Mortgage Arrears 4.11.14

Mortgage Arrears: Motion [Private Members] (Continued)

Tuesday, 4 November 2014

Dáil Éireann Debate

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(Speaker Continuing)

[Deputy Simon Harris: Information on Simon Harris Zoom on Simon HarrisThe Department of Finance recently published submissions received from a range of respondents from the financial services industry, consumer groups, public representatives and individuals and other stakeholders. Officials in the Department are carefully considering the submissions and it is anticipated that legislation will be published by the end of this year.

This Government has put in place a wide range of initiatives to assist homeowners in mortgage arrears. The main banks have been set targets to propose and conclude sustainable solutions to mortgage holders in arrears, and they are meeting those targets. A new, innovative personal insolvency regime is in place, the mortgage-to-rent scheme has been rolled out nationwide, and the Government’s mortgage advice and information service has been established. This Government is dealing with the mortgage crisis it inherited. It has now developed and provided a suite of measures designed to address the problem of over-indebtedness. This strategy will continue to deal with unsustainable debt positions and do so in a way that is as fair as possible to borrowers and lenders, but also in a way that seeks to minimise the costs involved for wider society. The statistics issued by the Department of Finance and the Central Bank demonstrate that the numbers in arrears are falling, the number of restructures is rising and much of the groundwork laid by the Government is having the desired effect in relieving families of the burden of debt and anxiety associated with being in arrears and putting them on a sustainable footing for the future. I look forward to the rest of the debate.

Deputy Tom BarryInformation on Tom Barry Zoom on Tom Barry I welcome the opportunity to speak on this very important motion, and I am glad it has been introduced. I remember writing a document in 2010 called Parked Percentage Mortgage Plan, which was eventually fed into the Keane report, which called it a split mortgage. This was a start, as at the time there was hardly anybody in the country who did not have some iron in the fire, having bought an expensive property or become over-leveraged. In the financial meltdown we experienced, people were wondering how to survive. However upsetting it is for businesses to go to the wall or for a person to experience the possibility of losing a job, the idea that one could lose one’s home was terrifying. At that stage, the basis of a process for dealing with this was put in place. We should have no doubt that the banks were not in a position or they lacked the skill set to deal with the issue. They made many mistakes, but, like everybody else, I can only give most of the banks credit for the way they are starting to deal with the problem now. As most Members are aware from people attending their clinics, we have had discussions with banks about people in genuine long-term distress. The matter has to be dealt with on a one-to-one basis. One cannot advertise such cases, but they are very important to those involved. The formulation of solutions is for people in serious financial difficulty. A case of arrears by itself is not enough; the arrears must be of such a scale that they cannot be tackled.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews There is the case of Tony O’Reilly, for example.

Deputy Tom BarryInformation on Tom Barry Zoom on Tom Barry We must remember that the country is recovering. I am not smiling when I say that. In such a recovery, people have the opportunity to repay more than they thought they could some time ago. It is important that we have a solution for every person involved. Ironically, the solutions fitting mortgages may also help a sector with which I am involved, that of small businesses. Most of these businesses have some non-core debt, which can be as grave as mortgage debt in that it can pull down the core business. Solutions involving the stretching of non-core debt and resolutions affecting non-core debt are important, because this relates to people’s jobs. These businesses are starting to grow, thanks be to God.

I do not like the inclusion of the word “mandate” with regard to creditors and mortgage servers. A deal must be done in a spirit of agreement between both parties, taking into account the full aspects of the code of conduct on mortgage arrears. Both parties must be genuine in their approach. Mandating somebody to do something would mean one party would leave unhappy. Both parties must hope a resolution can be achieved fairly.

There is some merit in the idea of a split mortgage with no interest on the warehoused portion. If a person with a €200,000 asset can only afford to pay interest and principal of €100,000, the balance of €100,000 would be parked. If that person passes on the house to a son or a daughter with €100,000 left to be paid, but the value has risen to €300,000, there is surely a case to be made that some portion of the interest should be paid in a fair way. These moneys must be returned to the State. I would gladly take on an asset if I knew I could take it on at 50% of current value. We must be practical, and we cannot have the State bear all the burdens where mistakes have been made. We must ensure the process can be fair to the State also. Many people in the House have given out about how we all were burdened with debts from the banks and nobody will appreciate us adding more unnecessary burden to the taxpayer. The people would certainly reward us if genuine compassion were shown towards people with family homes.

There are people with second homes or buy-to-let properties. If a party cannot afford the payments on a buy-to-let property, the issue is not as serious as if it is a primary dwelling. If the problem cannot be dealt with, the properties should be recycled into the system and the noose should be removed. I agree that we need to know what will happen when properties are surrendered. When banks do deals with people, they are working as best they can.

It is important that both parties participate honestly and with genuine interest in ensuring it can be a fair deal. It should not be a sweet deal for one party and it should apply equally to both. It is very popular to give out about banks, but I have dealt with them for many years. I have been in business for 20 years and I have dealt with banks from when there was no money available in 1991. There is now a realisation that the people who have come through this recession have been toughened and will survive. They will thrive, in time, but they must be given some breathing space. In my experience, and particularly in the past two years, some banks have acted very responsibly. We have brought constituents to met their representatives on a regular basis and although this may have been a difficult experience a couple of years ago, there is now a real willingness to engage. That is fantastic. Only two weeks ago I brought in a couple who were in dire straits and were almost afraid to discuss the issue. Although they were paralysed with fear initially, they realised the people from the bank were not that frightening. It is very easy to blame banks, but we have a responsibility to deal with this issue.

The code of conduct on mortgage arrears and the Keane report have been very helpful. Many people do not realise how helpful they are. When debt is burdensome, some people may fail to interact as they would if they were in the best of health. Mortgages were given out to people who should not have got them. For example, mortgages were given to people over 50, who were expected to be healthy and wealthy for the next 20 years. That was a lot to ask. Others got mortgages for houses they could never afford. We need to achieve a sense of realism, and the country cannot offer interest-only deals on mortgages where the house value bears no relation to the means of the people living in it.

This is a very important discussion, and things are changing. It was a much graver debate three years ago, as nobody could see the light at the end of the tunnel or foresee a recovery. A growth rate of 4.6% or 4.7% is colossal. It means there are many more people at work and people are able to contribute more. They may not be able to contribute the full amount of an initial mortgage, but the solution is evolving more quickly every day.

(Speaker Continuing)

[Deputy Tom Barry: Information on Tom Barry Zoom on Tom BarryProperty prices are increasing and negative equity is becoming less of an issue, though it still exists. Negative equity does not determine the ability to pay off a debt. Many of us own properties that are in negative equity and we pay for them fully if we can. If a working person can afford to pay an agreed mortgage, negative equity resolves itself in time. We must be careful on this issue because we cannot land taxpayers in greater debt while allowing anyone in arrears avail of these measures, rather than genuine cases. If this is opened too broadly people will try to exploit it and that would be wrong. As always, we must first protect people in family homes and thereafter apply a system of priorities. We must examine whether extra houses are required and see what to do about rental properties as they have presented problems. Some people with buy-to-let properties have taken rent and paid nothing back.

Things are changing and this discussion is important. People who are genuinely in debt should talk to their mortgage providers in the spirit of that agreement. Banks have the ability to deal with the problems that exist.