Deputy Joe Higgins is in possession and there are five minutes remaining in this speaking slot.
Land and Conveyancing Law Reform Bill 2013: Second Stage (Resumed)
Question again proposed: "That the Bill be now read a Second Time."
Tá suil agam go bhfanfaidh an Taoiseach, mar foghlamóidh sé cúpla ceacht ón méid atá le rá agam.
Tá mé ag éisteacht leis an gCiarraíoch.
I have already spoken on this Bill for 15 minutes and, as a courtesy, in my last five minutes I intend to speak in Irish. Deputies who might not be fully conversant, which is natural for many people, have a translation facility.
Reachtaíocht náireach atá sa Bhille um Athchóiriú an Dlí Talún agus Tíolactha, 2013. Tabharfaidh sé cumhacht ar ais do na bainc sealbhóirí a cheannaigh a gcuid tithe roimh 1 Nollaig 2009 a dhíbirt as na tithe sin má tá siad i ngéarthrioblóid le aisíocaíochtaí a gcuid morgáistí. Chaill na bainc an ceart sin nuair a aisghairmíodh alt 62(7) den Acht um Chlárú Teidil 1964. Nach iontach an rud é nach bhfuil ar intinn ag an Rialtas slite nua cruthaitheacha a chur chun cinn chun déileáil le morgáistí atá i gcruachás? Níl ar intinn ag an Rialtas ach dul siar go meon barbartha na tiarnaí talún agus daoine a chaitheamh amach as a dtithe má tá siad i gcruachás. Os rud é go bhfuil na bainc chun an cumhacht tíoránach seo a fháil, is féidir a rá go bhfuil siad mar aicme nua tiarna talún sa tír seo.
Is léir go bhfuil an Rialtas seo de chuid Fine Gael agus Páirtí an Lucht Oibre i mbraighdeanas ag na margaí airgeadais. Tá siad sínte ar an talamh roimh cumhacht eacnamaíochta na margaí sin. Tá siad ullamh chun cumhacht tíoránach a thabhairt do na bainc arís. An bhfuil sé dearmadta ag an Rialtas go bhfuil an córas airgeadais - go háirithe, na hinstitiúidí móra príobháideacha airgeadais - ciontach as an ngéarchéim tubaisteach eacnamaíochta atá ag goilliúnt ar shochaí mórthimpeall na hEorpa le cúig bliana anuas anois? Chuir na bainc céanna, mar aon le forbróirí agus an lucht speicléireachta, costas tithíochta in airde faoi 400% ón bhliain 1997 go dtí an bhliain 2007. Os rud é go raibh na hinstitiúidí seo faoi ndear na brabúsaíochta, ní raibh aon dul as ag gnáthoibrithe ach morgáistí millteannacha móra - 40 bliain ar fhad - le haisíocaíochtaí ollmhóra a thógáil amach. Bhí sé soiléir nuair a thit an pirimid as a chéile, nuair a chaill na mílte a gcuid post agus nuair a íslíodh pá na mílte eile, go gcaithfí beart radacach a dhéanamh chun réiteach a fháil ar an gceist. Tá an Rialtas ag leanúint leis an tseanslí céanna. Tá sé ag brath ar na bainc a bhí faoi ndear na géarchéime ar an gcéad dul síos.
Molann an Páirtí Sóisialach a mhalairt de pholasaí. Ba cheart an luach ollmhór a cuireadh ar tithe le linn an tréimhse bolgánach a íslú go dtí luach réadúil an lá inniu. Ba cheart na híocaíochtaí míosúla a íslú dá réir. Sa tslí seo, thabharfaí fuascailt dóibh siúd atá i dtrioblóid agus i gcruachás lena morgáistí. Fuasclaíodh an cur chuige seo na billiúin euro a rachadh isteach san eacnamaíocht. Cabhródh sé sin le éileamh ar earraí, seirbhísí agus a leithéid a fhorbairt. Mar thoradh ar sin, bheadh roinnt daoine atá dífhostaithe faoi láthair in ann filleadh ar obair sna siopaí agus sna seirbhísí. Má táimid ag brath ar an gcórás caipitleach faoi mar atá, ní tharlóidh sé seo. Is féidir linn ceist tromchúiseach na hinstitiúidí airgeadais agus na bainc atá in úinéireacht phoiblí, faoi stiúradh dhaonlathach na ndaoine, a réiteach sa tslí seo. Ag an am céanna, is féidir linn fuascailt a thabhairt dóibh siúd atá faoi dhianbhrú os rud é go bhfuil siad i gcruachás lena morgáistí agus cabhrú le cúrsaí eacnamaíochta na tíre seo a fheabhsú. Ba cheart dúinn an bóthar radacach sin a thógáil, seachas leanúint leis an tseanslí atá teipthe go tubaisteach go dtí seo.
We all have an interest in this legislation, especially in these straitened times. The legislation arises from a commitment in the third quarter of the 2012 review of the EU-IMF programme of financial support. That commitment states that by March 2013 the Government will introduce legislation to remedy the issues identified in case law in the Land and Conveyancing Law Reform Act 2009, so as to remove unintended constraints on banks to realise the value of their loan collateral under certain circumstances.
I know the Minister has reviewed the extent to which land conveyancing took place during the boom period, but the full consequences of the kind of conveyancing regulations that were applied during that period have not yet been borne out.
They will in the time ahead because many conveyances took place with very little regard for good practice and consequences. We have seen situations where more than one owner was registered for a property or previous liabilities had not been discharged. To operate in a system like that in any kind of major way would leave the State, but more particularly the people or consumers in our society, in a very exposed and vulnerable position. I hope in the course of this legislation that the issues that have been brought to the Minister's attention over the last couple of years will be dealt with adequately.
This Bill has to be dealt with alongside the insolvency legislation. One of the things I have noticed is that there seems to be a reluctance on the part of lending institutions to come to grips with situations where a large amount of negative equity exists. The lending institutions are staying adrift of that. In situations where there is no negative equity but through no fault of their own the borrowers have found themselves in particular difficulty there is a fairly ready recognition by everybody that the lending institutions want to move very quickly. That is creating an imbalance in our society and the property market.
Obviously the lending institutions will want to seize property as quickly as possible where they can realise the full value of the asset, and it is quite regularly done. Meanwhile they are ignoring the areas where they might have a liability themselves to deal with situations where negative equity exists to a huge extent. For example, a property might easily be worth less than half what it was valued at in the middle of the boom. Since there is nothing to be gained by the lending institutions' repossessing that property, they are quite happy to tag along with it for as long as possible. Where a person has a smaller mortgage on a property with considerable positive equity, the lending institutions will move in very quickly and deal with that situation. If that is done on a large scale and becomes accepted, it will have serious consequences throughout the length and breadth of this country. I ask the Minister to keep in mind and monitor the activities of the lending institutions. I fully realise the borrowers and lenders have responsibilities in these matters and I do not suggest the borrower has no responsibility, but the lender has responsibility also. I hope that from the examples we have seen and the experiences over the past two years, recognition will be given to the fact that there is the possibility - and strong evidence to suggest - that lending institutions will move quickly against those who have assets and collateral that is readily marketable and on which they can realise the value very quickly.
I ask that the various lending agencies be monitored with a view to determining the trend, scale and extent to which settlements are arrived at or negotiations take place with borrowers. To return to what I was saying a minute ago, we have all dealt with tragic situations in this House over the past couple of years. Like everybody else, I have come across situations where lending took place which was, to say the very least of it, unwise. Unfortunate borrowers who have different family or income circumstances now find themselves in an impossible situation.
I asked how lending was done and how a loan or mortgage was offered in the circumstances that prevailed at the time. There was no logical basis for it at all in terms of good practice for lending in many such circumstances. It only inflated the market and created further problems. I can see nothing happening anywhere that gives recognition to the fact that in many cases lenders offered loans to people who they knew would have no chance to repay if anything went wrong at all.. One of the tests that is supposed to be done in all these situations is to try to find out at the very beginning whether or not, in reasonable circumstances, the borrower is going to be capable of discharging the debt into the future. I ask the Minister to examine the number of cases that have been dealt with in the courts, the pattern that has developed over the last two years or so, with a view to at least recognising or encouraging the lending institutions to recognise that it is not all the borrowers' fault, and we know that from the cases we have dealt with.
