than somebody of 26 who is now buying a house for €300,000 or whatever. I have a moderate period left on my mortgage and I am very lucky. However, if the solution to the problem is to extend the mortgage term now and it becomes a 35 or 45-year mortgage, which allows people to retain their houses, the secondary argument is practically immaterial, namely, that they retain possession. It would be nice to believe that equity will return eventually and a property market will re-emerge. I am sure many householders would be delighted in the event, as equity would mean the house could be sold, the debts cleared and they could move to something more manageable. If that happens when markets recover, as they will, it will be wonderful.

Ireland is somewhat unusual in terms of our desire to own property and have 20-year mortgages. In many European countries the practice is to have a lifetime mortgage which, sadly, is passed on to the next generation. I do not have a specific answer on the length of the mortgage term. It is not nice to think of somebody in their 30s or 40s with a 40-year mortgage because his or her life is planned out and there is no variance. Imagine having to cope at the age of 26 or 29 with a mortgage of €2,185 a month, which is the case with some repayments. It is beyond comprehension.

Deputy Kieran O’Donnell

I welcome the witnesses. Senator MacSharry made the point that we are all here for the same purpose, namely, to ensure that people can stay in their homes. Can this be achieved without putting it on a legislative basis? Scotland is at present enacting legislation to deal with repossessions. The procedures the witnesses have outlined are what the Scots are talking about putting on a legislative basis. The judge will have to be assured that the very last thing that can be done is to repossess a house. To expand on that theme, in the recent NAMA legislation Fine Gael put forward amendments to the effect that it should be on a legislative basis.

The Irish Banking Federation, through its members, has stated it will insert a protocol whereby there will be a six-month roll-in period. That does not cover sub-prime lenders. Therefore, can there be a practical solution without that being on a statutory footing? The proposal as it stands contains too many variables. It is voluntary rather than statutory in nature. Would the witnesses support our proposal to the effect that it should be on a statutory basis? The main reason is that this would ensure it would apply to all mortgage providers.

Many people who attend our constituency offices have 100% mortgages they should never, in their wildest dreams, have obtained. That has to do with the financial institutions. In many cases it has to do with brokers. Those affected are invariably young people, many of whom are in their early 20s and 30s. In many cases both partners are working to the pin of their collar just to meet the repayments. Suddenly they find they are getting into enormous arrears and we have to come up with a structure to address that. From my analysis of the problem, and I should like to hear the view of the witnesses, I cannot see how this initiative will bear fruit unless it is put on a statutory footing.

Mr. Barry O’Flynn

I believe it should be statutory. While there are many laudable aspects to the protocols of the IBF and the Financial Regulator, they are merely that. The IBF protocol contains many terms including one to adopt flexible procedures in dealing with debt problems subject to regulatory requirements, internal controls and previous experience with a customer, to facilitate him or her as much as possible. It also refers to "mutually acceptable" compliance and many terms such as that which are open to interpretation. The danger with interpretation and I accept what Deputy Bruton said about legislating for everything and the constitutional challenges——

Deputy Kieran O’Donnell

What I have in mind is what is being done in Scotland where the judge goes through a range of procedures and effectively——

Mr. Barry O’Flynn

I support that approach. The proof is when it comes down to a District Court, Circuit Court or High Court judge who has the authority within the law to say "This makes no sense". If in the credit union a case is brought to the court, sadly that is necessary at times, it is right that the judge would examine it and may say that one is way off the ball. If the lending decision on day one was as set out, one should not look to the courts for protection for it.

Deputy Kieran O’Donnell

Do the witnesses agree that best practice should be put on a legislative basis in order that the judge can refer to legislation. One also has to be fair to the banks where every avenue would have to be explored before repossession is considered. Would Mr. O'Flynn agree with that?

Mr. Barry O’Flynn

I would support the legislative basis.

Senator John Hanafin

I worked in this area for 17 years in a building society that became a bank. The principles enunciated are positive and correct. The witnesses differentiated between those who cannot pay and those who will not pay. I agree with my colleagues in regard to the banks' responsibility for lending way over and above what they should have lent in the first place. As well as what the witnesses have suggested, there are basic principles that should be adhered to. We will be calling on the banks who appear before the committee to implement many of these principles. Obviously, we are now looking at legislative means to ensure those at the periphery, such as Smart Mortgages Limited, play by the rules. In regard to those who cannot pay, we want to do everything possible to assist those people. The last thing anybody wants to see happening is that people lose their homes. There are then legal, repossession and auctioneers' costs and the maintenance cost of the house but the cost of actually housing the people is being passed on to somebody else. Therefore, it is not businesslike to put people out of their homes.

There is a second group, those who will not pay. I have been correctly reminded of a loans officer who used to call people in after three months who would not pay their loans. The people arrived and were made welcome and set at ease. They might be asked if they had difficulty getting through the traffic and general chit-chat about whether they got away on holidays this year and if they had a nice couple of weeks in Italy. After about five minutes of talking about peripheral issues, the loans officer would quite rightly say that it would be more in one's line to mind and keep one's house than to keep one's car and go on a holiday. For those who will not pay there is an important principle. The legislative means, as necessary, should be extended so that their salaries can be garnished or whatever needs to be done. It is not those who cannot pay that we need to concentrate on because we will look after those in the new paradigm as we should.

