Government fails households in mortgage distress

Last week the Irish Central Bank held a conference on ‘How to fix distressed property markets’. In this state this issue is of huge importance because of the numbers of citizens in mortgage arrears.

Despite the fact that the state has borrowed €67 billion and used €64 billion of this to recapitalise the banks there has been little evidence of the banks themselves seeking to address the mortgage arrears issue in a compassionate yet effective fashion. They have refused to engage credibly with distressed borrowers. And have stuck their heads in the sand over the obvious need for debt forgiveness for those borrowers who clearly cannot repay their debt.

As the Irish Times acknowledged last week, ‘Debt forgiveness is inevitable. It is an unavoidable part of any major debt resolution process.’

Last October Fiona Muldoon, the Head of Banking Regulation at the Irish Central Bank was scathing in her criticism of the bankers and their failure to address the issue of mortgage distress.

And on Wednesday Allied Irish Bank indicated that it plans to increase its variable interest rates once again - a move that will directly impact on 70,000 customers.

Every 0.25pc rise in rates adds €30 a month to the cost of repayments on every €200,000 borrowed. That’s €30 that many of these families simply don’t have.

Clearly the banks have learned nothing, and care less.

But worse, AIB is a fully owned state bank and the government is refusing to tackle this issue head on. It’s alright to give €64 billion to the banks but it’s not alright to helps citizens in mortgage distress.

This week Sinn Féin’s Private Members Business in the Dáil was devoted to the twin big issues in housing, of mortgage distress and the lack of social housing.

The government has failed to tackle these two issues in a planned and effective fashion and consequently is failing the tens of thousands of families in mortgage distress and on the social housing waiting lists.

Fine Gael and Labour came to power promising to prioritise those in mortgage distress – it has abandoned them.

Exactly two years ago in the days immediately before the general election vote the Labour told people in mortgage distress that, ‘if Labour is in government, they will enjoy peace of mind.’

The Labour Leader Eamon Gilmore said: ‘The banks have already received thousands of millions in taxpayers money. There has to be a ‘quid pro quo’ for that, and that is to give people who are in mortgage distress a breather …’

Another election promise made and another election promise broken by Labour.

Today, there are more citizens than ever in mortgage distress. The governor of the Central Bank Patrick Honohan told last week’s conference that household financial distress is at unprecedented levels. Last June one in five mortgages were in arrears amounting to some 167,000 households. The most recent figure puts that now at 180,000 households currently in trouble with 115 additional homeowners falling into distress every day.

The government’s Personal Insolvency legislation will not fix this problem. It hands a veto over any Personal Insolvency Arrangement to the banks. And as long as the Banks have a veto, and the government refuses to face them down, there is little prospect of real progress for struggling homeowners.

In respect of social housing; the policy of Fine Gael and Labour in depleting the social housing stock is exacerbating the crisis in housing and the numbers of citizens on waiting lists.

My constituency offices, in Dundalk and Drogheda, like many other TD’s offices, are dealing with increasing numbers of people who have been forced to leave what was the family home.

Sinn Féin believes there are solutions to this problem. The starting point must be to remove the veto given to lenders over proposed insolvency agreements in the Personal Insolvency Act 2012. The government should also prioritise the maintenance of the family home in any agreements dealing with residential mortgages.

In our Private Members Motion we set out several other proposals. These include:

      ·       provide in the legislation for the independent adjudication and enforcement on mortgage distress cases, through a new category of agreement to be known as ‘independent agreement on mortgage distress’ which will be adjudicated by a ‘mortgage restructuring panel’ appointed by the Minister, who would have the statutory power to agree and impose agreements on lending institutions where the panel believes that such agreements would enable the mortgage holders to remain in the family home;

·       include the possibility of write downs on portions of the mortgage debt as well as other options such as debt for equity swaps, mortgage to rent and short selling in the options available when reaching ‘mortgage restructuring agreements’;

·       take more direct action with the Central Bank to force lending institutions to adopt a more proactive and lender friendly approach to the mortgage crisis;

·       ensure that NAMA contributes to ‘the social and economic development of the State’ in providing any housing units in its portfolio suitable for social housing; 

·       develop a plan to commence the building of at least 5,000 housing units by the end of 2013, with a further 4,000 houses by the second half of 2014 for the public housing system, including the use of social housing bonds to fund these projects; and 

·       restore funding for Traveller accommodation to its 2010 level.”