The Minister is fully conversant with the last subject I want to bring to his attention because of the degree to which excessive borrowing took place and the extent to which we find ourselves in a totally different economic situation. We have a big difference between the situation prevailing now and that which prevailed in the 1980s, for example. This must be borne in mind in the context of the national economy. In the 1980s there were borrowing difficulties for borrowers throughout the country. There was an economic crisis to a similar extent to, some would say worse than, the present one. The difference between then and now is that nearly everybody is affected at this stage. A huge swathe of people across the marketplace are affected in a way which did not happen in the 1980s. One group or another group was affected to a greater extent back in the 1980s. If the lending institutions pursue what they think they need to pursue, they will create such a whirlwind in the market that property prices will collapse completely in the not-too-distant future because of the extent to which repossessions will have to take place. Property will be put on the market, and this property will become unsaleable or will perhaps be available to investors, in which case the whole property business will become landlord-controlled, which is not good for the domestic economy at all. I ask that these considerations be borne in mind.
I, like everybody else, have had to negotiate on behalf of individual constituents over the past four or five years, before the present Government came to power. Many of the issues we identified four or five years ago are still there. They have just dragged on. The Governor of the Central Bank has been very anxious to move things forward, to ensure the lending institutions dealt with the borrowers in a meaningful way. That means different things to different people. Some lending institutions see that as a signal to move in quickly and repossess left, right and centre, but more particularly to repossess in cases where they know they have positive equity and they know they will get their money. They are less willing to do so in cases that are less positive for them. The Personal Insolvency Act is supposed to deal with all of this but I am not so sure it will.
Whatever resolutions are worked out, they must have some bearing on the old criteria that used to apply to borrowing. The worst thing one can do when solving a debt problem is to increase the burden on the borrower for the foreseeable future.
That means whatever debt problems they got into in the first place will be exacerbated for the next five or ten years. It does not work. We need to look now at the old criterion whereby two and a half times the earnings of the principal earner was taken into account as being the optimum sum a borrower could repay in reasonable terms. Let us stretch this a bit further, because in those times the income of the secondary borrower was included, and let us assume the sum is a multiple of three. It would be reasonable to assume a borrower can repay a loan on the basis that it represents three times the income of the household. The situation emerging now, however, is that people are expected to repay borrowings based on up to ten and 12 times the income of the household. Their income has been reduced dramatically in the meantime so there are two issues that need to be borne in mind, merged in some way and recognised by the Minister and by everybody in the lending institutions, as well as by borrowers, in the time ahead of us.
I agree with much of Deputy Durkan's analysis of what is wrong, his criticisms of the lending institutions, his reservations about the Personal Insolvency Bill that was passed in this House and the difficulties we face in the future in respect of this problem. To say it has not yet been adequately addressed is possibly an understatement. The main problem is that the Government and the banks are approaching it from an almost identical position - they see the borrower as the problem when the real problem all along has been the banks. The borrower has partial responsibility but ultimately the main responsibility for this awful mortgage arrears crisis - the main focus of this Bill - lies with the bankers.
The Title of this Bill is somewhat soft and misleading. It is called the Land and Conveyancing Law Reform Bill, which sounds as if a small legal problem with a bit of land can be addressed in the near future and the Bill passed in minutes. This, however, is one of the most traumatic Bills - and a fundamental attack on individuals - introduced in this House in the current session. The Title of the Bill was laid down, no doubt, for good legal reasons but in fact this Bill does two things. It does the will of the troika and the IMF and undoubtedly was dictated by those institutions. The review of the EU-IMF programme of financial support for Ireland contained the Government's commitment that by the end of March 2013 it would introduce legislation remedying the issues identified by case law in the 2009 land and conveyancing law. What matters is that the format chose to remove the unintended constraints on banks to realise the value of loan collateral under certain circumstances. That is the nub of this Bill. It fulfils a pattern or campaign that has been ongoing since 2010 and restores to the banks the position of hegemony, leadership and domination in the financial world which they held up to 2007 and 2008.
Hear, hear.
We are again back in that situation and must accept that this Bill is the final piece in the jigsaw which gives the banks those particular powers. It is traumatic and final but it could have been done and approached in a very different way.
The immediate problem is that some mortgagors, as they are so delicately called but meaning bankers, had in the Dunne case no right to repossess houses in certain circumstances. One must ask whether we should give bankers who have given such reckless loans the rights to repossess in any circumstances or whether any situation should be cleared by an independent body after consultation with the banks and after reviewing the cases in point. After all, these are the very people and institutions that made the reckless decision in the first place. I continue to be surprised by the willingness of the Government, which has ownership of most of the banks in this country, to give the same banks such independence in their operations on issues where they have culpability. This Bill does that. It tells the banks they can repossess at will and as they wish, in spite of their behaviour in the past. As the House will know, there is a provision for two months' adjournment for people who go back to the personal insolvency legislation and ask for their case to be looked at again. That is only a sop to those individuals, however, because the same result will happen two months later.
For some time there was a freeze on repossessions in this country, partly as a result of the Dunne judgment. That has obviously led to a build-up and a difficulty but, as Deputy Durkan noted, there will be plenty of lending institutions that will move quickly. Some of them are waiting to move quickly. The reassurances that this will simply be a last resort measure are entirely unconvincing. For the Government to state this will only be a measure of last resort implies that somewhere, somehow, there will be a check on the banks when they are given this power to repossess; that it will be able to intervene to order the banks not to do so in certain cases, to hold back on the numbers. That is not going to happen. If the measure is going to be used as the last resort it will not be used in that way by the banks - that is now how they behave. Banks behave ruthlessly, in the interest of their balance sheets and how these will look, and possibly in the interest of their shareholders but certainly not in the interests of either the nation or the borrowers. Let us not believe this will be a last resort measure. It will be a sword of Damocles that will be held up at the first point of negotiation. When banks go in to negotiate with any borrowers under the Personal Insolvency Act they will hold the repossession card in their hands as the measure of first resort. It may be the last weapon to be used but it will be the first threat. That will be apparent; that will be what will happen.
There was an alternative, in both the personal insolvency legislation and in this Bill. I wonder why the Money Advice and Budgeting Service, MABS, was not included in any of the structures that were set up to provide solutions for personal insolvency. I wonder why, given it was well debated in House, there was no independent body other than bankers included that would decide on the final solution to a mortgage arrears problem. Repossessions are going to multiply.
They are going to explode. I wonder why it is being left to the bankers to decide when and where repossession take place. Why is it not proposed to establish an independent body to decide whether repossessions can or should take place? There will be malingerers and people who can pay their debts but refuse to do so. Some people are exploiting the freeze on repossessions but they are few in number. An independent body could judge them and syphon them out. However, there will be no checks on the bankers when they decide who is to be repossessed or evicted. That is the main flaw in this Bill.
The build-up of repossessions and the reluctance of the Government to produce this Bill, which is late and produced under pressure, are due to a stand-off on this difficult problem but the delays have made it much worse. Neither the banking sector nor the Government relish the idea of repossessions. The Government does not like repossessions because it is politically disadvantageous, unpopular, morally wrong and can lead to awful accidents. The bankers do not want to repossess because they prefer to kick the problem down the road. The troika has refused to allow the problem to continue not for accounting or even debt reasons but because it recognises that the continuing fall in house prices is reflected in a misleading way in banks' balance sheets.
The reality is that the banks are still bust and will need recapitalisation. Government denials of that will be proved wrong. The primary reason they will need recapitalisation is mortgage arrears. The banks' balance sheets contain one large hole which is deliberate, utterly misleading, connived at by auditors and ignored by the Government, that is, the provisioning for mortgage arrears and bad debts. Every honest commentator who recognises the necessity of recapitalisation also recognises the fantasy in the banks' books when it comes to their provisions for bad debts and mortgage arrears. The price of the underlying collateral is not reflected in the books but sooner or later they will be recognised, by repossessions or other means, and the banks will be exposed as needing more capital. As neither they nor the Government want to be exposed in that way, the big lie continues to occupy the mortgage books of the major banks while they pretend they can sell assets at prices that are much too high. That is why the problem was allowed to fester for so many years and it will not be sorted out by repossessions or the Bill which the House passed some time ago.
There was a strong case for putting MABS in the centre of the picture, as a body which could represent borrowers, and for putting the borrowers in a position that was at least equally powerful to that of the bankers. That did not happen, however. There is also a strong case for giving an independent body, such as MABS, the power to decide whether it is fair to repossess in certain circumstances. The judgment of the lenders is flawed and should not be trusted under any circumstances. It is depressing to read that MABS has in recent times been downgraded. In recent weeks various newspapers have reported a sinister development whereby MABS has been threatened with restrictions on its funding if it does not sign certain agreements. If there is a move to downgrade this body, it will mean that many citizens will suffer and it will transfer the power and weight in negotiations away from those in mortgage arrears and back into the hands of the banks. I have no other evidence than from undenied media reports that MABS may have to close many of its branches if these restrictions are imposed. It is being asked to sign service level agreements which it does not consider acceptable. It is a pity that a body of this sort should be threatened and it would be a pity if it is taken off the pitch on mortgage arrears or reduced in stature and power. It would also indicate that the banks have won yet another battle.
