I move amendment No. 1:
To delete all words after “That” and substitute the following:
(a) noting the significant concerns with the Mortgage Arrears Resolution (Family Home) Bill 2017 in respect of its compatibility with the Constitution of Ireland, but acknowledging the positive intentions behind the Bill;
(b) acknowledging the importance of addressing the difficulties faced by distressed borrowers in mortgage arrears and the high priority that Government attaches to this issue;
(c) noting the range of measures already put in place by Government, both up to 2016 and under A Programme for a Partnership Government, to support and assist financially distressed borrowers in mortgage arrears on their homes, with a view to keeping people in their homes and avoiding repossessions as far as possible;
(d) noting the welcome substantial and continuing decrease - as shown in the latest Central Bank of Ireland statistics - in the overall number of home mortgage accounts in arrears, the very significant number of home mortgage restructures now in place, and the very high proportion of home mortgages which are meeting the terms of their restructure;
(e) noting also the welcome significant and ongoing reductions, both in the issue of new civil bills seeking possession on foot of home mortgage arrears and in the numbers of repossession orders made by the courts, and the continuing and substantial increase in repossession proceedings struck out or discontinued;
(f) noting the existence of the personal insolvency arrangement, provided under the Personal Insolvency Acts, as the primary formal mechanism to facilitate the negotiated resolution between debtors and creditors of both unsecured and secured (including mortgage) debt;
(g) noting that the personal insolvency arrangement is designed, as far as possible, to permit the debtor to continue to reside in his or her principal private residence, while resolving their debts in a holistic manner and returning the debtor to solvency;
(h) noting that under changes introduced by the Personal Insolvency (Amendment) Act 2015, a borrower whose reasonable proposal for a personal insolvency arrangement - which includes his or her home mortgage arrears - is refused by the mortgage lender or other creditors can now seek an independent review of that refusal by the courts, which have power, subject to certain conditions, to impose the rejected proposal, thus ending the so-called bank veto;
(i) noting the introduction of free independent financial and legal advice and assistance, for insolvent borrowers in home mortgage arrears, as part of a range of supports available through the Money Advice & Budgeting Service, MABS, under the Government’s Abhaile mortgage arrears resolution service, and the high level of take-up by distressed borrowers of the various supports provided under Abhaile;
(j) noting the public consultation already completed on personal insolvency legislation, and the ongoing review of the insolvency system, to be completed this year under A Programme for a Partnership Government commitments on mortgage arrears;
(k) noting the further measures already in train under the Government's Action Plan on Housing and Homelessness, including recent and continuing changes to the mortgate-to-rent scheme to extend its availability, particularly for borrowers in rural areas; and
(l) noting the other relevant measures which have been put in place to protect principal private residences of those in mortgage arrears; and declines to give the Bill a Second Reading.”
I acknowledge the work Deputy Michael McGrath has done and I thank him for raising this important issue and for his further information and explanation on the Bill. I acknowledge the Deputy's genuine concerns about this issue and the positive intentions behind the Bill. The remaining home mortgage arrears problem and the risk of repossession remain a major issue and a high priority for the Government as A Programme for a Partnership Government clearly underlines. We have already taken extensive actions to address these issues. Those actions are achieving practical results which have been demonstrated in the matter of reducing arrears and in helping to get sustainable solutions in place for distressed mortgage holders. I will return to those later.
Further important Government measures to address these problems are continuing to come on stream. I will mention these too. Unfortunately, the Bill before us will not make a meaningful contribution to resolving these important problems. It is an over-simplistic solution in this very complex area, which risks creating a range of serious and unintended negative effects, most importantly for distressed mortgage holders themselves. The Bill is not fully thought out on issues of fundamental importance. If implemented, it would be at risk of ongoing legal challenges. More seriously, the Bill appears to be incompatible with the Constitution and, in light of the advice we have received from the Attorney General, there is a very high risk that it would attract constitutional challenge. For these reasons, the Government will oppose the Bill.
I will turn first to the significant legal and constitutional problems raised by the Bill. Essentially, what the Deputy is proposing is the creation of a new, independent, quasi-judicial body to be called the mortgage resolution office. A financially distressed borrower who was in arrears on his or her home mortgage on or before 1 January 2017 would apply to this new office. The office would have the power under the Bill to make a new form of order called a mortgage resolution order. This would impose legally-binding changes to the terms of an existing mortgage. Such changes could include: extending the term of the mortgage by up to 20 years; directing a change in the interest rate; imposing a reduction in the principal sum due under the mortgage; directing interest-only payments for up to four years; imposing a split mortgage with warehousing for up to ten years; and imposing a mortgage-to-rent solution or any other solution to the borrower's arrears that the office may consider appropriate. An mortgage resolution order would also prevent a mortgagee or financial institution from issuing any new enforcement or repossession proceedings. It is clear that these powers are extremely far-reaching, which was the intention.
The only appeal provided for under the Bill is, effectively, to a second newly-established quasi-judicial entity, namely, an appeals officer. An appeals officer could refer a point of law arising before him or her to the High Court. Under the Bill, there is no appeal to any court either against an mortgage resolution order made by the mortgage resolution office or against a decision by the appeals officer. This is a fundamental flaw in the whole conception of the Bill and raises very serious constitutional and legal difficulties. The Bill essentially seeks to give these two new quasi-judicial bodies, the mortgage resolution office and the appeals officer, extremely wide-ranging powers to intervene and change the vested constitutional and contractual legal obligations and the legal rights of private parties. Such powers are exclusively reserved, as the Deputy will know, to the courts, under Article 34 of the Constitution as part of the administration of justice. Following legal advice obtained from the Office of the Attorney General, it is likely that the proposed far-reaching powers and discretions of these bodies would contravene Article 34.
