Family Home Protection (Miscellaneous Provisions) Bill 2011

I compliment Deputy Donnelly on bringing this Bill before the House and for giving time for a discussion on a matter of this nature. The Minister has rightly identified the personal insolvency Bill as an important matter, along with mortgage relief. Of all the subjects on which I have spent time since I became a Member, this is the subject I have dealt with most. I agree with the Minister that there are several misconceptions about this issue.

Deputy Donnelly referred to the Smyth and Fanning cases. The Family Home Protection Act 1976 was very innovative legislation in that it protected spouses, particularly women, from having the family home sold over their heads by the other spouse. This was a vital provision at that time. Of course, someone went to court to challenge it and, eventually, like everything else it was overtaken.

It is not true that judges do not have discretion in these cases. They use discretion regularly, in fact. I have been in court on many occasions with constituents faced with repossession when the judges took into account their efforts to make repayments and granted adjournments to allow that to continue. It is totally untrue to suggest there is no option other than granting permission to repossess in the event of arrears on a mortgage.

Two types of problem arise in regard to property values and negative equity. The first involves the person who paid €500,000 or €800,000 for a house at the peak of the boom and still has a job. This person can pay the mortgage but it is in negative equity. There appears to be a notion in public debate that everybody should get a write down. If that happens nobody will pay anything. Reference is made to people who will not pay. There will always be people who decide to get in on an act but we must also take account of those who carry the burden for the duration irrespective of whether they are in a financial position to do so.

The second type of problem involve those who have fallen on hard times after losing their jobs. They are trying to do the impossible in terms of paying off a mortgage on vastly reduced incomes. Even the sub-prime lenders are willing to talk at present because they are realistic about the options. That was not always the case in the 1980s.

I raised this issue for the first time in this House in 2008. There is a tendency to add compound interest, which is lethal. Once it is applied it multiplies so rapidly that it leaves no opportunity for recovery. There is only one option. The judges have, rightly, examined the degree to which compound interest is being used as a vehicle to repossess houses. The responses to my appeals to the courts have varied between surprise, welcome and no comment but judges have been more than fair in recognising the dilemma faced by householders. However, that should not be used to excuse somebody who borrowed several million euro for whatever purpose. It may be true that the bank should not have loaned such a sum of money but the individual would have known at the time that he or she faced consequences in the event of being unable to repay. Several years ago a businessman suggested to me that collateral should be determined based on the ability of an individual to pay but I disagreed because that can fluctuate rapidly. The borrowing should be based on good value.

For many years local authorities granted loans on the basis of the valuations their engineers put on properties. We used to object because the valuations were usually too low but that valuation kept debts in line. Things went wrong when a cohort of people who previously would have been housed by local authorities either directly or by way of loans were moved to the private sector. We were told the private sector would do the job better but they did not cater for this market at all. Approximately 100,000 families across the country have no chance of acquiring homes because the local authorities are no longer in that business. While these families are waiting on housing lists, we end up paying their landlords for them because they are eligible for rent support. There are more landlords today than ever before in the history of the State. Markets always allow for speculators but we do not have a moral obligation to ensure they are paid for speculating. Our obligation as legislators is to meet the needs of different sectors of the community to a reasonable extent. For the past ten to 15 years, we have not been meeting the needs of those who are on housing lists.

Like other Deputies, I hope to have another opportunity to discuss this subject in more detail. The Bill is well meaning but it does not reflect what is happening in the courts at present nor does it identify the multitude of issues that surround court cases. It does not address the issue of shared ownership loans. Nobody with a shared ownership loan who bought a house five or six years ago can hold on to the house while drawing the dole. It cannot be done because the repayment on the half equity that is rented from the local authority is higher than the mortgage. These people have been hammered for the past ten or 15 years. I could easily blame the Bacon reports, and we all know where they came from. I was at the meeting of the Committee of Public Accounts in which this issue unfolded more than ten years ago. I could see what was coming down the road. We need to offer hope and support to families who are now out of work through no fault of their own and are endeavouring to hold onto their houses. We must be prepared to stand with them in all reasonable efforts to hold on to their properties.

However, we should not give carte blanche to everybody to default. All this nonsense about default and burning bondholders from the opposite side of the House – my remarks are not directed at Deputy Donnelly – does not work and it undermines the legitimacy of our arguments. I hope to have another opportunity to speak at greater length on this subject. Unfortunately the five or ten minutes allocated to us are insufficient to cover the issues arising.