I am doubtful about what are described as sustainable solutions. Apparently a sustainable solution must be agreed between borrower and lender before a deal can proceed. This sounds good but who decides whether a solution is sustainable? Once again the power is being moved from the vulnerable side to the powerful one. Sustainability will be decided by the lender. This Bill is a sad recognition of the power of the troika, the appalling delay and refusal to recognise the problem and the need for a real solution, namely, further recapitalisation of the banks.
I welcome the opportunity to speak on the Land and Conveyancing Law Reform Bill 2013. My colleague, Deputy Durkan, and other speakers clearly outlined the predicament families and individuals face as a result of the reckless lending of the banks. Much of the debate on the issue of repossession is not very truthful and merely seeks the headlines.
As a solicitor who practised in conveyancing, I may view this issue from a particular perspective but anyone who argues that repossessions must never be permitted is not telling the truth. When borrowers sign a deed of mortgage it is explained to them that the ultimate penalty for failing to repay their mortgage is the loss of their home. This is the starting point, although it must also be recognised that banks played a major part in creating the difficulties in which people currently find themselves.
The Bill seeks to remedy a problem that was created by the Land and Conveyancing Law Reform Act 2009, an unintended consequence of which was that it rendered useless some clauses in mortgage agreements, thus making them unenforceable. The system works on the basis that people who borrow large sums from a bank consent to losing their property if they cannot stick to their side of the mortgage agreement.
As elected politicians who represent our constituents, we must address the human side of the mortgage problem by recognising in legislation the hardship imposed on people in mortgage arrears. They do not know where to turn and face the trauma of losing their family home. Our task, therefore, is to ascertain what we can do to ensure the repossession of a family home is the last resort, while taking into account the commercial realities and legalities involved when people obtain a loan. We must be cognisant that the lending system works on the basis that borrowers who cannot make repayments ultimately face the threat of repossession. The Minister recognises the problem facing borrowers whose family home or principal private residence is threatened with repossession. Where a bank issues repossession proceedings in a court, the Bill provides that the judge can order an adjournment of the case to ascertain whether alternative solutions can be found, in particular, whether a personal insolvency arrangement under the Personal Insolvency Act would be a more appropriate and advantageous course for the borrower in question. This provision recognises that the family home is different from other types of properties on which borrowers may have mortgages and should be protected to the greatest possible extent. The Minister is endeavouring to negotiate the legalities of achieving this objective.
The legislation presents us with an opportunity to throw down challenges to the banks before courts make orders for repossession. The free legal advice centres have made a number of helpful suggestions in this regard. The Central Bank has introduced a thorough code of conduct for banks. As Deputies will be aware from speaking to their constituents, the code has not always been adhered to and many borrowers who are up to their necks in debt are unaware of their rights and the options available to them. Many of those who are in a vulnerable position because they are unable to repay a mortgage believe they do not have any say. The Bill provides that where a bank cannot demonstrate full compliance with the Central Bank's code of conduct, it should not be given a repossession order for a family home.
As I stated, most borrowers are not lawyers but people trying to make ends meet. I concur to some extent with Deputy Ross on the lack of resources available to the Money Advice and Budgeting Service, MABS, and free legal advice centres. In my constituency, the waiting time for an appointment with a free legal advice centre is six months or more, although I acknowledge that the primary function of the centres is to deal with family law cases, an important area. Individuals who may wish to challenge aspects of their loan or mortgage agreement are unable to obtain legal advice and are in some cases signing repossession orders without having taken legal advice. Many are unaware of the Central Bank's code of conduct and do not know that the Government is in the process of introducing protections and rights for borrowers which will empower them as they seek to secure the best outcome. Something had to be done because it was clear that we could no longer continue in the same vein. The personal insolvency legislation was introduced to give people options.
Serious consideration should be given to increasing the resources available to the free legal advice centres and Money Advice and Budgeting Service. People are not able to obtain the legal advice they require. As Deputy Durkan stated, they are seeking help from politicians. We are willing to try to help but these matters can have serious legal and personal consequences. For this reason, greater resources should be made available to enable people who are in a distressed state to obtain legal advice and assistance.
It is common practice for lending institutions to bring repossession applications before the High Court. This increases costs because ultimately, it is the borrower who must pay the loan amount, interest, penalties and legal costs. The Circuit Court would be a more appropriate forum for hearing repossession cases.
Banks must be challenged when they refuse to co-operate with borrowers. I dealt with a case where a bank refused a borrower permission to sell a property. As a result, the property is probably worth less than previously, whereas the borrower's circumstances have not changed. The banks have the upper hand in lending relationships as borrowers and banks do not have equal negotiating power. For this reason, we must hold the banks to account by requiring that repossessions can only proceed where no other recourse is available.
The resources needed by MABS and the free legal advice centres to provide support and advice to borrowers are sorely lacking and need to be beefed up.
I welcome the opportunity to speak to this legislation as it gives the House an opportunity to have a broad debate on mortgages and repossessions. Having listened to previous speakers, it is clear that Deputies have strong views on borrowing, repossessions, mortgages and the provisions of the Bill. Many of us are angry that the banks and their senior managers who helped wreck the country are putting pressure on the Government to hammer home owners and demanding more repossessions. I am galled that they have such a brass neck. My job, as an Independent Deputy, is to stand up for families with mortgages by challenging the banks that are hammering householders.
As previous contributions have demonstrated, there is cross-party support for the excellent work done by the Money Advice and Budgeting Service. The advice, assistance and support provided by MABS are an example of public service at its best. Many Deputies will have had a positive experience of using the service on behalf of constituents.
The Bill provides that certain statutory provisions in respect of repossessions will apply to mortgages created prior to 1 December 2009, the commencement date of the Land and Conveyancing Law Reform Act 2009, notwithstanding the repeal and amendment of these statutory provisions by the 2009 Act.
Subsequent case law highlighted the unintended consequences of this repeal in the context of the repossession rights of lenders. The Bill also provides for the adjournment of certain repossession actions where a matter can be resolved by recourse to the Personal Insolvency Act 2012. I will return to that matter later.
I take this opportunity to praise and commend a small group that is very involved in protesting about this and other issues relating to debt and the banks. I refer to the Ballyhea protest group, which is a little thorn in the side of the establishment. The members of this group live in Ballyhea, which is near Charleville, County Cork, and they have highlighted the issue of our debt for the past number of years. There is a major imbalance in Ireland's contribution to the current Europe-wide crisis. To correct that imbalance, and after consultation with several experts in the field, the Ballyhea group is trying to meet officials from the ECB and the European Union. The group in question is doing us a great service because it is highlighting this issue, which is directly linked to the legislation before the House. The group is asking the ECB to write off the €28.1 billion in sovereign bonds currently held by our Central Bank in lieu of the promissory notes - €25 billion and €3.1 billion for 2012 - which were issued in 2010 to cover a flagrant abuse of the emergency liquidity assistance fund when €31 billion was pumped into two already insolvent institutions, namely, the former Anglo Irish Bank and Irish Nationwide Building Society. This was an abuse which the ECB approved. The group is also seeking that the EU - through the ESM - restore to the Irish Exchequer the €3.1 billion already destroyed on the basis of those promissory notes, the €20.7 billion taken from the National Pensions Reserve Fund to bail out the banks to which I refer and the remaining €13 billion or so borrowed from the various emergency funds to bail out the Irish banks in general. The first proposal in this regard would ease the long-term bank debt burden and the second would ease the current situation, provide money to be invested in job creation and enable us grow our way out of the recession. All of this is linked to the debate on this legislation and that which relates to mortgages, repossessions, etc.
The Land Conveyancing Law Reform Act 2009 is a major instrument designed to reform many areas of land law, including ownership, trusts, co-ownership, conveyances and, relevant to the current Bill, mortgages. The purpose of doing so was to simplify existing land law, which had been developed over centuries, and facilitate the introduction of e-conveyancing. It is important to consider the position with regard to existing law and examine the details relating thereto. I referred earlier to MABS and I commend that organisation on the work it does to assist people who are at risk and provide them with sensible economic and personal financial advice.