The Bill seems to be based on legislation providing for a statutory scheme of grants in which State subsidies or payments are the only matter at issue, such as in respect of social welfare appeals or agriculture appeals. The proposed mechanism of a quasi-judicial decision at first instance and on appeal could be suitable in that context. That is wholly inappropriate in the context of this legislation. Even if the Bill were fundamentally revised to provide for the proposed mortgage resolution orders to be made by a court rather than this quasi-judicial body, it would remain at high risk of constitutional challenge. Such orders would intervene with the banks' legal right to be repaid under a mortgage contract validly entered in with private parties. These are protected vested property rights under Article 40 of the Constitution. The constitutionality of proposals to impose mortgage resolution solutions has been extensively discussed by Government Departments and the Attorney General's office, not only in recent times but in recent years, as all Members are aware. Any legislative interference with private property rights in this area seeking to achieve an objective of the common good still has to demonstrate clearly that it is a carefully balanced and strictly proportionate intervention which has taken full account of the respective rights and obligations of both parties. The very cursory provision in this Bill falls far short of that standard.
The Bill also has significant further legal defects. Time will allow me to mention but a few. The income, asset and debt levels required to qualify as a financially distressed borrower are not defined in the Bill. It is questionable whether a Bill could constitutionally leave this key issue to be decided by a statutory instrument. There is no provision for the mortgage resolution order to be varied if the borrower's financial situation changes, only for it to be terminated which may leave the borrower in a worse position than he might have been in before. The new office is proposed to be located with the Insolvency Service of Ireland. However, there are a number of conflicts between statutory functions of the latter and those proposed for the new office and these would likely to lead to ongoing operational problems of a serious nature.
In addition, the Bill raises significant practical problems. I will give some examples. While the Bill provides a mechanism intended to protect against enforcement or repossession of the home, it does not provide any protection against registration of a judgment mortgage against the home by a creditor other than the mortgage lender. This creates a real risk that unsecured creditors would rush to register judgment mortgages against the home creating new problems for the distressed borrower. A judgment mortgage is a court order and can only be varied or suspended by a court, not a quasi-judicial body. Given its very considerable legal defects, the Bill is likely to give rise to a very high proportion of objections, appeals, legal challenges or views which would be time-consuming, expensive and uncertain. The Bill only provides for a resolution of the borrower's mortgage arrears. There is no provision for dealing with other debts or returning the borrower to solvency as would be done by way of a statutory solution under the personal insolvency Acts. These issues were raised by Deputy Fitzmaurice who seemed to think they had been incorporated into this Bill already. There is a risk that borrowers will opt for this new solution only to find themselves back in the frying pan for this reason. The Bill risks delaying a debt or getting a comprehensive solution, getting some certainty and making that outcome more difficult to achieve. I am also concerned the Bill could discourage financial institutions from new lending for house purchase purposes which would exert a negative impact on the recovering housing market.
I will now turn to the extensive measures already undertaken by the Government in this area which Deputy Cowen failed to acknowledge and the demonstrated and practical results in helping home owners in mortgage arrears. Deputy O'Callaghan wonders what happened in the past six years so I will mention a few things. Measures already introduced include the Personal Insolvency Act 2012; the courts' power under section 2 of the Land and Conveyancing Law Reform Act 2013 to adjourn repossession proceedings so a borrower can explore whether personal insolvency can resolve his or her financial difficulties; the Personal Insolvency (Amendment) Act 2015, which removed the bank veto in personal insolvency cases by introducing a court power to review an unreasonable refusal by a creditor; the Abhaile mortgage resolution service set up to implement the first point in the programme for Government's commitment on mortgage arrears, providing free, independent, expert legal and financial advice and assistance via MABS to borrowers at risk of losing their homes; and the development of the MABS resource across the country, which is now integrated into the Abhaile scheme.
I acknowledge that mortgage arrears remain high but, despite what is suggested by some media reports and commentators, both home mortgage arrears and repossessions are falling significantly and have been doing so now for a sustained period. Owner-occupier private dwelling house, PDH, mortgage accounts have been falling consistently for 15 consecutive quarters since their peak in September 2013. All categories of PDH mortgage arrears are declining. Even those in largest arrears, equivalent to over 720 payments, have now been declining steadily for seven consecutive quarters. It should also be noted the Central Bank indicates the figure of 76,400 home mortgage accounts includes 26,500 restructured mortgage accounts where the remaining arrears are historic and the borrower is not at risk provided he or she meets the current terms of restructure.
We can see a clear impact of Government measures to help borrowers in home mortgage arrears to get solutions into place. There is no room for complacency and there is much more to be done in that regard. Important further measures already in train under the Government's Action Plan for Housing and Homelessness include recent and continuing changes to the mortgage-to-rent scheme to extend its availability particularly for borrowers in rural areas.
The House is well aware of the extent of complexity of the home mortgage arrears problem. I am sure Deputy Michael McGrath and the authors of this legislation also acknowledge that. This remains a priority for Government. Arrears and repossessions are falling steeply but they are still too high. We are determined to reduce them further. We have taken action and we continue to take action. Of course, we are open to looking at all constructive solutions and fully appreciate the genuine intent behind this legislation but it is fundamentally flawed. It appears incompatible with the Constitution and risks adding problems to those already suffering the worst of arrears. For these reasons, we cannot support it.