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Cathaoirleach,

I move Amendment No. 1 to the motion.

I have listened to the Senator opposite introducing his motion with a sense of growing disbelief. Where has he been for the past number of years? Has he and his party forgotten that we are still dealing with the mess in which his Government left this country? Their legacy included huge increases in unemployment and consequent family indebtedness and inability to meet financial obligations. That Government, in which the Senator’s party was the main element, bears a significant responsibility for the financial difficulties now being experienced by tens of thousands of our people.

This Government, in stark contrast to its predecessor, has made considerable progress across a number of sectors in addressing the very significant and severe mortgage arrears crisis which it inherited. This crisis is directly linked to the economic situation presided over by members of the previous Government.

There was a total failure of the part of the previous Government, though in office for a considerable period, to propose or introduce relevant insolvency or bankruptcy reform legislation. The consequences of that failure are clearly apparent. Unfortunately, the motion before the House this evening shows the same mind-set which they displayed down through the years while causing the economic collapse of this country. They pretended the good times would always roll, that the property bubble would never burst, that a bailout would never be necessary.  And now they seek to pretend, to those whose financial lives they were responsible for ruining, that there is some painless way of resolving their problems.

Each motion on financial and economic matters which Fianna Fáil brings before this House or the Dáil appears to be informed by the same amnesia. There is little or no recollection of their failed policies that resulted in an economic, fiscal and banking collapse. Thousands of people have lost their jobs. Living standards were substantially reduced for families across the country. Ultimately, this country lost our economic sovereignty. 

The party opposite did nothing to reform the law on bankruptcy and personal insolvency. Any response was piecemeal with short term solutions. It did not seek to address the problem in a real way. Nor did it require banks to start addressing the problem. They did not provide any statutory debt resolution mechanisms or structures to facilitate individuals in financial difficulty. Nowhere was the problem more acute than the area of mortgage arrears.

Against that background, a useful consequence of the motion tonight is to provide an opportunity for a suitable apology from the party opposite for all they did to contribute to the mortgage difficulties in which so many people, regrettably now find themselves.

As the counter motion in Amendment No. 1 makes clear, this Government since coming into office has taken a number of significant steps to address the personal insolvency situation, including the mortgage arrears problem, and also to stabilise the banking and wider economic situation. Such steps can be contrasted with the inactivity of the previous Government in regard to updating our ancient and ineffective personal insolvency law.

The Government has two overall key strategic objectives in this area. First, there is a need to ensure that mortgage holders who were experiencing real difficulty should, where appropriate, be assisted in remaining in their own homes. Second, any framework and range of supports for mortgage holders must be able to distinguish between those who cannot afford to pay their mortgage on their primary home and those who choose not to pay.  The principle of a fresh start for people facing genuine difficulty in dealing with their mortgage commitments is a key priority. 

This Government, on assuming office in 2011, established the Inter Departmental Mortgage Arrears Working Group (also known as the Keane Report) and are now implementing the key recommendations of the Report published in October 2011. Based on its recommendations, the Government established the Mortgage Arrears Steering Group to co-ordinate the responses of the Departments and agencies centrally involved. Since March 2012, the Steering Group has reported to the Cabinet Committee on Mortgage Arrears. 

In contrast to the inactivity of our predecessors, let us consider some of the important initiatives taken by this Government.

For example, the mortgage-to-rent scheme, available since June 2012, is a mainstream social housing solution for the most acute cases of mortgage arrears. Lenders are now engaging with the process and substantial progress has been made. Over 800 cases have been put forward for the scheme.

Development of a mortgage to lease scheme is also progressing. Under this scheme, the lender would become the long term owner of the property after voluntary repossession had taken place. The household would become a social housing tenant of the relevant local authority and the local authority would, in turn, lease the property from the financial institution for the period of the lease.
 
An information and advice service has been established to help people in mortgage arrears through the website www.keepingyourhome.ie; an information helpline and the availability of independent financial advice for people being offered long term restructuring proposals by the banks.

The most significant development in addressing the area of personal over-indebtedness including mortgage arrears has been the development and enactment of our new personal insolvency legislation. The Personal Insolvency Bill was published in June 2012, passed by both Houses on December and signed into law in December.  