I agree with those of my colleagues who referred to the group of fat cats within society whose members have money and resources but refuse to pay. I do not include these individuals in any sympathy or understanding I may wish to convey. It is they whom we should not be afraid to pursue. I accept that there are many people who are trying to pull the wool over the eyes of others. That is a matter about which we must be sensible. We must also be sensible with regard to what happened in the banks in the past. When I refer to the banks, I am not talking about the low-paid workers or ordinary staff who are now getting grief from customers, etc., with regard to the actions of very senior officials. I am, rather, referring to the fat cats at the highest levels within the banks who brought this country to ruin and who conned and misled politicians and the people. That point is not often made in the House but it is an extremely important one. The fat cats to whom I refer also lied to all and sundry. It is vital to make that point because the message in this regard does not appear to have been put across as yet. Many people were blatantly misled.
In discussing this issue, we appear to be afraid to question what is happening in the EU and the ECB. There appears to be something of an inferiority complex among many people in Ireland. If mainstream politicians do not ask questions in respect of the matters to which I refer, more extremist right-wing groups such as those which have emerged in the UK - I refer here to UKIP - and elsewhere in Europe will exploit the situation. There is a need to monitor what is happening within the European Union and the ECB and we must not be afraid to discuss the euro, which is the elephant in the room for many people. We must not be afraid to discuss what happened and ask whether we made a cock-up and whether certain individuals did not do their jobs. I am of the view that the latter is what happened. There is no point in beating around the bush.
In January 1999 the EU launched its new currency, the euro, which carried within it the seeds of its own destruction, including those flaws highlighted in an article which appeared in the Financial Times a year prior to the launch. The dangers had, therefore, been pointed out. There was a lack of foresight with regard to what might happen when countries and their banks suddenly found themselves with access to an unlimited supply of previously expensive billions. What was done was not thought out. In addition, there was a lack of oversight and no one applied the brakes in respect of the destructive and reckless rush of capital from the core to the periphery. Finally, there was an absence of any structure to help the Union cope in the event of an emergency. Within eight years the euro crashed, taking with it an entire array of banks and causing devastation in the economies of several eurozone countries. One of the major causes of the systemic imbalances built up during the period 2000 to 2007 across the eurozone was the monetary policy mismatch. This is not my thesis but rather that of Dr. Constantin Gurdgiev. I am not stating that Dr. Gurdgiev is correct in everything he says but I am of the view that there is a need to ask questions at European level. The Government must up its game in that regard and take a more proactive approach.
Everyone accepts that there is a need to share responsibility. However, we must ask if Europe is prepared to share the burden. It seems to be the accepted approach within the Government that these matters must be dealt with behind closed doors. When the Government does something good - I refer, for example, to deals on the promissory notes or stretching out the terms of repayment - then I will wish it luck because it is acting on behalf of the Irish people in this regard. Such developments are not party-political issues; they are in the national interest. I, as an Independent Deputy, will back anyone in government who does something that is good for the country, regardless of who he or she may be. If those in government fail in their duty in this regard, then I will act as the watchdog. Those of us in what is now known as the eurozone who signed up to the new currency, with all its design flaws, share responsibility for the chaos it has caused. We must also share the cost. In that regard, I refer to the various financial institutions in this country that engaged in reckless lending. Ireland has been burdened with a massively disproportionate share of the cost to which I refer. What is that share? To date, and excluding the contribution from NAMA - which was established to take over the major bad debts of the Irish banks - the bailout has cost €64 billion. When broken down, this represents a cost of €14,244 per person or €60,000 per family. That is the reality. It is important to highlight this fact because it has a bearing on the legislation before the House in the context of people's mortgages, insolvency issues, etc.
When the financial crisis hit Europe, Ireland was first in the firing line. Lacking any guidelines or structures from Europe or any supervisory oversight, the then Government took unilateral action to save the banking system and introduced the infamous blanket guarantee of September 2008. Having considered the matter in hindsight, many are of the view that this course of action was ill-advised in every sense. All of the advice provided on that fateful night in September 2008 - and the subsequent decision to introduce the guarantee - was based on misinformation. I was a Member of the House at that time and I am aware that a great deal of misinformation was spread. Despite what it now states, the Labour Party was going to support the bank guarantee and it had only minor reservations in respect of it. Those in the Labour Party have been saying for two and a half years that they did not support the guarantee in September 2008. However, they subsequently gave their support to it, so they should get off the pitch and stop trying to con people in respect of that matter. The bank guarantee was, as already stated, ill-advised and there was a serious amount of misinformation relating to what was happening at the time. That is a matter to which consideration must be given. I would welcome any discussion relating to the causes of the banking crisis in order that we might learn lessons. I am aware that its fan club in this House will not like me saying so but the European Union was not on its game in respect of the financial crisis and neither were our regulatory authorities. We should not be afraid to make this important point.
As a result of everything that has happened and in the context of the legislation before us, families are being hammered with repossessions and so on. In addition, the provision of services is being affected and people are suffering and taking major hits.
Yesterday, Deputies held a cross-party meeting on the cost of resource hours for people with Down's syndrome. I recommended that we avoid asking the Government for extra money for services without devising cost proposals. The cost would be approximately €700,000 or €800,000 per year. We will be off next week. We should not need to do this. A group of 30 or 35 children with major disabilities will be starting school next September. They should receive resource hours. Give them four hours and 15 minutes every week. I am making this point because it is relevant to the economic debate. The kitty is empty because of other people's actions.
Reverting to the issue of mortgages, enforcement is important. A mortgagee may seek to reinforce his or her security by methods other than repossession - for example, a court order for possession of the mortgaged property followed by the sale of that property out of court, sale of the property through the court's intervention, a court order for the sale of the mortgaged property, taking possession of the property and acquiring rents and profits from it, appointment of a receiver, or foreclosure on the property. However, it has been noted that these methods may be more costly and time-consuming for all parties involved due to the procedural requirements. As a result, summary proceedings are deemed to be more efficient. It has also been noted that prolonged and costly procedures to seize mortgage collateral tend to be associated with slower recovery in property markets. This is the current situation.
Mortgage arrears remain a problem and present significant difficulties for banks and the wider economic recovery. I have been naive for a number of months. When people attended my constituency clinic with problems, I told them to discuss the matter with their bank managers and that I would write letters in support. I believed that the deals reached were great, as the payments had been spread out and reduced. What I did not realise was that, under the law, the banks had no other option but to do deals. It is important that the banks sit down with people and help them. I have encountered a number of examples of good practice. I have met only a couple of chancers who were trying to pull a stroke and get out of their mortgages. The majority of people attending my clinics want to make their repayments and are willing to take a hit for a couple of years until they are out of this crisis and have their acts together again. I was pleasantly surprised, as I had expected a higher percentage of people to try to use the process to get out of their mortgages.
The priority on which we must focus is the family home. Last week, I encountered a case of repossession in the northern end of my constituency. There was a row, the family ended up out on the street, and they are now trying to access the housing list and obtain rent supplement. The cycle will start again.
Under this legislation, bankers and the Government should try to keep away from the serious players and instead attempt to reach a negotiated settlement. The majority of people want to pay. Even if it is only €60 or €80 per month, it is still a contribution to the economy.
This Bill is being introduced to address a loophole in the law on summary repossession and is a part of the Government's roadmap for addressing the mortgage arrears crisis. A commitment is also contained in the revised memorandum of understanding between Ireland and the troika to introduce legislation remedying the issues identified by case law in the Land and Conveyancing Law Reform Act 2009, those being the unintended constraints on banks in realising the value of loan collateral in certain circumstances.
We need common sense and balance. During the good times, we had neither. Nor did we have sensible supervision or regulation. Despite this, some people are returning to the pitch and claiming that we need light-touch regulation if we are not to damage the financial services sector. We need sensible and clear-cut regulation. When I worked in a north inner city school, the Department's inspector supervised us. If I was £300 over budget, my local inspector told me to watch my finances. We then stayed within budget. If we came up short, we ran a fund-raiser to make up the balance. We need the same type of housekeeping found in people's homes, not the rampant light-touch regulation that has destroyed the country. The Minister will not like me pointing this out, but it has been highlighted by the left for the past 20 years. Various Governments turned a blind eye and got carried away with their rock 'n' roll, parties and so on.
The Deputy has two minutes remaining.
I am doing well.
It is a pity the Deputy did not bring his guitar.
I was actually going to do a three-minute slot.
