Dáil Éireann Debate, Tuesday - 8 April 2014
8. Deputy Richard Boyd Barrett asked the Minister for Finance in the aftermath of reports that AIB is giving debt write-downs to distressed mortgage holders, the actions he will take to require other banks to follow suit; and if he will make a statement on the matter. [16152/14]
View answerThe news that AIB was offering write-downs to distressed mortgage holders was somewhat positive, but the submissions we received from groups such as FLAC, the Irish Mortgage Holders Organisation and others last week showed that there was incredible inconsistency across the banks in dealing with mortgage holders in distress. They have stated a crisis that was in abeyance for the past few years because of uncertainty is now ready to explode, particularly for the 33,000 families over two years in arrears. With rising property prices and so on, the banks will accelerate the move to repossess people's homes and the people concerned pointed to the Government as being the one that needed to do something about this.
The Deputy will be aware that in March 2013 the Central Bank published the mortgage arrears resolution targets, MART, framework, which sets out performance targets for mortgage arrears resolution for the six main mortgage lenders. As I mentioned, these lenders are Allied Irish Banks, Bank of Ireland, Permanent TSB, Ulster Bank, ACC Bank and KBC Bank Ireland. They are required to meet targets for both "proposed" and "concluded" sustainable solutions for their principal dwelling home and buy-to-let mortgagees who are in arrears for more than 90 days.
In that context, a sustainable solution has been defined in the Central Bank's published MART, mortgage arrears resolution targets, document as one of the following: an arrangement, concluded in accordance with the CCMA, code of conduct on mortgage arrears, where the borrower is co-operating under the MARP, mortgage arrears resolution process, and the bank has satisfied itself that the arrangement provides a sustainable solution which is likely to enable the customer to meet the original or, as appropriate, the amended terms of the mortgage over the full remaining life of the mortgage; a personal insolvency arrangement, effected under the Personal Insolvency Act 2012; or, if an arrangement could not be reached or is not appropriate having regard to the circumstances of the case, that the property securing the mortgage loan has been voluntarily sold or, failing that, any situation where a bank takes possession of the property, including by way of voluntary agreement with the borrower or by court order or otherwise.
Regarding performance to date, the lenders have reported to the Central Bank that they met the 20% proposed sustainable solutions target in the second quarter of 2013 and also the 30% third quarter target. Regarding the third quarter, the lenders reported they had issued, in total, proposals to 43% of mortgage accounts in arrears of more than 90 days. Furthermore, last December, the Central Bank set its expectations for the quarter ending June 2014 which requires that sustainable solutions be offered to customers to reach 75% of over 90-day arrears and for concluded solutions to reach 35% by that date.
Additional information not given on the floor of the House
The CCMA applies to the mortgage loan of a borrower which is secured by his or her primary residence. The CCMA requires lenders to explore all of the options for alternative repayment arrangements offered by that lender. Such alternative repayment arrangements may include reducing the principal sum to a specified amount and-or an alternative modification of the mortgage such as interest only repayments on the mortgage for a specified period of time; permanently reducing the interest rate on the mortgage; an arrangement to pay interest and part of the normal capital amount for a specified period of time; deferring payment of all or part of the scheduled mortgage repayment for a specified period of time; extending the term of the mortgage; changing the type of the mortgage; adding arrears and interest to the principal amount due; equity participation; and warehousing part of the mortgage, including through a split mortgage.
However, it remains the case that it is at the discretion of each lender, including, as provided for in the relationship frameworks, those banks in which the State has a shareholding interest, which alternative repayment arrangements it offers to borrowers in arrears. These are operational decisions for the individual lender having regard to the circumstances of individual cases. In this context, however, the CCMA requires a lender to document its considerations of each option examined, including the reasons why the options offered to the borrower are appropriate and sustainable for his or her individual circumstances and why the options considered and not offered to the borrower are not appropriate and not sustainable for the borrower's individual circumstances.
In order to improve transparency for borrowers, provision 14 of the CCMA also requires that a lender must detail, in its MARP booklet, which is issued to borrowers in arrears of more than 31 days and must be published on its website, the alternative repayment arrangements offered by that lender, including how they work, their key features and an outline of the lender's criteria for assessing requests for alternative repayment arrangements.
As has been said already today, as well as on many other occasions and reinforced by the groups before the finance committee last week, many of the so-called sustainable solutions are just demands for so-called voluntary surrender or, increasingly, an acceleration of repossession efforts. Lenders are not seriously implementing the mortgage-to-rent scheme, for example, which would be a way of dealing with people in real repayment difficulty. There is significant inconsistency across the banks because the Minister gave them the veto in the personal insolvency legislation. Banks are being banks. That is what we were told in the finance committee. Banks will always behave with their best interests at heart, not in the best interests of distressed mortgage holders. The Minister’s responsibility is to ensure consistency and fairness for the tens of thousands of people in mortgage distress.
The total number of permanent restructures has increased to 54,000. Term extensions and arrears recapitalisation are the dominant permanent restructure types, comprising 60% of the total. It should be noted there has been an increase in the number of split mortgages to over 7,100 from approximately 2,500 at the end of August 2013. This includes split mortgages on a trial basis, pending the completion of a short period of successful payments. Temporary restructures have fallen over the period, as a greater focus is being applied to permanent restructures. Total restructures of accounts more than 90 days in arrears are around 21,000. The proportion of these that are classified as permanent is increasing every month. Regarding buy-to-let properties, a key point to note is that receivers have been appointed in respect of 3,721 accounts. Progress is being made across the range of options that are being applied to restructured debt.
The point is that while some progress is being made, there is also a clear increase in the move to repossession proceedings. In the last two months of 2013, there were 3,331 proceedings for repossession, a significant increase the finance committee was told last week. As I already pointed out, there has been no serious effort to offer the mortgage-to-rent option for people on the lowest incomes. Instead, for much of the time, the so-called long-term solutions are just demands for voluntary surrender. There is radical inconsistency across the banks.
Does the Minister intend to let the banks carry on doing what they want to do or does he propose to improve fairness and consistency in this area by intervening more in the process? That is what we called for last week at the Joint Committee on Finance, Public Expenditure and Reform.
It is not true to say there is a widespread move across the banks to a repossession strategy. I understand the joint committee will have the banks before it shortly and individual cases can be raised with them. The information we in the Department of Finance have got from the Department of Justice and Equality advises that the number of new civil bills issued for the first two months of 2014 was approximately 450. The Deputy knows well that the issuing of a civil bill is a long way back from repossession. Usually, many of these bills just sit there and are left unprocessed, as there is little repossession in the Irish system. I am glad of that. We do not want houses to be repossessed. It is untrue and it upsets people to suggest that the banks are on a rampage now and are into tens of thousands of repossessions. They are not.