The development of modern insolvency law was a key commitment in the Programme for Government. It was also required under the EU-IMF-ECB programme of financial support for Ireland. It was inspired by the Law Reform Commission’s significant contribution in its 2010 Report on Personal Debt Management and Debt Enforcement and by the recommendations of the Keane Report.

The Personal Insolvency Act 2012 provides for three new debt resolution processes which, though requiring approval by the court, are essentially non-judicial in nature: 
· The Debt Relief Notice (DRN) will allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period.
· The Debt Settlement Arrangement (DSA) provides for the agreed settlement of unsecured debt, with no limit involved, normally over five years.
· The Personal Insolvency Arrangement (PIA) will enable the agreed settlement of secured debt up to €3 million, although this cap may be increased with the consent of all secured creditors, and unsecured debt without limit, normally over six years.

The Act also provides for the automatic discharge from bankruptcy after 3 years subject to certain conditions.

The Act introduces new insolvency resolution concepts to Irish law. The new Personal Insolvency Arrangement, or PIA, is a process, which I understand is unique in insolvency law anywhere, in providing for the negotiated resolution of secured debt in a court sanctioned process that provides certainty for creditors, and, if I may say so, hope and relief for debtors. The "personal examinership" approach in the PIA is designed to be sufficiently flexible and robust to be able to address complex personal insolvency cases which may include combinations of trade, consumer and mortgage debt. It offers a second chance mechanism for talented and capable individuals and entrepreneurs to return not only to solvency but to make a contribution to the economic development of our society.

To protect the constitutional rights of all concerned, and to prevent potential actions for judicial review, the Act makes provision for enhanced oversight by the court of the three new debt resolution procedures. This enhancement of court involvement has the significant benefit to the debtor of providing protection from enforcement actions by creditors, either during the negotiation period or during the lifetime of the arrangement. In order to deal with this anticipated volume of work and to facilitate the speedy consideration of insolvency applications, a new cadre of Specialist Judges of the Circuit Court is being recruited.

The Insolvency Service of Ireland was established on 1 March 2013 by Ministerial Order.  It will be formally launched tomorrow and will commence its information campaign which will include its website, the issuing of publications designed to assist those interested in the new debt resolution processes and the opening of a public information line. The announcement of the regulatory framework for personal insolvency practitioners will follow shortly. The Director of the Insolvency Service, Mr. Lorcan O’Connor, is working with all speed to complete the administrative and technical preparations to ensure that the full operation of the provisions of the Personal Insolvency Act can begin as soon as possible.

The Personal Insolvency Act makes provision for the Insolvency Service to draw up guidelines in regard to reasonable living expenses that would be applicable to a debtor in one of the new insolvency processes. In developing these guidelines, the Act required the Insolvency Service to have regard to a number of criteria. The Insolvency Service has engaged in extensive consultation with the relevant Departments, Agencies and organisations. I am informed that these guidelines should be ready for publication very soon. 

It may be expected that a significant number of persons are likely to avail of the new or reformed insolvency processes. For broad planning purposes for the first full year of operation of both the law and the Insolvency Service, the tentative estimate of applications is for about:
· 15,000 applications for the Debt Settlement Arrangement and Personal Insolvency Arrangement,
· 3,000 to 4,000 applications for Debt Relief Notices, and
· 3,000 bankruptcy petitions may be made.

The critical message – which I wish to reiterate again tonight - to all those experiencing debt problems is please engage with your lenders and other creditors so as to negotiate an appropriate settlement. That also requires that lenders must engage properly with customers. Now that the architecture of our new insolvency legislation is settled, financial institutions must now better engage with debtors.

Mortgage lenders themselves have the primary responsibility to deal with the customers who are experiencing difficulties with their mortgage repayments. These institutions extended the credit in the first instance and often, we might say, without much in the way of expected oversight or due diligence. Urgent action is now required from the banks to address the problems their customers in genuine difficulty are experiencing. However, each case of mortgage arrears is different and will have to be looked at on its merits on a case by case basis. 