When we debated the Personal Insolvency Act 2012, the Independents submitted more than 80 amendments. We had a great deal of input to the legislation. Three sections of the Act dealt with important debt arrangements - debt relief notices, debt settlement arrangements and personal insolvency arrangements.
We must be sensible in this debate on repossessions and mortgages. We cannot revert to the days of the Famine when evictions were carried out without common sense. We must examine the situation and be sensible in doing deals with mortgagors, including young couples and families. They bought three-bedroom houses in the middle of the boom for €475,000 that are now worth only €180,000. This is a difficult situation for them. Legislation should have a touch of humanity. We must be supportive of people, particularly those being threatened with repossession. We need common sense, clear regulation and, above all, compassion.
I welcome the opportunity to contribute on this important legislation, which has significant implications for families and society as a whole. We know the Bill's background, which is an anomaly in the enactment of the 2009 Act that has stalled repossessions by banks. The Bill has provided us with a window of opportunity to put the mortgage debt situation back on an even keel. While I welcome the fact that the Personal Insolvency Act was a significant step in the right direction, the main difficulty with it is that the banks still hold all the cards. This has been quite frustrating, as the banks have final refusal on proposals. In this respect, the anomaly in the 2009 Act has provided some balance for the mortgage holder, but it could be removed on foot of this amending legislation.
We have been given assurances that repossessions will mainly be of investment properties rather than family homes.
There is no doubt that is the Government's intention with the legislation. The difficulty is that the banks have a completely different agenda. Their agenda is very much focused on profitability. We can see the attitude the banks are taking currently with variable mortgage interest rates. When the European Central Bank reduces interest rates, the commercial banks in this country increase them. They have no intention of trying to assist the economy or struggling home owners. I do not believe they have any intention of facilitating them following the passage of the Bill.
It is important to remember that other statutory mechanisms exist for the banks to gain possession of a property other than what is proposed in the amendment. For example, a court order could be secured for possession of the mortgaged property followed by the sale of the property by the mortgagee out of court. Foreclosure could also be chosen as an option or a receiver could be appointed. The difficulty is that such mechanisms are not as easily accessible from a bank's point of view or as cheap for the banks to enforce. Banks always go for the soft option. They should not be given a soft option because they facilitated the irresponsible lending that took place. There is no doubt people took out loans they should not have taken out, especially those who bought investment properties. They were hounded and pursued by banks who threw money at them and encouraged them to take out irresponsible loans, yet to date the banks in this country have got away scot free. The people who gained significant bonuses on foot of selling those particular mortgages in the first place went on to get significant lump sums and bonuses when they retired from the banks. They have been rewarded, and will continue to be rewarded, for irresponsible banking, and we, as taxpayers, are picking up the bill in that regard.
Sadly, many home owners who are struggling to make ends meet are the ones that are bearing the brunt of it. Not only do they have to pay for the austerity we all face and try to balance the books at the end of the month, but they are also in serious financial difficulty with the banks and face the prospect of repossession. It is important the banks take some of the responsibility for the situation. They have taken no responsibility to date and have not even acknowledged that they bear some responsibility for the lending that took place.
In some cases, banks were so anxious to offer mortgages that the title is a mess. There are situations where the house is owned by one bank through the mortgage taken out on it while the site on which the house is built is held by another lending institution and the paperwork has never been resolved. In other cases, developers built houses on land that was held in bond by local authorities and banks were willing to give out mortgages in spite of the situation arising whereby the site has one particular lien on it and the house itself has another lien. The banks did not seem to have any difficulty in that regard but it will cause huge problems for the home owners involved.
The fear is that repossession is the stick that will be used to break the back of many families who are in distressed mortgages at present. However, I accept that there is a valid argument for repossession in the case of a person who refuses to engage with the banks. There is difficulty repossessing properties in developer-built estates and having the developments completed and the properties sold off. Sadly, in my constituency, we have semi-derelict estates and ghost estates where only a small number of people, unfortunately, bought houses. Unbelievable vandalism and anti-social behaviour are taking place in such estates. Families are caught in such situations where they got a mortgage to buy a house. They paid well over the odds and are now stuck there with significant negative equity. At least if the bank could get clean title and have the estate completed and the properties sold off at a marginal price, one would have owner-occupiers in those properties. I have heard of cases where houses have been torched and burned to the ground due to vandalism in estates. There is a danger that a vacant semi-detached house could be set on fire and the home next door could go on fire as well. I accept there is a need to have a swift mechanism to deal with those issues.
It is important to strike a balance. The proposals that have been put forward by free legal advice centres, FLAC, are to be commended. They restore some of the balance towards home owners. FLAC made the point that there should be an amendment to the legislation to ensure the Central Bank’s code of conduct on mortgage arrears is applied fully by the banks. Where that does not happen, the court would have the jurisdiction to refuse the application by the bank for repossession. More discretion must be given to the courts in such circumstances to bring some balance into the situation for families. FLAC has set out six key points that would help to bring some balance to the proposals before us. I hope the Minister will take on board on Committee Stage the proposals made by FLAC. They provide the type of balance that is required and ensure that while the loophole in the legislation is addressed, the law protects those with distressed mortgages who are in family homes and at least gives them some power and leverage over the banks.
Previous speakers referred to the cuts to the money advice and budgeting service, MABS. I am disappointed with the cuts because MABS provides an extremely valuable support for families. More must be done to resource the money advice and budgeting service properly rather than cutting back on it. It would make sense for MABS to work with RTE to produce a series showing people how to better manage their finances. The difficulty is that when growing up, my peers did not see the same need and shortage of money as previous generations. Those in their late 40s, 50s and 60s have the skill of managing money, unlike those who grew up during the 1990s and the 2000s who had access to cheap money and plenty of credit.
Even the basic skill of managing money can be difficult for people, and something along those lines would be extremely helpful in assisting families. I am not necessarily referring to families who need to access MABS now but families who, if they are helped now, can avoid having to access that service in the future. I hope that something along those lines can be considered as part of a public education campaign. RTE, as the public service broadcaster in this country, should examine the possibility of running such a series. A similar series was run in the past with Mr. Eddie Hobbs, and a new series along those lines would be of immense benefit to families who are struggling to make ends meet.
I wish to raise a number of other issues with the Minister for Justice and Equality which relate directly to land transactions and the Property Registration Authority. The first is an anomaly has come to my attention in the context of dealings I have had with the lands division in Cavan, which is the replacement for the Land Commission. The division is doing a tremendous job, with very limited resources, in trying to work out all of the remaining title issues regarding lands that were originally acquired through the Land Commission over many years. I am aware of a proposed project to develop a public walkway through Tarmon bog outside Castlerea, County Roscommon. A community group has come together there to seek funding through the Leader programme to develop this as a public amenity, but the lands are in the control of the Department of Agriculture, Food and the Marine through the lands division in Cavan. The administrators of the Leader programme and the Department both believe this is a very worthwhile project but, at the final hurdle, the group faced a difficulty because there is no statutory right given to either the Department or the Minister to grant permission to the community group to use the lands owned by the Department. Those lands were originally owned by the Land Commission. The disposal of the lands can only be governed by section 8 of the Irish Land Commission (Dissolution) Act of 1992, which did not make provision to allow community groups to access lands for the development of amenities such as that proposed for Tarmon bog.
A change must be made to the existing primary legislation to facilitate the transfer of those lands. In that way, some of these lands can be used as public amenities and as assets to draw tourists into areas where tourism footfall has been low to date. As we know, walking and cycling tourism is growing rapidly internationally and is a tourism segment that we can capitalise on here because it is not weather dependent. I ask the Minister to speak to staff in the PRA and the lands division of the Department of Agriculture, Food and the Marine to see if a solution can be found to facilitate community groups such as the one in Tarmon, County Roscommon. Perhaps some mechanism can be found whereby another arm of the State could take over the ownership and management of the lands and then allow the community group to develop the public access project. Historically, funding has been available for such projects through Leader companies but that funding has now dried up because the current Leader funding stream is coming to an end. However, new Leader programmes will be up and running again in two years, which provides a window of opportunity for us to resolve the legal issues relating to this project.
It is important to point out that such issues do not just affect this particular project in Roscommon. The same problem will arise in the future with many of the bogs that have been designated by the National Parks and Wildlife Service, NPWS. The intention is to provide public access to many bogs which are of huge scientific interest, but this particular problem will arise again because the majority of the title for those bogs is still held by the lands division, the successor to the Land Commission.
