Speech | Proposing the Family Home Protection Bill

Delivered in the Dáil on February 3, 2012. The full debate is here.

Stephen Donnelly:

I start by thanking the Government for introducing this mechanism. For me and I imagine for all of us, being a Member of Dáil Éireann is an extraordinary honour. This is my first time introducing legislation to the Dáil and it is the most amazing privilege as a citizen of Ireland and a Member of the Dáil to be able to do so. I am sure Deputies present who are not Ministers may have already had a chance to use this facility. While I know there is a long waiting, I hope many do so. On a personal level, as a new Member of the Dáil, it is a great privilege to be here this morning introducing this legislation.

I also thank my fellow Deputies, the Ministers, Ceann Comhairle and the staff for attending. I am quickly learning the multitude of draws on a Deputy’s time and I know everybody here could be doing very important work either here in their offices or in their constituencies this morning. I express my sincere thanks to everybody for coming here today. I look forward to debating the Bill, teasing out some of its imperfections, and considering what is useful in the Bill, what the essence of it is and how that might be progressed.

I am aware that the Bill will be voted down on Tuesday. The Minister for Justice and Equality, Deputy Shatter, was good enough to give me some of his time during the week when he outlined some of his concerns with the Bill and I am sure they will be outlined in some detail today. I present the Bill to the House, not as a technically perfect Bill or as something that I believe should be signed into law tomorrow. I present it as what I hope is a solid starting point for a legislative process and through that legislative process, the Dáil, the relevant committee or committees and the Seanad would get to give input to the Bill, refine it, get it right and then ideally pass it into law.

I am aware that the Bill comes in the context of the personal insolvency Bill the Minister, Deputy Shatter, will bring to the House. I read the 164 pages of the heads of the Bill, which as a non-lawyer took several cups of coffee and some time to do. I was greatly impressed with what is a radical Bill, which will provide extraordinary comfort to many citizens. It is a radical stance and a change on behalf of the citizens which will be of enormous social benefit. While it may not be possible, I would very much like to see the essence of this short Bill to make its way into the personal insolvency Bill if the Minister, the Cabinet and the House believe it contains something that would work well as part of that Bill. While I am not an expert in law or in this area, I believe there is a place, potentially as part of the personal insolvency Bill, for this amending clause to be added.

I am aware that the vote will not go my way on Tuesday and I imagine nothing I might say here today will change the outcome of that vote.

I will not try to change the outcome. However, I will use this opportunity to explain the Bill’s objectives, the problems it will address and how it would complement the upcoming personal insolvency Bill.

I have asked for some briefing notes to be passed to the Deputies in the House. In preparing the Bill I did some analysis of the current state of mortgage arrears. The notes that have been circulated show three possible scenarios for what could happen. As of September 2011, according to Central Bank figures, one in 12 mortgages in Ireland was in arrears of more than 90 days. If one adds the mortgages that have been restructured, some of which may be viable but are still causing enormous hardship for the borrowers, the figure goes up to one in ten. If the arrears of less than 90 days are added, it goes up further. It is of serious concern that the rate if increase in mortgage arrears is not happening linearly but exponentially. What I mean is that we are not seeing 5,000 new arrears cases per quarter, but it is increasing by 10%, 11% or 12% per quarter. Very worryingly in the last four quarters for which we have data the rate by which that percentage is increasing is rising. I believe it was approximately 10%, 11%, 12% and then 13%, which is of serious concern.

The top line of the graph I have handed out shows what would happen if the rate we have seen during the past four quarters continued for the next two years. It shows a cataclysmic outcome whereby almost one in two mortgages in the country would be in arrears of 90 days or more. The middle line shows what I believe is most probable. This maintains the percentage growth in arrears for the next eight quarters at the average percentage growth we have seen for the past two years, approximately 12% per quarter. If this happens, we will be faced with one in four mortgages in arrears of 90 days or more in only two years. The potential scale of this mortgage arrears problem is absolutely vast. It is no longer a marginal thing.

We thought we capitalised the banks to deal with this. We made €7.5 billion available to them through the BlackRock stress-testing but they are not passing it on. Representatives from Bank of Ireland were before the Joint Committee on Finance, Public Expenditure and Reform and they admitted, after being asked five or six times, including through an intervention from Deputy Alex White, that they had not passed on one single penny. Representatives from Allied Irish Banks, AIB, said they did not know but they got back to the committee and stated that they only passed on €600,000 in full legal surrender in any call on this debt. They have made provisions in their balance sheet but that does not help the borrowers. The banks are not passing on any of this money. I suggest the reason they are not passing on the money is because they do not have to. At the moment, the law is weighted entirely in their favour. The Bill proposed by the Minister, Deputy Shatter, goes a considerable way to correcting that imbalance and I suggest that my rather more humble Bill helps in one particular case and complements the Minister’s Bill.

I will outline a quick case study. A couple from Wicklow came to my constituency office. She is a public sector worker, her income has fallen in recent years. He is a local businessman. The family home and the business premises are in arrears and negative equity. The reason they are in arrears is because the bank has raised the variable mortgage interest rate approximately four or five times in the past year and this has doubled their mortgage payments and forced them into arrears. Every Deputy is dealing with the social consequences of what is taking place on a daily basis. In this case, one thing I cannot get out of my mind is that the lady said that they are now watching the amount of toothpaste they put on their toothbrushes because they are left with so little money that they do not have money for toothpaste. This is the situation they are in.

