Gerry Adams
Ceist:14. Deputy Gerry Adams asked the Minister for Finance if he will carry out an impact assessment of the property tax on the numbers of those in mortgage arrears. [14061/13]
Amharc ar fhreagraThursday, 21 March 2013
Ceisteanna (14)
Freagraí scríofa
The Government has considered the impact of the Local Property Tax (LPT) on those in mortgage arrears. The Thornhill Group (the inter-departmental group chaired by Dr. Don Thornhill to consider the design of a property tax) acknowledged that in current circumstances an additional case should be made to target assistance on owner occupiers suffering severe financial stress as a result of housing mortgage commitments undertaken during the housing boom period, aggravated in some cases by reductions in income. The Thornhill Group recommended increased deferral thresholds in cases where the mortgage was taken out between 1 January 2004 and 31 December 2008. The Government accepted the Thornhill Group’s recommendation but decided not to limit the increased thresholds to those who purchased properties during a particular time period. Therefore, an increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage. In such cases, the gross income thresholds for both full and partial deferrals may be increased by 80% of the mortgage interest payments. A deferral option in qualifying cases in this regard will apply until the end of 2017 and will assist individuals currently in mortgage distress. Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Interest of 4% per annum will apply to any amounts deferred.
The Finance (Local Property Tax) (Amendment) Act 2013 provides that a person who has entered into an insolvency arrangement – i.e. a Debt Settlement Arrangement or a Personal Insolvency Arrangement under the Personal Insolvency Act 2012 – may qualify for a deferral of the LPT that falls due for payment by that person during the period for which the insolvency arrangement is in effect where a valid claim is made to the Revenue Commissioners.
This 2013 Act also introduces new measures which provide for the possibility of a deferral for liable persons who cannot without excessive hardship pay local property tax when it becomes payable, as a consequence of a significant and unexpected financial loss or expense (subject to the application for a deferral from the liable person to the Revenue Commissioners, in line with Revenue guidelines to be published, and notification from the Revenue that a deferral is allowed).
The Thornhill Group recommended that the LPT paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates and suggested that consideration be given to phasing in deductibility over a period of years. There is no provision in the legislation for such deductions at present. However, it is the intention of the Government to introduce such a provision on a phased basis, though the manner and timing of this has yet to be decided.
Taking all of the above measures into account, I believe any impact of the LPT on mortgage arrears will be limited.
Turning to mortgage arrears in general, this Government is conscious of the difficulty some home owners are experiencing in meeting their mortgage obligations and is committed to helping homeowners in distress to weather the recession, and to ensuring that Ireland has a sustainable housing policy. The main focus of attention is on those mortgage holders who are experiencing genuine difficulty in meeting the commitments in respect of their home. As set out in my Department’s Review of 2012, much work was done in relation to mortgage arrears and personal indebtedness to assist those in difficulty. A Steering Group, chaired by my Department, was established to oversee implementation of the Interdepartmental Mortgage Arrears Working Group (Keane Report) Report’s recommendations. The following key milestones were delivered in 2012:
- The Personal Insolvency Bill was published by the Department of Justice in June 2012;
- The Mortgage to Rent scheme was formally launched by the Department of Environment, Community and Local Government in June 2012;
- A three-phased approach to establishing a comprehensive Mortgage Arrears Information and Advice Service to provide the necessary supports to assist people in mortgage distress was launched by the Department of Social Protection in September 2012;
- The banks, with Central Bank oversight, completed pilots and commenced the roll-out of strategies and solutions to address loan arrears and unsustainable debt in October 2012; and
- A CEO was appointed by the Department of Justice to mobilise and operationalise the Insolvency Service of Ireland in October 2012.
The new Personal Insolvency Act was signed into law at the end of 2012. The legislation provides a legal framework for the resolution of unsustainable personal debt (including mortgage debt) and it will provide certainty for borrowers and lenders alike about the consequences of non-payment and failure to reach agreement. Complementing this legislation is a comprehensive set of measures implemented by the banks following detailed consultation with my Department. These include:
- An increase in staffing resources allocated to assisting in arrears management;
- The provision of alternative mortgage servicing arrangements; and
- A more focused strategy encompassing engagement, stabilisation and resolution.
In 2013 we will build on the progress made to date by continuing to lead key stakeholders, through chairing the Mortgage Arrears Steering Group, to deliver the remaining elements of the Mortgage Arrears programme by:
- The development of resolution targets by the banks, through Central Bank oversight; and
- The operation of the Personal Insolvency Act through the Insolvency Service of Ireland.
The Central Bank, which is represented in the Steering Group, recently announced new measures to address mortgage arrears, including the publication of performance targets for the main mortgage banks and proposed changes to the Code of Conduct on Mortgage Arrears (CCMA). The new approach is aimed at ensuring banks offer and conclude sustainable solutions for their customers in arrears by setting specific performance targets and proposing revisions to provisioning standards. The Central Bank is also proposing to update the CCMA so that it continues to provide protection to customers who cooperate with their bank while facilitating and promoting the resolution of arrears cases.
The Central Bank will assess whether the performance targets are being met. To the extent that the banks fail to meet these targets to the satisfaction of the Central Bank and within the timeframes set out, the Central Bank may take further regulatory action, which may include, without limitation, obliging a credit institution to hold additional own funds or requiring a credit institution to apply a specific provisioning policy or treatment of assets, in terms of own funds requirements. This is without prejudice to the power of the Central Bank to take regulatory action at an earlier date where appropriate.