I wish to refer to the decentralisation of the PRA to Roscommon town. As the Minister knows, a new state-of-the-art building was provided, at a significant cost to the taxpayer, to accommodate 230 staff. That building currently houses 80 PRA staff and 50 staff from the Department of Agriculture, Food and the Marine. The lease has expired on the Setanta Centre in Dublin, which houses PRA staff. Plans are also afoot to amalgamate the PRA with Ordnance Survey Ireland and the Valuation Office. In that context, it would make sense to decentralise some of the staff to the PRA offices in Roscommon town which were purpose built for the PRA rather than entering into new leases for offices. The PRA office in the town has a very useful public office and I must commend the staff there who provide an invaluable service to those who do not have the wherewithal to access information online, because not everyone is up to speed with technology or has the computer literacy required. I urge the Minister to consider streamlining that particular decentralisation, now that he is amalgamating the Valuation Office, the Ordnance Survey and the PRA. Even in the west, the Ordnance Survey is leasing two offices, one in Sligo and the other in Tuam. I contend that it would make sense, given that the State already owns the property in Roscommon town and is planning to amalgamate three bodies, to relocate the staff to that premises.
I welcome the opportunity to speak on this Bill, even though my party's position on it is quite clear. We will be opposing the Bill because it is fundamentally flawed, as has been elaborated on by my colleagues. The name of the Bill would suggest it is very benign legislation. The Land and Conveyancing Law Reform Bill sounds harmless enough, but at the very heart of this is the closing of a loophole in the original 2009 Act and addressing the Dunne judgment. Clearly, at the heart of this legislation are provisions to allow banks to repossess property. While we all know that repossessions must occur from time to time, the desperate position of the banks at the moment leads to the concern that, with no independent oversight, they will use their whip hand excessively and force many from their homes.
We must look at the history of how we got to the position we are in now. The Minister is partisan and I am a partisan Opposition spokesperson, so we will have to agree to differ on that and try to stick to the facts. One of the biggest difficulties in the context of where we are currently has been the bank guarantee of 2008. There are various reasons for that decision, but it was based on the problems that arose. Those problems arose because of banks becoming sales representatives. They were no longer functioning as banks but were hawking mortgages, credit cards-----
Yes, and the Deputy's party was in Government, falling asleep, when that was happening.
Yes, and Deputies in Opposition at the time were sound asleep too. Deputy Shatter never raised it once in his entire life. The Deputy did absolutely nothing about it.
The Deputy's party was in Government. Deputy Kelleher was in Government. That is a laughable contribution. The Deputy was in Government. He was in Government, hyping it up.
I ask the Minister to allow the Deputy to speak.
I have already pointed out that the Minister is the most partisan person here and I cannot get up here and talk-----
The Deputy's party denigrated anyone who tried to call a halt to what was happening.
Deputy Shatter was sound asleep on the Opposition benches for 14 years. In fact, he was turfed out of here once by the public too, may I remind him. That is how laughable his record was.
I ask the Deputy to speak to the Bill.
I will not take nonsense from that partisan blackguard over there.
I am not here-----
I am entitled to come in here and make a contribution.
Yes, the Deputy is entitled-----
I did not once point out Deputy Shatter's absolute incompetence, and by God, was he incompetent when it comes down to it as well.
Deputy-----
He did not once, in 14 years in this House, raise the issues of regulation, regulatory reform, irresponsible banking or irresponsible lending. Not once. He was sound asleep.
I was not here between 2002 and 2007.
He was not here for five years because the public did not have any faith in him.
Deputy, please-----
Methinks the Deputy doth protest too much.
I do not protest. I am simply trying to highlight the difficulties. I accept all my responsibilities on this side of the House, where I am at present by the decision of the people. However, if we must discuss how we got to where we are we should address many of the fundamental issues.
Deputy Kelleher, please.
He should talk about where those in Fianna Fáil are.
This legislation will not do that. All the nonsense from the Minister, Deputy Shatter, will not address the issues facing thousands of mortgage holders every day of the week. People on this side of the House are trying to come up with sensible solutions, not the guff that comes out of the Minister on a daily basis.
Fianna Fáil put those people where they are.
Excuse me, Deputy Kelleher, please. If you do not mind, I am trying to chair this. If you could-----
I am trying to speak but he will not allow me. It is only blackguardism.
It is the truth.
I will give the Minister the truth.
Could you keep to the contents of the Bill? This is not a personal attack on anyone in the room. It is a debate on the Land and Conveyancing Law Reform Bill. That is what it should be on.
Will the Acting Chairman tell the Minister that?
I did indeed. I called on the Minister and I am calling on you to have a little respect for the Chair.
I have the greatest of respect for the institutions of the House. I stated at the outset that I would park the partisan approach and try to make a genuine contribution to the difficulties that exist.
Thank you.
This legislation will not address the societal carnage that exists at present with 100,000 mortgages approximately 90 days in arrears. We know the difficulties that exist. The banks are generally in considerable trouble financially. They are still insolvent and the mortgage arrears issue is the gaping hole in their balance sheets that no one has been willing to address in a meaningful way. They kicked the can down the road, as the proverb goes, and we are now in a position where property prices have not stabilised. In some cases they are still falling and the holes in the balance sheets of the banks are getting bigger every day. The point is that the banks are desperate organisations fighting for their survival while the Government is hoping that they will struggle on and that they will not need to be recapitalised further. They will do desperate things to address their impaired balance sheets, especially in respect of the mortgage books. I am concerned that with no independent oversight-----
We have the courts.
We could go down that road again with the Minister but we will not bother. It would be far better if the Minister could address it in the legislation. There should be independent oversight. MABS could be brought in and people could adjudicate in a fair, impartial and rational manner and deal with the difficulties.
In his contribution at the Central Bank conference in February 2013 Professor Patrick Honohan referred to how to fix distressed property markets. He stated:
In particular negative equity is not in itself a rationale for debt relief.
On the other hand that, while repossession may be inevitable for many investment properties (BTLs), it should be avoidable for the majority of owner-occupier cases where the distressed over-indebted borrowers – often suffering from unemployment – are doing their best; a debt modification that enables them to stay in their home will often be the best solution all around. Repossessions of course have huge consequences for the affected family, and besides, there are typically financial costs that erode the amount than can be recovered by the lender. Still, at the end of the day, most would agree that there must be consequences for an unco-operative borrower refusing to make a reasonable effort.
No one could disagree with that. The difficulty is that those who will define what is a reasonable effort will be the banks, unless the Minister goes down to the court and stuffs more money into some barrister's pocket. That is the clear difficulty with this legislation. We are not discussing normal times. We are discussing more than 100,000 people whose mortgages are 90 days or more in arrears. It does not appear that it will be getting better any time soon. There is a slow-down and a stabilisation. The great difficulty for the banks is that during the past five year property prices have tumbled and there has been no uplift in the property market. The big holes in the balance sheets of the banks remain. My concern is that if they start this process they will begin cherry-picking the mortgages that have most collateral. The last thing the banks want is to flog properties of poor value on the market because that could further erode their balance sheets. That is of great concern.
Despite all the glibness that overcomes this place from time to time this is one substantial issue that could be addressed by having independent oversight. We can debate who should oversee it but MABS should have a clear and defined role in the legislation when it comes to dealing with impaired mortgages.
Let us consider the banking inquiry. As the Minister is well aware, last year the Government put a proposal before the people and they rejected it. They could not trust the Government with it and therefore the Minister, Deputy Shatter, should not blame me for everything. The point is they could not trust the Government. The Government was unable to competently convince the people that it was capable of setting up a banking inquiry that would be fair, rational and reasonable. The Government could not do that much and, therefore, the Minister should not talk to me about incompetence in this place. The key issue is to address the need for a banking inquiry and get to the truth of it.
The point I was trying to make before the Minister became partisan again was that we must address the issues prior to the bank guarantee. The bank guarantee was a consequence of reckless lending. It was not the result of reckless lending by the Government. It was because of lack of oversight and regulation. At the time the Minister's party supported it in the House and supported the position of having independent regulation that would allow the financial system to flourish and expand. I do not believe there was any opposition from the Minister's party when proposals on regulation and oversight of financial institutions in the country were put to the floor of the Dáil. At the time there was good, reasoned debate about why it was good to lighten the regulation, allow the banks to flourish, allow the International Financial Services Centre in Dublin to flourish and make Ireland a financial services hub. That was the theory behind it.
