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Mortgage Arrears Proposals (Continued)

Tuesday, 2 July 2013

Dáil Éireann Debate
Vol. 809 No. 2

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(Speaker Continuing)

[Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan] Lenders must apply a realistic valuation of the borrower's assets. This also applies to any assumption of potential asset price appreciation, as well as the estimated costs related to a potential repossession of property and lenders must use an appropriate interest rate when discounting future income flows, which should take account of the lender's cost of funds.

  The Central Bank has been in communication with each of the relevant institutions to set out the reporting requirements with regard to the public and non-public targets of the respective institution. It also will assess compliance with the sustainability principles as outlined above in its supervisory audit of compliance with the targets, including an analysis of a sample of modifications.

  Additional information not given on the floor of the House

  The necessary overall strategy and building blocks to address the mortgage arrears problem are, therefore, now in place. These include the Central Bank targets initiative, the new code of conduct on mortgage arrears, the fundamental change to personal insolvency legislation including the provision of new, more accessible and less penal resolution mechanisms to debtors and a comprehensive mortgage information and advice service. The onus is now on lenders to move to address individual arrears cases in a comprehensive and speedy manner. Therefore, I expect the banks to increase the number of split mortgages and the other long-term restructured mortgage arrangements put in place over the remainder of this year.

  As part of the process banks are requested to make regular returns to the Central Bank on their performance against the targets and the Central Bank will audit the performance of the lenders in this regard. I can assure the Deputy that both my Department and I will keep in close liaison with the Central Bank and individual banks on this important issue.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath I thank the Minister for his reply. I believe that with all the focus in the last week or so understandably having been on the Anglo tapes, the revised code of conduct and the latest mortgage arrears statistics have not received the attention they deserve. More than 142,000 families are in mortgage arrears on the family home at present. This is a national crisis that deserves a decisive response. In his reply, the Minister outlined that under the mortgage arrears targets programme, 20% of those in arrears were to be offered sustainable solutions by the end of June 2013. These sustainable solutions can involve being put on interest-only repayments, putting someone into insolvency or the voluntary surrender of the property. Many of them will not, by definition, represent genuine long-term restructuring of the mortgage.

The Minister's reply refers to the reporting arrangements. Will Members receive information at the end of each of the those milestones, namely, the 20% and 30% targets, as to what is being offered? While I do not expect such detail by bank, will Members be informed that X percentage received an offer of a split mortgage, while Y percentage is being put into insolvency? While this is the responsibility of the Central Bank, such information is critical because the banks are becoming increasingly aggressive with people on the ground. This is being facilitated by the change in the law concerning repossession, by the removal of the limit on the number of unsolicited contacts, by the tracker rate now being on the table for the first time and by the removal of the moratorium at 12 months. Moreover, if one is deemed to be non-co-operative, the banks now can move immediately. They are becoming more aggressive and while all Members accept they also must face up to the crisis, my difficulty is that the banks are firmly in control. They are in the driving seat and decide what is a sustainable solution. They decide who is or is not non-co-operative. Many people wish to work through their situation and are in genuine financial distress.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Thank you Deputy. I must call on the Minister.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath At present, the evidence on the ground is that the banks are becoming more aggressive. They are being armed with more and more tools by the Central Bank and the Government.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Thank you. I call on the Minister.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath Will Members get information on the sustainable solutions that are being offered?

Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan I agree with the Deputy. This is a difficult situation and I am glad that there is now movement to resolve it. On the data available to me on the targets set down, approximately 25,000 offers have been made across the banks already. I can get more precise data for the Deputy. I do not have to hand the breakdown on what are the specific solutions across the range of solutions that may be applied but the general principles are as I have laid out. These general principles now have been refined further by the code of conduct on mortgage arrears, which has been reviewed again by the Central Bank. The criteria taken into account are the personal circumstances of the borrower, the overall indebtedness of the borrower, information provided in the standard financial statement, the borrower's current repayment capacity and the borrower's previous history.

However, the principle under which everything is operating is an attempt to distinguish between those who cannot pay and those who will not pay. For those who cannot pay, the banks are engaging and providing sustainable solutions. There is of course a difference between the target on offer and the subsequent targets on solutions. Consequently, there will be a second set of data giving information on the offers that have been accepted.

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