Keane Report Speech- 20th October 2011

 Our hearts go out to people in mortgage distress who are having problems with cash flow who find it impossible to repay their mortgages. It is a very difficult place to be and it has dreadful consequences for self-image and family welfare. We must acknowledge that as being the context of what we are discussing.

An important principle is that we must deal with distressed mortgages case by case because no two are the same. There are different capacities to pay and different dynamics at work. I congratulate the Fianna Fáil Members who tabled the Private Members’ Bill this week and our party acted properly in accepting the Bill. I applaud the work done on the Bill, which will give people the opportunity to deal with an agency that will interface with the banks and give professional advice, which will be an important support to people in distress. Members of this House might underestimate the importance of that for individuals who are not as well equipped to be their own advocates and marshal arguments on their own behalf.

The Keane report and the subsequent Government response are accurate in affirming that we cannot have blanket forgiveness – it is fantasy to suggest we could. It would not work on a number of levels. The taxpayers could not sustain it and in many cases the beneficiaries are also taxpayers. It is not sustainable on the level of community relations and its administration and application would become a nightmare. It is not realistic. A myriad of solutions just short of it are required. Long-term forbearance and dealing with loans by banks is a prerequisite and will have to be accepted. For example the Japanese have double the lifespan of mortgage that we have here. We will need to consider granting much longer-term mortgages in future. In dealing with distressed mortgages, the long-term solution will be central. Therein lies a much better holistic solution than suggesting a complete write-down of debts.
The concept of a trade-down to more affordable mortgages might be applicable in many cases. There is a cultural difficulty with that kind of thing in Ireland and there will be some small community stuff that will make it a bit difficult to administer. However, it needs to be on the menu of solutions and it is proposed in the Keane report. There is no way it can be avoided in certain instances. The idea of splitting the mortgage, making it almost a two-term mortgage and putting payment of part of it back is good and will need to happen in a number of cases.

The major plank of the Keane report is the introduction of a mortgage-to-rent scheme, which has considerable merit in instances where people are unable to pay and would become candidates for social housing anyway. There would be significant long-term costs in supporting them in mortgage subsidy. In many cases mortgage subsidisation is insufficient to ensure they can continue to repay their mortgages. The mortgage-to-rent scheme has inherent value and I commend it as a very realistic proposition. Obviously implicit in that would be a level of debt write-down by the banks, which is made possible by the support the banks have already received from the taxpayers. The level of rent would also need to be manageable. There is no reason for that not to be a very private and discreet situation between the householder, the local authority and the lender. It can be managed at that level and there is no reason for people to have any form of public humiliation.

Over time that system will result in the elimination of mortgage support, which is a reasonable proposition. While I would consider much of what Deputy Boyd Barrett said unrealistic to the extent that we cannot escape international and domestic financial realities and the sovereign agreement with the EU and IMF, I agree with him on the money advice and budgeting service, MABS. MABS should have been more central in the preparation of the Keane report. MABS will have a very important role to play in complementing the work of the new agency to interface with the banks. MABS has a key function in budgeting and managing other ancillary debts. Very few people have distressed mortgages alone and also have credit card debts, and so on.
It is mentioned as well in the report that we will need Central Bank control of foreign mortgage lenders where there might be a difficulty.

In certain instances, a level of debt will have to be written off by the banks and mortgage companies, and they will have to accept their responsibility. I would recommend to the Minister that we take a serious look at the proposition by New Beginning. There is a logic to the proposition that people would pay no more than 35% of their net disposable income on their mortgage and there is logic to the proposition that they pay less in the beginning until they accustom themselves to the mortgage and deal with their personal circumstances. These propositions are worth examination and should be incorporated into any solution.
We will need a multifaceted solution. The solution begins with the interaction between the distressed debtor, MABS and the new agency. It will extend to a number of solutions involving forbearance by the banks and putting off the debt in many instances, scaling it over several years, while in other instances involving a level of write-off. In instances where it is not possible to pay, the mortgage-to-rent scheme should be used. It is very difficult to arrive at one solution that will fit all, and every case will need to be dealt with individually.

This is central to the revival of our economy. Many excellent steps have been taken to date to put our economy on a sound footing and these are beginning to bear fruit. Dealing with this issue is a very important part of that mix, because domestic demand would increase immensely if we dealt with distressed mortgages. It is an important debate and I recommend to the Minister that he look at an holistic solution covering every available option.

Senator Joe O'Reilly representing Cavan & Monaghan 2010. | An ExSite website