25th October 2011
I welcome the Minister of State and the openness of his intervention. I am certainly no expert on this subject, but I believe it is one that goes to the heart of every household. It is, therefore, a burden we must all share. In finding a solution, we must work together.
In my reading of the Keane report, I did not see definitive solutions for distressed homeowners. The report raises more questions than it provides answers. It has left me with the distinct feeling that the balance has been struck very much in favour of the banks, which is why I welcome the Minister of State’s comment that we need to consider other solutions and reports. The report falls short of addressing the overall debt crisis, which is desperately needed.
I have some specific questions on which I seek clarification. The mortgage-to-rent scheme has been recommended as one of the tangible supports needed for distressed homeowners with unsustainable mortgages. The introduction of two mortgage-to-rent schemes was referred to. One envisages utilising an approved housing body, otherwise known as the housing association. The Minister of State outlined that the idea would be for the housing association to buy properties from mortgage holders at a discount on the current market value. The report does not set the level of discount, but the equivalent scheme in the United Kingdom refers to 90% of current market value. The mortgage lender would provide a 75% long-term loan for the housing association, secured on the property. The Department of the Environment, Community and Local Government would provide the remaining 25% equity. The mortgage holder would pay, or partly pay, the mortgage with the proceeds of the sale. This would obviously involve some write-down of the outstanding mortgage, but the report does not specify whether the debt would simply be written off by the bank or whether the mortgage holder would still be liable. Perhaps the Minister of State will clarify that aspect for me. The mortgage holder would stay in the property as a social housing tenant, paying differential rent to the housing association, with the Department of the Environment, Community and Local Government paying up to 80% of the market rental figure to the housing association.
I welcome the Minister of State’s comments, but my concern about the specific mortgage-to-rent option, which forms part of my overarching concern about the report being limited in its recommendations and conclusions which result partly from the working group not consulting representatives of wider society or the organisations on the ground responsible for implementation, is that it places a considerable financial risk on the housing association which would have to borrow large sums to run the scheme. If the mortgage-to-rent scheme is to become a reality, it is imperative that a formal consultation process with the housing association sector be embarked on first and that the sector be meaningfully involved in setting up the scheme. Will the Minister of State provide an assurance that such a formal consultation process will be put in place before the setting up of the scheme, given that housing associations are effectively being asked to borrow money to remove large property debts from the balance sheets of the banks?
I share the concern of many who have stated the recommendations are narrowly focused and do not address the personal debt problem. I refer to mortgages. As the Minister of State outlined, we need a more holistic all-debt approach that recognises that the mortgage arrears problem is part of the overall personal debt crisis which is crippling tens of thousands of people. I was looking at the proceedings of the Joint Committee on Finance, Public Expenditure and Reform on the monitor last Wednesday when representatives of MABS said they could not separate mortgage debt from other forms of personal debt because 91.5% of people contacting its offices with mortgage debt concerns were also overwhelmed by personal and other household debts. It is for that reason MABS suggested it be bolstered by the addition of 100 advisers instead of creating a 100 personnel-strong mortgage arrears agency, as proposed in the Keane report.
I join the Minister of State in saying we need to redouble our efforts, as we must all be part of finding a solution. I ask the Minister of State to encourage all relevant Departments to consider the nine principles to overcome personal debt proffered by FLAC and other national front-line organisations dealing with mortgage arrears, personal debt, poverty and housing rights. The report should be viewed as a useful framework to shape a policy response. The solution to the overall debt crisis will have to be arrived at in one way or another. In the interests of cost-effectiveness, both social and economic, like all present, I believe we need to arrive at it sooner rather than later.