I fully accept the proposals put forward here that a reduction in the mortgage might be included for people who were miss-sold mortgages. Young people were under the impression that all one had to do was buy a house and two years later it was worth 40% more. Those of us who were around the track in the 1980s know that is not the truth. They did have an illusion of the realities of life and they are now saddled with big debts that they cannot meet. Perhaps what might be included in the group's report, which is very comprehensive, is a reduction in the mortgage for that part that was miss-sold by the banks. There should also be a provision to ensure that those who will not pay do pay and, if necessary, that salaries are garnished to ensure that even those who are irresponsible do not lose their houses.

Deputy Terence Flanagan

I welcome the delegation and thank it for its work in this area. Given that 77,000 households are in arrears, are the banks in denial with their heads in the sand? I suppose their hand has been forced on the issue of developer loans given that the bad loans are transferring to NAMA. In regard to its solutions, the witnesses did not mention anything about NAMA taking an equity stake in homes. How would the witnesses feel about that as a proposal? The Scottish Government has initiated that type of solution.

Mr. Ignatius Beglane

I am very pleased with all the positive comments expressed here. All the members of the committee are aware of the problems out there and they are catastrophic. The problem is subdued because as Deputy Flanagan said, the banks are somewhat restrained because of their own situation with their bad debts. I do not think they have assessed the situation in regard to mortgages. The amount of sub-prime lending is minimal up to the mainstream banks but the fact is that the bulk of mortgages rest with the mainstream banks. I do voluntary social work and the stress out there is frightening. I make a plea to the committee on a social basis to do everything in its power to try to alleviate it. It is clear from British statistics from the recession of the 1990s that two out of three couples who lost their homes ended up parting company. My little bit of voluntary work for the past 30 years would have centred around children. The security of their parents in their home is most important to them.

To answer the question posed, I think the banks have been restrained. As speakers have said, our projection is that the problem lies in the next couple of years. Deputy Bruton mentioned the legislation that may be needed to correct this situation. We have seen huge somersaults in legislative terms in the protection of the banks. I cannot let it go unsaid because I am also a hairdresser, but I garner a good level of opinion from that source and we are experts in advice.

Chairman

They are experts.

Mr. Ignatius Beglane

Exactly, they run the world. The universal feeling among the populace is that they, their sons and daughters, as genuine taxpayers, are rescuing the banks and the financial system. I am talking about young professionals and people in good jobs who are worried about the increased interest rates and in many cases they are already on interest-only repayments. Last week I read an extensive article in a Sunday newspaper by two young people who declared themselves to be in negative equity and having mortgage troubles. Again, it epitomises the huge problem out there. As a nation we have to put our shoulder to the wheel. I consider myself at my stage in life lucky but I am willing to put my shoulder to the wheel with everybody else.

This is a really big area and the political system must offer support if it is going to get the country back on track. We all have to do it together and in a time of looking for cuts and so forth we also have to give a lot. This is a very positive thing to say to all the people losing their jobs. There is hope when one loses one's job but when one loses one's home there is no hope. The other point is that when a person loses his or her home there is dreadful shame and this is what stops people seeking advice early. They feel dreadful shame in the community because they have failed. I have spoken to many psychologists and psychiatrists in recent times and they are fearful. There is overwhelming evidence that among those who come before them are people whose debts are leading them to consider suicide. The practitioners are fearful of this.

I shall finish with that plea to the committee. It is in the members' hands. I do not think the committee will find people wanting if the political establishment can support them as it has done with the financial institutions. The financial institutions owe it to the young people to whom they sold mortgages.

Chairman

I thank Mr. O'Flynn, Mr. Beglane and Senator MacSharry for the presentation. It highlights a matter of which we are all aware, especially with regard to what is likely to come down the track. Senator MacSharry made a recommendation that the committee should send a motion to the Minister for Finance. I suggest the Senator should formulate a motion and if any member wishes to offer ideas to him let him or her do so, contact the clerk and have the motion put to the next meeting of the committee. Is that agreed? Agreed. Again, I thank Mr. O'Flynn. The presentation was very informative and will keep this issue at the cutting edge.

Mr. Barry O’Flynn

I shall indulge the committee briefly. This is something very close to what I do on a daily basis. I ask the committee, at some stage, to examine the issue of moneylenders' rates. Moneylenders in Ireland, such as Provident Credit and a number of other firms, are legally entitled to charge 187% interest, with all the misery that causes. That legislation is long past its sell-by date. I appeal to members, as a Government and a group of legislators, to review that issue. I have correspondence going back to the 1980s when this was deemed immoral. It certainly is immoral now. I would love if the House were to look at it and say there was no reason for it. I thank the committee for its time.

Chairman

We are drawing up our 2010 programme so it is an opportune time to put forward that motion and we shall include it.

Sitting suspended at 12.20 p.m. and resumed at 12.25 p.m.