If the bank decided to take possession of their home, it could be stopped for one year because of the moratorium but, ultimately, the judge would have to enforce possession. He or she would be allowed to apply no discretion or make the case that the borrowers had made a reasonable offer and that the bank had essentially forced them into arrears through its actions and that it is not reasonable for the bank to take the house. This is at the nub of what the Bill tries to do.

I do not present this as something that should be passed into law tomorrow but I am keen to find a way for the essence of what I am trying to do and what this Bill is trying to do to be realised. It is important. The Bill was drafted in close collaboration with New Beginning. Ross Maguire, a senior counsel, is in the courts dealing with these matters and he is at the negotiating table all the time. He welcomes the Minister, Deputy Shatter’s Bill as well and he believes this extra legislation would help. He said that, ultimately, the banks can take the view that they need not co-operate with or take any offer from borrowers and that, ultimately, they can take the family home and make borrowers homeless and that the borrowers must do whatever they want.

There is now a credible threat of bankruptcy for three years. The people who deal with these matters in the courts every day believe that the essence of what we are trying to do would help and complement the other Bill. There is an open letter in The Irish Times today signed by Professor Gerry Whyte, one of the foremost experts on the Constitution, Dr. Pádraic Kenna, a housing law expert, Constantin Gurdgiev, who examined the economic implications, Noeline Blackwell, director of Free Legal Advice Centres, FLAC, and by several senior counsel, including Bill Shipsey and Ercus Stewart. I accept there are technical problems with the Bill but serious economic and legal people have examined the matter and, in essence, they take the view that they support it and they are keen for something like this to come through.

  • Jamie Cassidy

    Hi Stephen, 

    Congratulations on getting together a bill to propose to the Dail. It is a worthwhile achievement and especially noteworthy given the respected figures you have backing your objectives in the open letter.

    I have read the Explanation of the Bill on your website and I have some concerns, not on the finer points of detail but on the central objectives of the bill as laid out in the Explanation. It is possible that these concerns are similar to those laid out by Deputy Shatter and are perhaps ones that you agree with. Nonetheless I would like to lay them out here so that you could address them in a way that those of us interested but outside of direct political involvement could access. 

    Currently (as I understand it) the banks can at their own discretion renegotiate mortgages where they feel appropriate, and are under significant pressure from the government to do so in cases where the borrowers are co-operating in every way they can and the mortgage has not become entirely beyond viability. The banks make this decision to renegotiate or repossess in full knowledge of the market prices and therefore the inevitable loss they have to take if they were to repossess and resell the property and so as a profit driven entity it is unlikely they would do this lightly. What you are proposing is that even in these situations the courts would have discretion to force a renegotiation of a written contract. This would undermine both the basis of contract law in Ireland and the viability of the banks, which in many cases are publicly owed companies, as profit making organisations.

    I also have concerns about the logic that the banks have forced people in to arrears based on hikes in variable interest rates. While these interest rates increases are undesirable, they are direct result of increases in the cost of funding for the banks themselves. It is currently impossible for many Irish banks to borrow money from the markets, even over the medium term, for less than double digit interest rates. Therefore it is unreasonable to expect these banks to not to pass these extra costs on to lenders who signed contracts based on interest rates which could be varied with the bank’s cost of credit. 

    Another issue I would like to raise is the stance towards the couple in your letter, the businessman and his partner in the public sector. I know there is a special place in the family for a home but I would ask you to consider this loan as if it were made on a BMW. Circumstances beyond their control have meant that this couple can now no longer feasibly afford this loan. The bank takes their car and they have to rent a Fiesta while paying off the balance of the loan. After a couple of years of hardship they pay off the loan and buy themselves a new less expensive car. Perhaps the couple in question own a one bedroom studio apartment and have no possible way to trade down. If this is the case they have my sympathies, although I do think in such cases the banks would be very reluctant to repossess. In any case for the vast majority of cases it is possible for the people in question to trade down. 

    One thing none of us wants is a law that protects those who bought mansions they could never possibly afford and now the banks (which we as taxpayers now own) have no powers to take back these properties.

    Finally, I agree that the laws do not currently provide enough protection for ordinary people. I think one key change we could make would be to change the law to line up with other countries such as the US whereby the mortgages are written with the asset as ultimate collateral, so the borrow can return the house and are then free of the loan. This approach completely avoids the negative equity trap so many are currently in and also puts more pressure on the banks to ensure the loans they write are sustainable.


  • Martinlyncch

    Well done Stephen
    Your bill is the simple effective way going forward to protect vunerable people from losing their homes.
    Far from being ill concieved it is the only way to deal with this mess.

    Mr Shatters response typifies the utterings of a failed minister who is more of a laughing stock than a serious politician

    Looking in on the Dail from the outside one can see the discomfort of the government when faced with a person whose intellect daunts them.

    Mary Lou and yourself are the real stars in the house and if the fiscal treaty is allowed to be voted on by the people then it will  be up to politicians like you to explain it in an understandable way and not allow the citizens to be blackmailed into voting for it.

    Keep up the good fight!!


  • Michael Conlon

    Well done Stephen .. Fair dues to you …. Keep it up