Speech On Mortgage Arrears Issues

The below is a speech in relation to Private Members Business in the Seanad on Wednesday 17th April:

This motion is an important motion in many ways as it seeks for us to agree that we, ultimately, recognise the mortgage arrears problem. However, while we do recognise that there is a mortgage arrears problem, and I will set out exactly how this Government have both recognised and acted on it, we don’t agree with the need for Fianna Fail’s motion – as much of what they talk about in it has already been done.

On mortgage arrears, the Government’s policy has four strands; resolution strategies, the Personal Insolvency Bill, advice services and the mortgage to rent scheme.

In reference to the first point in this motion, it’s worth noting that the rate at which mortgages are falling into arrears by more than 90 days is declining. And the number of early arrears cases under 90 days has reduced. There is no question that the numbers are stark – 94,500 are in mortgage arrears for more than 90 days, with over 23,000 in arrears of more than 720 days. That is why this Government has prioritised the issue. We have put in place new legislation, new processes and news structures to attempt to help this situation.

Recently the Central Bank published a series of measurable, timed goals for the six main banks which will ensure specific measured progress towards the objective of increasing engagement with borrowers in arrears. The targets outline that by end of June this year banks should have proposed sustainable mortgage solutions for 20% of distressed borrowers.

It is important that we work to make sure that there is a framework within which banks must work towards solutions: citizens going bankrupt is not a useful solution to banks, to the country or indeed to the citizens themselves.

The main point of this, from the Central Bank’s point of view, is to ensure that banks are actively engaging in dialogue with their customers who are in trouble to come towards an acceptable solution. It is with that same rationale in mind that the Government put together the Personal Insolvency Act – which sets out the ways by which people can engage with borrowers on a resolution of sorts.

While some may criticise the Personal Insolvency legislation over the banks ability to veto any proposed solution, it has to be noted that creditors themselves ultimately have the final say on a proposal. Indeed, the banks are incentivised to properly engage in this process because the Insolvency Act makes bankruptcy a feasible alternative by reducing the period of bankruptcy from 12 years to 3 years. If the banks don’t make an agreement under the Personal Insolvency Act, then a mortgage holder could end up in bankruptcy which would worsen the financial position of the banks.

The third strand of the Government’s mortgage arrears policy, that of advice, can be seen through the Mortgage Arrears Information and Advisory Service, which was launched in 2012 and the website, keepingyourhome.ie which was also launched last June and has seen over 63,000 visitors to date. Distressed mortgage-holders offered long-term restructuring by their lenders can avail of free independent financial advice from more than 2,000 accountants nationwide.

The final part of the Government’s policy is the mortgage to rent scheme, which was launched in June 2012. It ensures that a family remains in the home, paying rent, while a housing body becomes the owner. This can be useful as a solution of last resort, and is part of an overall framework that works towards ensuring, where at all possible, that no family will be leaving their home.

There is no question that the Government acknowledge and indeed have already acknowledged the great difficulty that mortgage arrears poses for families across the country. However, this is already on our radar and sorting it out is already a key objective for 2013.

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