If our financial institutions refuse to constructively and realistically engage, then the Government has made it very clear, on a number of occasions, in this House and in the Dáil that it will take any necessary measures to refine our approach to ensure that the new debt resolution processes work. I realise that banks must have regard to commercial considerations, but they must also behave with greater flexibility and insight and apply a broader range of common-sense options based on financial reality.

The new Debt Settlement Arrangement and Personal Insolvency Arrangement are designed to facilitate a workable, sustainable voluntary resolution between a debtor and his or her creditors. A common-sense rather than a coercive approach is taken, as can be seen in the creditor voting process provided for in the Act. It is also an approach designed to avoid, insofar as is possible within constitutional constraints, the necessity for contentious court hearings and adjudications together with the substantial delay and inevitable legal costs inherent in such process.

The Government has very much engaged with the financial institutions in the lead-in to the enactment of this legislation. They understand exactly what our concerns are and what they should do in the context of operating the legislation constructively and sensibly.

Justifiable concerns have been raised about the balance of power between banks and debtors. There is talk of what has been commonly referred to as a "bank veto". The reality is that it is in the best interests of both debtors and creditors to seek to conclude an acceptable and workable arrangement under the Act.

The Central Bank has had ongoing and detailed engagement with the lenders on their mortgage arrears situation and has explored possible options that could be applied to cases where more than a temporary forbearance response would be required. These are well known at this stage and include split mortgages, trade down mortgages and sale by agreement options which would allow families to move to homes more suited to their current needs; whether it is to obtain employment or to move to a more appropriately sized home for their family. There will also be cases in which debt forgiveness is the only practical solution and will also, in the medium to long term, benefit both debtors and creditors and the write off of a portion of the capital debt outstanding on a family home is a further option. Where appropriate, the mortgage to rent scheme will also be available for consideration.     

The Central Bank is now satisfied that the tools are now in place to accelerate the work-out of the mortgage crisis. Banks and borrowers now need to use these tools to reach fair and sustainable solutions to mortgage arrears on a case-by-case basis. Of course, progress by the banks in providing durable solutions had not been sufficient. Thus, the Central Bank has set targets for the conclusion of sustainable agreements and for the durability of such solutions and will audit each bank’s performance against the targets and where necessary apply sanctions.

The Central Bank has also commenced a review of the Code of Conduct on Mortgage Arrears to ensure that it can facilitate better engagement between borrowers and lenders about a mortgage problem while also maintaining important protections for those bowers who do engage with their lender.  A consultation process on the review of the Code ended on 12 April, and the Bank is now reviewing the submissions received. I understand that the aim of the Central Bank is to publish the revised CCMA in the first half of this year.

In addressing the mortgage arrears problem, we cannot, however, ignore the fact that the issue of repossession must be addressed in some cases. Ireland, for a number of reasons, has had a very low level of repossessions. Currently the majority of repossessions arise on a voluntary basis. However, nobody can be unaware of the issues that arise where repossession proceedings relate to family homes. It is an emotive and sensitive topic. 

The Minister for Justice and Equality has recently published legislation - the Land and Conveyancing Law Reform Bill 2013 - designed to address issues arising from case law in various repossession proceedings which have created uncertainty relating to the exercise by lending institutions of their repossession rights. The consequences of this case law were unintended at the time of enactment of the Land and Conveyancing Law Reform Act 2009 and the purpose of the Bill is to restore the intended position. The new legislation also fulfils a commitment to remedy these issues in the context of the Quarter 3, 2012 Review of the EU/IMF Programme of Financial Support for Ireland.

Essentially, this Bill is designed to restore the law that has existed over the centuries which enables a lending institution to rely on its security in relation to a mortgage, as intended by the Oireachtas when enacting the Act of 2009. The Bill also provides for the adjournment of actions for repossession in certain cases relating to the principal private residence of the borrower where it is the opinion of the court that the matter could be resolved by recourse to the Personal Insolvency Act 2012 and to examine whether a Personal Insolvency Arrangement would be a more appropriate course of action.