What happened as an outflow was that the banks became very competitive. There was a flow of cheap money from Europe and of other banks coming from outside the jurisdiction offering cut-deal mortgages and other personal credit lines. All of this opened up the whole market to competition, but it was competition without any oversight. Banks were beginning to lend six, seven and eight times the principal sum of an earner for a mortgage and included room rent and social welfare payments as part of the principal earner's salary to get a mortgage over the line. Clearly, that was fundamentally flawed. As house prices went up we were caught on the other side. House prices kept escalating. Developers would see that a house that had been worth €300,000 could be worth €400,000. They were willing to outbid each other for land banks throughout the country. They were funded by the same banks and the bust eventually happened. Then, the guarantee came as a consequence of that.
If the Minister wishes to get partisan he can blame me about the bank guarantee but he should not blame me for every particular aspect of what happened previously, because that was the philosophy of the day espoused by almost everyone except, as Deputy McGrath stated, those on the left who were opposed to it. Some of those on the left were opposed to it but many were happy with it. Social partnership bought into it and everyone else bought into it because it seemed to deliver good times. Obviously, those good times fell foul in recent years. All the indications were that there would be a soft landing, that the economy would level off and that we would be back to sustainable growth of 2.5% or 3%. None of that happened but that does not make it any easier for the people who are facing nightmares night after night and worrying about whether the bank will knock on their door and ask for a serious discussion on their situation.
I have no difficulty with banks bringing people in to have a genuine debate, sitting down to highlight the difficulties they are in and saying that they need action on given scenarios. However, since the banks hold the whip hand they will use it excessively because they are desperate to fight for their survival. The only guiding principle in the banks at present is to try to repair their impaired balance sheets. The big hole that remains is the mortgage area. I believe the Government should act on the proposal put forward by my party and many on this side of the House. We can have a debate on history some other time but we are discussing people's lives, homes, families and the societal carnage that exists at present and we are trying to come up with constructive proposals.
The Bill was to deal with the loophole as highlighted by the Dunne judgment. The consequences of the loophole and the Dunne judgment has led to a delay in addressing mortgage arrears. I believe that was the reason the banks did not deal in a meaningful way and engage with people for a protracted period. They were concerned that if they delved too deeply into their mortgage books they would expose a big hole. The Minister, Deputy Shatter, knows it exists, I know it and they know it. The difficulty is how to fill it if it is exposed in one fell swoop.
There was a naive hope that some way down the road, house prices would stabilise, the hole would not be as big and we could start to fill it over a period with property inflation. That has not happened and it does not look as though it will happen for some time to come, regardless of the Government's promises to create 100,000 jobs and all the other nonsense we heard before the election. There is still unemployment of over 14%, a mass exodus of people from the country, an international recession and financial difficulties in Europe. The growth that was presumed has not happened. Regardless of who is right and who is wrong, these are the facts. The Department of Finance and the Central Bank have again revised their forecasts for growth downwards. No matter what we do in this country, we are dependent on growth in Europe and the broader international economy; we are a trading, open nation.
I do not blame the Minister for every aspect of the present difficulties, but his difficulties are minuscule compared to the 100,000 who have huge difficulties. That is why this debate should be treated with more courtesy and respect.
My concern is that banks will cherry-pick those houses where there is some equity or value, even though people are in massive mortgage arrears. There are properties whose values have halved and whose owners are in very difficult circumstances and are incapable of making any meaningful repayment. The banks could cherry-pick initially by targeting repossessions and that is another reason there should be independent oversight. It should not just deal with individuals; there should be independent oversight in dealing with trends the banks will follow with regard to repossessions. The Minister knows as well as I do that in every banking institution in the State, there are those who were previously flogging mortgages and selling credit cards, personal loans, holiday loans and car loans. They are all members of the nutting squad now, bringing people in to talk to the banks. The bottom line is that they want to get their pound of flesh now and there should be oversight in this area.
Fianna Fáil can be blamed for this, and I will accept that responsibility, but whether we like it or not, the banks were absolutely culpable in the reckless lending that went on for years. The Central Bank was culpable for years and the regulator was culpable for years. Some people highlighted the things banks were up to, such as multiplying the principal earner's salary by seven when calculating the size of a mortgage and adding a few bob for furniture. That was clearly unsustainable, regardless of how good times might be.
With the best will in the world, this is flawed legislation from start to finish. Whatever happens between now and the passing of the Bill, the Minister will have to at least listen to our suggestions. The Minister visited Meath East during the by-election and no doubt met some of the staggering number of people who are shattered and who do not see any light at the end of the tunnel. People in those circumstances have almost written off their own hopes and aspirations, but their main concern is no longer their own hope; it is hope for their children. That is a devastating way for people to live. That is why this Bill is fundamentally flawed. Those hopes and aspirations are now dependent on banks deciding what is a reasonable offer for a borrower.
The Deputy has two minutes remaining.
Apologies to the Chair, but I certainly do not apologise for what I said across the floor. The Minister can take a robust exchange and he is capable of having one himself.
If we are to have an independent inquiry into the banks, let us have it, and if the Minister wants to play a game with what happened on that fateful night in 2008, he can toddle over to the Department and look at the files. In the meantime, if we are to have a truly independent inquiry into banking, it should be from start to finish and not concentrate on one fateful night, because the guarantee was the result of what had happened during the previous five to six years. I found very few people in this House who said at any time before this that banks were lending too much and were being irresponsible as they shovelled out credit. Even the policies being pursued by the Minister when he was in opposition were inflationary. Fine Gael sought more tax designations and holiday home designations. The party called for the scrapping of stamp duty to get rid of the last brake the Government had on the property market so it could muster a few headlines in the Sunday Independent for taking a populist stance.
If we want an honest debate on the difficulties, we will have it, but in the meantime we must come up with solutions that address the problems faced by 100,000 people who lie in their beds at night wondering how they will ever get out of the difficulties they are in. I do not believe this legislation holds out any hope for them. It holds out a lot of hope for the banks when it comes to addressing the difficulties.
I welcome the personal insolvency schemes, but they do not take into consideration what a family is expected to live on. All this does is tell people to live on less while the bank flogs them to make them pay back the full amount for five, six or seven years. Families will live in penury. That is no way to allow them to contribute to society.
I thank all the Deputies who contributed to this debate, including those with whom I have had robust exchanges. I thank Members of both Fine Gael and the Labour Party for their support and for raising issues about which we all have particular concerns. Those concerns are shared on all sides of the House. I also thank Opposition Deputies for the contributions they have made.
I want to reiterate a number of key points about the Bill before the House today. The Bill does not create any new right of repossession on the part of lenders. It restores a right which was specifically intended to continue to exist under reforming legislation enacted by a Fianna Fáil-led Government in the Oireachtas in 2009 in circumstances in which certain High Court judgments had raised doubts about the ability of lenders to exercise that right. There was never any suggestion in 2009 that anything was intended other than that the repossession laws would continue to exist. Doubt has arisen in the context of those laws as a result of a certain judgment of the High Court. As other Deputies have correctly pointed out, even for pre-2009 mortgages, lenders can take other approaches to recover money due to them. Section 1 of the Bill restores the necessary certainty to continue a legal provision that has been part of our law for centuries.
It was Deputy Kelleher's party that entered the original arrangement with the troika and I presume Fianna Fáil, if it was still in government, would keep its commitments. While there is a troika commitment to introduce this legislation, it is necessary anyway.
We cannot sustain an ongoing lack of certainty with regard to the legal position on mortgages. We cannot sustain a situation in which, on the one hand, banks are expected to lend money by way of mortgages and, on the other hand, there is lack of certainty about the exercise of their legal rights when it comes to major default by a borrower. It is simply an unsustainable legal position to maintain.
I have stated on a number of occasions that repossession of family homes is intended to be a last resort after all other avenues have been tried and tested. Even where the point of a court action for repossession of a person's home is reached, the Bill makes specific provision for a late intervention safeguard for borrowers by allowing for an adjournment for the parties to investigate the alternative of a personal insolvency arrangement, PIA. That is a facility that was not available under the 2009 Act because our predecessors in government neither enacted any new personal insolvency legislation nor put in place the alternative debt resolution mechanisms, which now exist and which, right at the end of his contribution, Deputy Kelleher kindly acknowledged. Listening to some of the contributions made in this House, one would think either that the personal insolvency legislation had never been enacted or that major flaws had appeared in it since it came into operation. The agency is established, the website is functioning, people are making inquiries and the legislation should be operative and available to assist people within a couple of months or so. We will judge how successful it is when it is operating and, as I stated, if it turns out there are any flaws in the legislation, we will address them with any further legislation that may be required.
