Could it be possible that, at a future date, with regard to local authorities who cannot fund water and sewerage schemes, money would be raised in this way to complete such schemes, which will not come under EU funding programmes for the period 1995 to 2000? Will all the money raised in this way be taken up in payments to the women involved, or could some of it be used for funding local authority sewerage schemes?
Securitisation (Proceeds of Certain Mortgages) Bill, 1995: Committee and Final Stages.
The initiative to raise additional money under this legislation rests with the Minister for Finance. The Government could decide that the money should be raised and devoted for a purpose. We are concerned with SDA loans. All the loans taken out since 1987 refer to the housing finance agencies, so we are really concerned with historic loans that are extant and which existed prior to 1987. The total value of the loan book, capitalised, is approximately £440 million. This does not include redemptions, where individual SDA loan mortgagers have cashed in and paid off the balance of their loans.
We are taking £200 million out of that £440 million. There is a balance of approximately £240 million that could be securitised in a similar manner, and could, subject to what the Government decides, be used for whatever purpose. Later, we will address the relevant section if this point is to be raised, but it would require an affirmative vote of the Houses of the Oireachtas to enable us to raise additional money before this could be done.
Is it correct that none of this will have a detrimental effect on the borrowers? There have not been many since the housing finance agencies took over in 1987, and some borrowers would probably have cashed in or restructured their loans since the drop in interest rates. This will not inhibit anybody who wishes to restructure or cash in their loan, nor will it affect the interest rates on them. Is that correct?
That is correct. This section specifically refers to the local authority co-operating with the Minister for the Environment with regard to information about the operations of their loan book. However, there would be no difficulty with regard to the points raised by the Senator.
The point at issue in this and in other sections, which has been a subject of concern, is that the relationship between the tenant, who has become the tenant purchaser, and the local authority remains intact, and nobody can come in between that relationship. If, for example, tenant purchasers were to get into financial difficulty and fall behind in payments, there is no question that a third party, who might be a bond holder of some of the securities issued on foot of this legislation, would knock on their doors alleging that they were behind in their rent. This does not arise.
Would the winding up of the designated body be long or short term? How long does the Minister see the body being in place? When it is wound up, will everything go back to what it was at the outset?
The bonds that are purported or proposed to be issued will be ten year bonds. They will be sold in ten years, plus two or three years, but they will mature and be terminated at that time. If there is a surplus in the special purchase vehicle kitty, it will be wound up and the surplus will be transferred back to the Exchequer. This would be the end of it for the issuing of this £200 million, and there will be no further recourse.
It is similar to the situation where one had a fixed pension, rather than guaranteed because some of them would be fixed interest loans, of £5,000 per year for the next 20 years and one decided to capitalise £2,500 of that income. At the end of the 20 year period of the pension, this obligation, in return for the capital sum which would have been obtained up front, would mean that the annual payments of £2,500 to capitalise half one's pension would have been discharged. As one would, with a building society, sign off on one's last mortgage repayment, it would be the end of the business with regard to this matter.
On Second Stage yesterday, the Minister of State referred to the payment to the women involved. When the Bill is enacted, does it mean everybody can be paid straightaway?
Effectively it does. The only constraint on payment is not our unwillingness to pay the full lump sum up front, it is the problem of assessing the exact amount to which everybody is entitled. Of the total sum of approximately £260 million, £200 million will be paid out in this year. As Senators will be aware, individual recipients received sums of the order of £5,000 to £6,000 in July this year. This money has now been paid out and reimbursed.
There are accounts to be repaid and settled in 1996, and there may well be some outstanding sums that might fall to be cleared in 1997. However, the expectation is that the balance of the money, which will be raised under this mechanism, will be paid out in full in 1996.