Where the court is of such an opinion, it may adjourn the hearing for no more than two months. What the Minister is seeking to provide, by way of this provision, is a transparent, final, time limited safety net for a homeowner where repossession is being pursued without the PIA possibility having been fully explored by the parties.

However, it may be the case that, as a last resort, the best interests of the borrower may be served if repossession does take place. This could arise, for example, if there are substantial arrears and there is no prospect that the borrower will be in a position to address these arrears or to restore some stability to the mortgage situation. This is in fact recognised in some cases and currently the majority of repossessions arise on a voluntary basis, or there is some other voluntary arrangement to address the unsustainable mortgage.

In circumstances in which individuals borrow money to acquire a home and that home is security for borrowing, it has been the law of this State going back over the centuries that ultimately the financial institution that provides the loan can apply to the courts for possession of the property where the borrower fails to discharge mortgage repayment. In the absence of such a law no financial institution would lend money for house purchases as their security would be meaningless.

Modern insolvency legislation is a required feature of any properly functioning market economy. It will assist not only debtors and financial institutions, but also business of all types and sizes, tradespersons, local co-operatives, etc. All debtors and creditors are concerned by this reform. All must be treated fairly. Many persons or companies may be both debtors and creditors. While I can understand and indeed, share, some of the very negative feelings towards financial institutions and their contribution to our current economic difficulties, we must not lose sight of our objective, which is to introduce reformed, workable and balanced insolvency legislation.

This approach, which seeks balance and fairness, has been criticised as suggesting that creditors, particularly mortgage creditors, will exercise a veto. That criticism is reflected in the ill thought out Motion this evening. Such a contention is based on an incorrect view of how normal commercial contractual issues may be resolved. If you borrow, you must repay where you can. If you receive a good or service, the provider is entitled to be paid. If the debtor is genuinely unable to pay, negotiation with creditors may resolve the difficulty, and this Act provides the new framework for sensible negotiation.

The approach in the proposed Debt Settlement Arrangement and Personal Insolvency Arrangement is that the insolvent debtor will, with the assistance of a personal insolvency practitioner, put forward what the debtor considers to be a realistic offer to his creditors, one that will restore the debtor to solvency within a reasonable period while at the same time giving creditors a better financial outcome than the alternatives of debt enforcement or bankruptcy. The creditors will need to consider carefully the debtor’s offer, conscious that if they refuse, the debtor has another option - the standard debt discharge procedure available under the reformed bankruptcy laws.

The motion from the Opposition Senators tonight also makes reference to developing some form of non-judicial independent agency or process to arbitrate and impose solutions on creditors and debtors. However, the new debt resolution processes which this Government has introduced, and in particular the Personal Insolvency Arrangement, are designed to operate on a voluntary basis with common sense and enlightened self-interest in mind rather than coercion of any of the parties. There is no example of the type of body that appears to be demanded by the Senators in their Motion existing in any jurisdiction. During the debate on the passage of the Personal Insolvency Bill last year, no Senator, nor indeed no member of the other House, could give an example of such a body. There is good reason for that. Such a body would be struck down by the courts as a gross interference in the rights of parties to conduct their affairs.

The State cannot impose a settlement on parties to a private contract involving the provision of goods, services or capital.

On behalf of the Government and the Minister for Justice and Equality, I oppose this quite cynical and badly informed motion which does not seek to inform or educate or indeed to improve matters by offering constructive and objective proposals. It has no particular purpose. Rather, it serves to again highlight the inaction of the previous Government.

The Personal Insolvency Act 2012 is one of the key elements of the Government’s strategy to return this country to stability and economic growth. Its success will depend on the goodwill and determination of both debtors and creditors to agree workable arrangements that can be sustained over a number of years to a successful outcome.

We cannot allow the emerging economic recovery to bypass families in mortgage arrears or leave a significant number of families in limbo because they have no certainty about their future financial situation.  However, neither can we allow situations to arise where people, who have the capacity to repay their debts, renege on their commitments or, if there is a problem, not to meaningfully engage with their lender.

This Government, unlike its predecessor, is delivering the reform process and the real solutions needed by our citizens so that they can engage constructively with financial institutions and creditors to bring about certainty, hope and relief.

Thank you.

ENDS