Dáil Éireann Debate, Wednesday - 3 February 2010
90 Deputy Richard Bruton asked the Minister for Finance the initiatives under study by the new group considering debt distress and home repossession; and the timeframe set for implementation of agreed measures. [5682/10]
Amharc ar fhreagraAs I have said on many occasions in this House, the Government is conscious of the high value Irish people place on home ownership and the growing problem of indebtedness and mortgage arrears that home owners face in the current economic climate. The renewed programme for Government sets out the Government's commitments for addressing these issues under the headings Protecting the Family Home and Helping Those in Debt.
I approved the setting up of the interdepartmental mortgage arrears review group, chaired by one of my officials, for the purpose of bringing together all relevant information in Departments and examining options, including initiatives in other jurisdictions, in relation to the matter of support for home owners facing the problems of mortgage arrears and repossession. The Law Reform Commission, which is under the aegis of my colleague, the Minister for Justice, Equality, and Law Reform, is addressing the issues of debt management and enforcement. In addition I have discussed with Cabinet colleagues the broadening of the membership of the mortgage arrears review group and I will bring proposals to Government.
The mortgage arrears review group is examining options to improve State supports for home owners with mortgage arrears, including schemes in operation in the USA and UK. These schemes are designed to address particular problems for particular groups of home owners and include options for re-financing mortgages, modifying the terms of existing loans, shared equity and purchase of mortgages for the purpose of renting back to the home owner. Other matters to be considered by the group will include the recommendations coming from the review of the Department of Social and Family Affairs mortgage interest supplement scheme, when it is completed, as well as suggestions for improving existing advisory services for persons who are in arrears with their mortgages.
The group will engage with various experts bodies involved in mortgage arrears such as the Money Advice and Budgeting Service, Economic Social Research Institute, the Irish Banking Federation and the Free Legal Advice Centres, among others, as part of its consultations. The Government is aware of the growing pressures on home owners in keeping up with their mortgage repayments, due to unemployment, reduced earnings and increases in interest rates and the need for early action. Nevertheless, the Deputy will appreciate that the overall consideration in terms of timeframes must be that decisions taken to improve current Government support measures involving taxpayers' money are taken in the full knowledge of the overall cost to both State and taxpayer. The group has met on several occasions and work has commenced on bringing forward options for dealing with these matters.
Additional information not given on the floor of the House.
The Law Reform Commission's consultation paper on personal debt management and debt enforcement, published in September 2009, contains an extensive list of provisional recommendations for reform of the law on personal debt that includes provision for a system of non-judicial debt settlement. The commission has indicated that the date for completion of submissions on its paper is the end of January 2010. It aims to have its final report available by end of August 2010.
The Enforcement of Court Orders (Amendment) Act 2009, provides that certain safeguards will apply to the provisions under which a court may hear an application or grant an imprisonment order against a debtor who has failed to comply with an instalment order. The Act ensures that the court will not imprison the debtor unless it is satisfied that he has the means to pay and may also postpone the execution of an imprisonment order until such time as it thinks just. In addition, the court will inform a debtor of the risk of imprisonment and of his entitlement to apply for legal aid. The Act gives the court a clear power to vary the terms of an order to pay by instalments or alternatively to refer the parties for mediation.
We have two versions of what is happening. One version is that the Minister is extending the membership of a think-tank and the second version is the one that has come from the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, that the Government is preparing a new scheme to bail out mortgage holders and that Cabinet will approve an implementation committee for this new scheme. Which of those two versions of events is the correct one? While this deliberation is going on, will the Minister extend the moratorium of one year for 6,400 mortgage holders who are now one year in arrears and are at serious risk? Is the Minister on board for the idea, which underlined Fine Gael's proposal, of the banks writing down some of the value of the loans? This has implications for recapitalisation and for the banks' capital. This is the essence of any of these schemes. Does the Minister accept that principle?
The Deputy asked three questions. First, with regard to the position of the Minister, Deputy Eamon Ryan, and his observations on this matter, clearly he was referring to the commitments in the programme for Government which are very explicit in regard to this matter and the various options set out there which can assist mortgage repayment. That is within the remit of the current review group and as I indicated on foot of my conversations with the Minister, Deputy Eamon Ryan, I am bringing proposals to Government to broaden the membership of the group. The third issue the Deputy asked me about was the Fine Gael proposal on write-downs.
The second issue was whether the Minister will arrange to extend with the covered banks the moratorium which is now coming to an end for 6,400 people.
That is an issue that obviously has to be examined by the committee and I am not in a position today to make an announcement in that regard.
With regard to the question of write-downs, Deputy Bruton's question draws attention to the fact that were we to write down mortgage debt in the manner he suggests, then clearly that would accelerate further losses in the banks requiring further capitalisation. While decisions will be required on capitalisation before the summer, and clearly in that context, consideration will be given to the exposure of the banks right across their loan portfolios in the years ahead.
I want to press the Minister on this matter. The essence of any of these arrangements is that there is some write-down by the banks of the value of their loan. In principle, is this something the Minister is willing to contemplate, otherwise much of this work will be for naught. I ask the Minister to understand there is a great deal of pressure out there. While an extension of the moratorium would be welcome, most people would like to see the Minister engaging directly with the banks to ensure they show forbearance while we work out the details of our proposals. People do not want to see the establishment of a think tank to consider the extension of the moratorium.
The banks are well aware that this is a high priority for the Government. The one-year moratorium was introduced at the time of the recapitalisation of the two main institutions because of our concern about this issue. It is not correct to say the matter has been consigned to a think tank or that I do not accept personal responsibility as Minister for taking initiatives in this regard. Far from it. However, the issues involved are complex. For example, our statistical base is somewhat inadequate in regard to the nature and scale of the problem. A diversity of approaches have been attempted in other jurisdictions with varying degrees of success. Discussion about write-downs in unqualified terms can lead to a perception on the part of those who are in a position to pay their mortgage debt that they need not do so. Governments must be cautious about their utterances in this regard.
