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 Header Item Business of Dáil
 Header Item Mortgage Arrears Proposals: Motion [Private Members]

Tuesday, 9 July 2013

Dáil Éireann Debate
Vol. 810 No. 1

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Business of Dáil

Minister for Justice and Equality (Deputy Alan Shatter): Information on Alan Shatter Zoom on Alan Shatter I thought there was an agreement that this matter was going to go on until 7.40 p.m. and then conclude. I may be confused about that.

Acting Chairman (Deputy Thomas P. Broughan): Information on Thomas P. Broughan Zoom on Thomas P. Broughan The Order of Business states there would be a round of speakers and then it would adjourn at 7.30 p.m., whichever is first.

Deputy Alan Shatter: Information on Alan Shatter Zoom on Alan Shatter That is fine. That would be the usual procedure but I was told that there had been an agreement that the matter would be completed this evening. We will come back to it another day.

Mortgage Arrears Proposals: Motion [Private Members]

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath I move:

I wish to share time with Deputies Ó Cuív, Browne and Calleary if that is agreed.

Acting Chairman (Deputy Thomas P. Broughan): Information on Thomas P. Broughan Zoom on Thomas P. Broughan Is that agreed? Agreed.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath This is the second time in six months that we have tabled a Private Members' motion relating to the mortgage crisis which is hitting every community across the country. Despite promises at the time from Ministers that decisive action was being taken to confront the problem head on, we now see the situation is actually getting worse.

  In the intervening period the numbers of arrears cases has continued to increase while the number of genuinely sustainable solutions put in place by the banks has been little short of abysmal. Borrowers are now being hit by a triple whammy in the form of the Land and Conveyancing Law Reform Bill which will make home repossessions easier, the mortgage arrears resolution targets programme which incredibly allows the banks themselves to define what is a sustainable solution and now the revised code of conduct on mortgage arrears which unravels vital protections for homeowners. Approximately 70,000 families are no longer protected from repossession proceedings being undertaken immediately by the banks. There are over 54,000 family home mortgages in arrears of one year or more. If one looks pro rata at those who are in arrears between six and 12 months approximately 16,000 of those can be assumed to be in arrears of eight months or more. When one adds that to the 54,000 it comes to approximately 70,000 families completely at the mercy of the banks facing possible repossession proceedings.

  I listened to the interview with the Governor of the Central Bank, Mr. Honohan, on radio at the weekend. While he did not repeat the language that he used in February when he said that Central Bank officials were tearing their hair out in frustration at the lack of progress being made in tackling the crisis, it was clear from his comments and other media reports that the banks have not stepped up to the plate. In that context it is inexplicable that the Central Bank would sign off on a revised code which strips borrowers of some of the remaining protections they had. As I said previously, the banks have not held off repossessing family homes to date out of any sense of economic altruism, social solidarity, or out of recognition at the costs they have inflicted on the taxpayer but quite simply because their hands have been tied by the Dunne judgment and the terms of the previous code of conduct on mortgage arrears.

  On Friday of this week the Seanad is likely to pass the Bill which will remove the loophole which limited repossession actions while the code of conduct will in effect let the banks off the leash to pursue borrowers in cases where the bank deems the mortgage to be unsustainable. It is worth noting what the code itself says in this regard, where a bank writes to a borrower to advise them that their loan is unsustainable "legal proceedings may commence three months from the date the letter is issued or eight months from the date the arrears arose, whichever date is later", and that, "irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case." This is a significant weakening of the protection which previously existed for borrowers.

  Our motion requests that the code be revised to reincorporate the 12 month moratorium before repossession actions are allowed to commence. In addition, it puts forward what I think is a very reasonable suggestion that before a repossession order is granted by the courts the bank be required to obtain from the Central Bank as regulator written confirmation that it has in fact exhausted all viable alternative options to repossession.

  Widespread home repossession is an almost unknown phenomenon to us in Ireland but the UK went through a disastrous period of social upheaval in the early 1990s as a consequence of thousands of families being put out of their homes. Despite arrears of greater than six months peaking at 3.5% in 1992 - a level far below what we are experiencing in Ireland - 200,000 homes were repossessed in the period 1990 to 1992. The social and economic effects of the failed policies that led to this situation were still being felt years later.

  We have all come across some extraordinary lending decisions where mortgages were granted that should never have seen the light of day. I want to share one with the House. This relates to a buy-to-let mortgage where the lending decision simply beggars belief. This lending decision was made by a main bank in Ireland. It relates to a married couple who, pretty much at the height of the boom, bought an investment property. The husband was then 61 years of age and was retiring as a public servant and was due to receive a lump sum of around €100,000. His wife was a housewife and did not work outside the home. They decided to buy a house as their pension, with a view to selling it on a short few years later. The house cost approximately €300,000. The couple received a 14 year mortgage of €196,000. That was a 14 year mortgage when the sole income earner was retired and aged 61. The mortgage would take the husband up to the age of 75. The couple put the €100,000 lump sum with the mortgage and bought an investment property for €300,000. The original loan agreement provided that the loan would be on interest only for seven years and for the remaining seven years, the couple would pay €2,700 per month, a level of repayment that was never going to be possible.

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