Dáil Éireann Debate, Tuesday - 5 April 2011
101 Deputy Terence Flanagan asked the Minister for Finance his plans to deal with the growing mortgage arrears and personal debt crises across the country; and if he will make a statement on the matter. [6858/11]
View answer103 Deputy Terence Flanagan asked the Minister for Finance his views on the previous Government’s policy of simply deferring the mortgage debt crisis by forcing the banks to defer any legal or repossession action; if he has a solution to replace this strategy; and if he will make a statement on the matter. [6860/11]
View answer104 Deputy Terence Flanagan asked the Minister for Finance his views on mortgage arrears levels which are expected to dramatically increase during 2011; his plans to replace the courts repossession system; and if he will make a statement on the matter. [6861/11]
View answerI propose to take Questions Nos. 101, 103 and 104 together.
As agreed in the Programme for National Recovery 2011 to 2016, the Government will examine a number of proposals aimed at helping mortgage-holders in difficulty. These will include:
Increasing mortgage interest relief to 30% for First Time Buyers in 2004-2008 (from the current sliding scale of 20% to 25% depending on the year the mortgage was taken out).
Directing any mortgage provider in receipt of State support to present Government with a plan of how it intends to cut its costs, over and above existing plans, in a fair manner by a sufficient amount to forego a 25 basis point increase on its variable rate mortgage.
I ntroducing a two year moratorium on repossessions of modest family homes where a family makes an honest effort to pay their mortgage.
Fast-tracking personal bankruptcy reform needed to bring Ireland into line with best international standards, such as introducing a flexible discharge period for "honest bankrupts", defined as one that has materially complied with the Tax, NAMA and Companies Acts among others.
Converting the Money Advice and Budgeting Service into a strengthened Personal Debt Management Agency with strong legal powers. The agency will support families who make an honest effort to deal with their debts, including non-mortgage debt, providing protection from their creditors where appropriate, so that they have time to sort out their affairs. In order to do so, the Personal Debt Management Agency will have quasi-judicial status.
Making greater use of Mortgage Interest Supplement to support families who cannot meet their mortgage payments, which is a better and cheaper option than paying rent supplement after a family loses their home.
The Deputy will be aware that the Expert Group on Mortgage Arrears and Personal Debt produced two Reports, an Interim Report published in July 2010 and a Final Report published in November 2010. All of the Expert Group's recommendations are listed in Chapter 2 of the Final Report. They can be accessed at www.finance.gov.ie .
Since the publication of the Reports, the Code of Conduct for Mortgage Arrears (CCMA) has been revised by the Central Bank to reflect many of the recommendations of the Expert Group including key recommendations relating to the introduction by all regulated lenders of a standardised Mortgage Arrears Resolution Process (MARP). The most significant changes in the revised CCMA include:
Borrowers in arrears who co-operate with the Mortgage Arrears Resolution Process (MARP) are not charged penalty interest charges;
Harassment of borrowers through unsolicited communications is outlawed; and
Borrowers in financial difficulties, but not in arrears, are allowed to come under the MARP.
The revised CCMA was published on 6 December 2010 and came into effect on 1 January 2011. The revised CCMA can be accessed at www.centralbank.ie . Lenders are required to comply with the CCMA as a matter of law but have been given a period of six months grace, ending on 30 June 2011, to put in place the requisite systems and training of staff necessary to support the implementation of the MARP. In addition, the Central Bank has also written to lenders to issue directions under Section 149 of the Consumer Credit Act 1995 which will mean that lenders cannot impose arrears charges or penalty interest on borrowers who are co-operating with the MARP.
The Deputy will also be aware of the existing importance of the Mortgage Interest Supplement (MIS) Scheme and the Money Advice and Budgeting Service (MABS) in assisting consumers who have fallen into arrears or who are experiencing difficulties servicing their mortgage repayments. The MIS Scheme currently supports approximately 18,000 mortgage-holders while MABS provides a national, free, confidential and independent service operating from 53 offices nationwide.
Regarding the question on replacing the courts repossession system, I am unclear as to whether the Deputy is suggesting that neither lenders nor borrowers should have ultimate recourse to the courts in the event of other avenues being exhausted. Insofar as the regulation of lender policies in this area is concerned, the Deputy may wish to note certain provisions contained in the CCMA. For example, Provision 46 of the CCMA states the following:
"The lender must not apply to the courts to commence legal action for repossession of the borrower's primary residence, until every reasonable effort has been made to agree an alternative arrangement with the borrower or his/her nominated representative."
Provision 50 of the CCMA states the following:
"In cases where legal action to obtain an Order for Possession has commenced, a lender must endeavour to maintain contact with the borrower or his/her nominated representative. If an alternative repayment arrangement is agreed between the parties before an Order for Possession is granted, the lender must put the legal proceedings on hold, for the period during which the borrower adheres to the terms of the alternative repayment arrangement." Thus, the CCMA effectively prohibits lenders from pursuing and continuing with court based repossessions of a borrower's primary residence, without having first sought to agree alternative arrangements.
The Central Bank's quarterly data series on Residential Mortgage Arrears and Repossessions show that the level of repossession activity in the courts, with respect to the primary residence of borrowers, can be considered very low in comparison with the scale of mortgage arrears pertaining. For example, the level of home repossessions per hundred thousand mortgages in the UK is over 5 times greater than the Irish rate. Furthermore, it can be observed that the majority of repossessions taking place are not by way of a court order, rather via voluntary surrenders and abandonments.