The Bill is not an isolated measure. We have in place the personal insolvency legislation designed to provide protections for people, but the Bill also exists within the context of a range of interventions which the Government has made specifically to assist with the debt and mortgage arrears crisis which we face. In addition to the personal insolvency legislation, we have in place the statutory Central Bank code of conduct on mortgage arrears, CCMA, and within the code, the mortgage arrears resolution process, MARP. Further, the recent Government statement on resolving the mortgage arrears crisis outlines a range of actions that have been taken, or will be taken, including the setting of time-bound targets prescribed for the banks to make arrangements with mortgagors in default.
This Bill will not open the floodgates for repossessions as some have alleged. It will reinstate the legal right of lenders in pre-2009 mortgages to go to a court as a last resort to repossess mortgaged properties where there has been a major default by a borrower. It is worth noting that the decision in the Start Mortgages case has been appealed to the Supreme Court. If we did not enact this legislation, it may well be that the appeal, if it comes up for hearing, would result in the Supreme Court taking a different view of the law to the High Court. We do not know that but it is right that we set out the position clearly in statute. As I have repeatedly said, it was never the intention, under the 2009 legislation enacted at a time when Fianna Fáil led the previous Government, that this right would have been compromised by the legislation, but arising from the manner in which provisions in the Interpretation Act 2005 have been interpreted in certain court cases, this has happened. The range of other possibilities which we have introduced for resolution of mortgage arrears and debt problems, including measures under the mortgage arrears resolution process and the statutory code of conduct on mortgage arrears, the targets set for the banks to make sustainable arrangements with mortgagors in default and the new personal insolvency legislation, all provide extensive supports for borrowers well upstream of any move for repossession, contrary to the perception of Deputy Ross, as he engaged in his usual single transferable speech and rhetoric. Repossessions will not be the first option available to banks where borrowers are in mortgage difficulties. Where an action for repossession arises, the Bill makes provision for an adjournment to ensure the alternative possibility of a personal insolvency arrangement with the intention of allowing the borrower to keep his or her home and to investigate the background.
I am conscious that I have only five minutes and I apologise to some Deputies if I do not get to reach all of the issues they have raised. We will come back to them on Committee Stage.
Deputy Donnelly, along with a number of other Deputies, raised the issue of the conduct of the banks in efforts to seek a resolution of borrowers' problems. In particular, criticism was made to the effect that the Bill does not require a court, in considering an application for an adjournment, to take into account the bank's behaviour. This was repeated by a number of Deputies. I would direct the Deputies' attention to section 2(3)(d) which allows the court to take into account the conduct of both of the parties to the mortgage in seeking to resolve issues concerning arrears on the mortgage. I would also point to direct evidence that the courts are, in fact, taking banks' behaviour into account, as witnessed in the recent case of Irish Life and Permanent plc v. Duff & Anor where Mr. Justice Hogan refused to order repossession, part of the reason being the fact that the bank had not complied with the provisions of the Central Bank code of conduct on mortgage arrears. Having said that, I will consider, in the context of Committee Stage, whether there is more we should do in this area and, indeed, take account of the views expressed by the free legal advice centres.
It is worth pointing out to those Deputies who question the adjournment period of two months that this adjournment period is provided to allow consideration of a personal insolvency arrangement. However, section 2(4) provides that the court may grant a further adjournment if, by the end of that period, it sees real evidence of progress towards a personal insolvency arrangement.
I should add that the purpose of the 60-day time period is to enable a debtor to engage a personal insolvency practitioner with a view to applying for a personal insolvency arrangement and, within the PIA process, to apply for a protective certificate under the Personal Insolvency Act 2012. The effect of the protective certificate, which will operate for a period of 70 days from the date of issue, is to prevent creditors covered by the certificate from initiating proceedings or continuing with proceedings, even where such proceedings were initiated before the application for the protective certificate, and in such circumstances a further adjournment would not be required.
Deputy Mac Lochlainn and others indicated their belief that banks will choose which properties to repossess on the basis of the amount of equity in the property. That is a possibility, but I sincerely hope that this will not be the case, and the Government will be monitoring the behaviour of the financial institutions on this and other issues to ensure this type of unintended outcome does not arise. Financial institutions are being encouraged to facilitate people by debt settlement arrangements even prior to them having to invoke the provisions in the personal insolvency legislation. I want to make that absolutely clear. As I stated on many occasions, debt settlement arrangements include, in appropriate cases, where persons are weighed down by unsustainable debt, the writing off of a portion of the outstanding capital due in order that they can recalibrate their financial circumstances and return to sustainability.
A number of Deputies raised the issue reported in the Independent newspapers recently about the possible closure of money advice and budgeting service, MABS, offices. As Deputies will be aware, MABS is a free, confidential, independent and non-judgmental service for those in, or in danger of getting into, debt in Ireland and it has more than 60 offices nationwide. Some Deputies did not seem to be aware that MABS will play a central role in assisting borrowers in the area of debt relief notices under the insolvency legislation. The Citizens Information Board, which comes under the aegis of the Department of Social Protection, has statutory responsibility for the service and provides funding for and supports the 53 individual companies which make up the service. As with any such arrangement, a service level agreement is made between the funding body and the companies. My understanding is that a new service level agreement is being discussed. It would not be appropriate for me to comment further on such discussion other that to express my wish that this valuable service should continue in the future. It is an essential part of the architecture to ensure the workings of the Personal Insolvency Act.
I was a little taken aback by the manner in which Deputies Niall Collins and Kelleher sought in their contributions to try in vain to present their party as the party of the common man. Listening to their contributions, one would think Fianna Fáil had been in Opposition since the founding of the State and that it had no hand or part in the economic crisis that has befallen the country, in the explosion of the property bubble or in encouraging individuals to borrow recklessly. All of their protestations about lack of fairness and tilting the balance in favour of the banks conveniently ignore the fact that the Government, as I outlined, has put in place a number of key measures to support ordinary borrowers in financial distress, measures our predecessors in government failed to put in place.
I note Deputies Niall Collins and Kelleher stated that their party will be tabling meaningful amendments to the Bill, and I hope they will be more meaningful and more relevant than much of what they had to say about the Bill so far. Having said that, I have a simple view. If there are constructive amendments that Deputies wish to propose, I for one will be happy to give consider to them.
I am conscious that we are reaching 1.30 p.m. If I can make one more point, I will conclude.
Deputy Boyd Barrett made a very interesting speech and there is a strange similarity between what he had to say and what Deputy Ross, despite being the former business editor of the Sunday Independent, had to say. Their mutual view seems to be that the banks should lend money but never have a right to recover it. Deputy Boyd Barrett seems to believe that banks should never have the right to repossess homes from ordinary people. If that were the case, the ordinary people would not be in a position to obtain mortgages. Clearly someone seeking a mortgage needs security, which must be meaningful. I am afraid the approach taken by both Deputies is completely unrealistic and politically opportunist.
I thank all those who have spoken and apologise to those who made some very important points for not having the opportunity to respond to them. I hope the House will support the Second Reading of the Bill.
Question put:
The Dáil divided: Tá, 75; Níl, 44.
Tá
- Bruton, Richard.
- Burton, Joan.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Corcoran Kennedy, Marcella.
- Creed, Michael.
- Daly, Jim.
- Deasy, John.
- Deenihan, Jimmy.
- Deering, Pat.
- Dowds, Robert.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Flanagan, Terence.
- Gilmore, Eamon.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Heydon, Martin.
- Hogan, Phil.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Nicky.
- McGinley, Dinny.
- McLoughlin, Tony.
- McNamara, Michael.
- Maloney, Eamonn.
- Mathews, Peter.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Nash, Gerald.
- Neville, Dan.
- Nolan, Derek.
- Ó Ríordáin, Aodhán.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Phelan, Ann.
- Phelan, John Paul.
- Rabbitte, Pat.
- Ring, Michael.
- Ryan, Brendan.
- Shatter, Alan.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Twomey, Liam.
- Wall, Jack.
- Walsh, Brian.
Níl
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Browne, John.
- Collins, Joan.
- Collins, Niall.
- Cowen, Barry.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Flanagan, Luke 'Ming'.
- Fleming, Tom.
- Halligan, John.
- Healy, Seamus.
- Healy-Rae, Michael.
- Higgins, Joe.
- Kelleher, Billy.
- Lowry, Michael.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McLellan, Sandra.
- Martin, Micheál.
- Murphy, Catherine.
- Naughten, Denis.
- Nulty, Patrick.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Dea, Willie.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Smith, Brendan.
- Tóibín, Peadar.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Seán Ó Fearghaíl and Aengus Ó Snodaigh.
Question declared carried.