Dáil Éireann Debate, Thursday - 16 January 2014
2. Deputy Pearse Doherty asked the Minister for Finance the reason according to figures recently released by his Department that after nearly three years of this Government only 17% of mortgages in arrears of over 90 days in the six largest banks are in a permanent restructuring; and the reason the number of these permanent restructurings not performing is rising. [1796/14]
View answerI am sure the Minister is aware of the reason this question was put down. While I acknowledge some very small progress in dealing with mortgage arrears, it is painfully slow. This is deeply frustrating for tens of thousands of families who are in mortgage distress and in arrears, and who have not had a long-term restructuring offer from the bank. The figures the Minister released recently show that only 17% of family homes have been restructured in the long term. I am sure the Minister is disappointed with that figure. What more is the Government planning to do in this regard?
The Government is aware of the significant difficulties some homeowners are facing in meeting their mortgage obligations and the Deputy will know that a comprehensive strategy to tackle the problem is in place. Implementation of that strategy is a major priority and, in that context, the Central Bank mortgage arrears resolution targets – or MART – framework is key. Under this rolling process, quarterly performance targets have now been set to the end of June 2014 to require the banks to propose and put in place durable long-term solutions to address the individual cases of mortgage arrears.
The Central Bank has indicated that all six mortgage lenders covered by the MART process have reported that they met the 20% proposed sustainable solutions target for the second quarter of 2013 and also the 30% target for the third quarter in 2013. In particular, with respect to the third quarter 2013 target of 30%, which is the latest available data from the Central Bank, the lenders have reported to the Central Bank they had issued proposals to 43% of mortgage accounts in arrears.
The new monthly mortgage restructures and arrears data published by my Department will also provide an impetus for those MART banks to increase the pace of provision of mortgage restructures. That data shows that some progress has been made in putting permanent mortgage restructures in place. For example, the number of permanent restructures of permanent dwelling mortgages more than 90 days in arrears has risen from around 41,200 in August to around 49,300 in November 2013, an increase of almost 20%. The number of permanent restructures of mortgages more than 90 days in arrears has also increased.
The ongoing roll-out of the MART process, in particular the incremental targets to put in place sustainable mortgage restructures, will be very important for this. Of course, the MART process can only work for the benefit of borrowers in circumstances where the borrower works with the lender and engages with the process. Likewise, lenders must also communicate and engage with a borrower in difficulty in line with the requirements of the code of conduct on mortgage arrears. Early and effective engagement between borrowers and lenders is, therefore, key to resolving cases of mortgage difficulty. A reduction in the number of early arrears cases, as evidenced in recent statistics, shows the benefit of early engagement between both parties. Where there is effective and meaningful engagement between the borrower and lender, the data is showing that an increasing number of durable long-term mortgage restructures is being put in place.
However, I agree with the Deputy that it will now be necessary this year for banks to significantly build on progress made to date. The issue of mortgage arrears is a major problem that needs to be resolved, not only for an individual borrower and lender, but also for the long-term economic and social health of the country. A comprehensive strategy to do this is now in place and the Government will ensure that it is fully implemented by all the parties involved in this process.
I have no doubt of the Minister's sincerity in wanting this issue resolved, and nobody in their right mind would want to see families that have fallen into this position being left lingering there. We are six years into a banking crisis and the Minister is in government nearly three years. I am sure that on the day he walked into his office in the Department of Finance, he would not have been satisfied if he had fast-forwarded three years and saw that only 17% of those in mortgage arrears of 90 days or more had been restructured on a long-term basis. It is a complete failure.
The Minister and the Central Bank have talked tough in the past in saying they would examine this and bring forward new initiatives. They need to start talking tough with the banks. I have been meeting with senior people in the banks. They tell me very clearly that if the Government and the Central Bank set targets, they will meet them. However, the way they are meeting them is through letters of repossession. The Minister can see from these figures, which he himself released, how the long-term restructuring is taking place, which is by way of arrears recalculation. There is no real, meaningful engagement and no urgency being sensed by the banks on this issue.
I agree with the Deputy that everybody in the House would like it if better progress was being made by the banks. Even though, as the Deputy said, there has been crisis in the banking industry for almost six years now, when I became Minister in March 2011, we effectively had a broken banking system. The doors were open but it was barely ticking over, and demoralised staff without capital were not able to do what banks should do, particularly in regard to mortgage arrears. It has taken a long time to mend and recapitalise the banks, and it has taken a long time for new management to restore some level of morale to the banking industry. The banks were completely deflated and many of them were incapable of doing what is required to be done. It has been a long process, disappointingly long, but we want to keep them on the targets that have now been agreed by them with the Central Bank. I am in constant meetings with the banks to ensure they meet those targets.
A permanent restructuring of a mortgage, even when the arrangements are made between the parties and the banks, has to be in place and successfully operating for six months, so there is clearly a time-lag between the audit of what is a permanent restructuring and the actual arrangement being put in place.
Deputy Doherty has concentrated on the end of the six-month period but if he looks at my reply, he will see that 43% of those in arrears over 90 days have now had proposals put to them which would resolve their problem. That figure will feed through over this year and there will be a better set of statistics. The Deputy is right. He is disappointed and I am disappointed. We all know what is happening on the ground. There is no lack of will in my Department to drive the process forward and make sure the banks do not resile from the targets to which they have agreed.
I welcome the fact that 46% have been offered deals but the devil is in the detail and when one goes into the detail, one finds from individual banks that thousands of those offers have been letters of repossession. None of us are going to dispute that. That is the reality. They tell us straight up that the penalty for not reaching the target is so severe that they will reach it and the easiest way they can do this is repossession. The problem is that this does not resolve the problem for genuine people who want to pay their mortgages and stay in the family homes and who want an offer of long-term restructuring.
I welcome the Minister's comments about his disappointment but it needs to go further. He needs to send out a clear message to the institutions under this process that there will be no more hokery-pokery with the figures and that repossessions on the scale on which they have been done to meet the targets are no longer acceptable. We also need to see long-term restructuring that goes further than arrears recapitalisation, which is the bulk of what is happening, and interest deferral. We must look at a greater range of issues around split mortgages in terms of debt write-down, debt for equity swap which is not happening, the Ulster Bank model and the economic concession model which seems very favourable as well. We need to see more of these measure and less of the legal letters to meet the targets.
Some months before Christmas, the relevant committee of the House containing many of the Deputies who are here examined the banks on this issue and highlighted the fact that repossession letters were not deemed to be a satisfactory solution. Deputy Doherty put down a question to me asking me what my view on that was. We do not deem letters of repossession to be satisfactory solutions. While we need to know the information about letters of repossession, they should not be put in the tot of what is a satisfactory long-term solution. The banks are now aware of that.
