Sinn Féin - On Your Side

Government ignores rising problem of home repossessions and illegal evictions

17 December, 2008


Sinn Féin Economy spokesperson Arthur Morgan TD speaking during the debate on the joint Sinn Féin-Labour Party motion on housing and homelessness accused the government of ignoring the rising problem of home repossessions and illegal evictions. He called on the government to introduce a two year moratorium on repossessions, while requiring lenders to conclude an 'affordable mortgage and debt payment arrangement' which protects a 'minimally adequate' standard of living.

Deputy Morgan said, "Threshold estimated that at least seven families have their homes repossessed by the banks every week, and as many as ten families in the private rented sector were being threatened with or actually evicted from their homes. Yesterday's newspapers reported that almost 14,000 people were unable to meet their monthly repayments on home loans according to the Financial Regulator. Of course the scale of the crisis is probably worse, as a significant number of cases of voluntary surrenders never make the headlines.

"The Minister of State in responding to the crisis facing families with mortgage and rent payments, spoke with breath taking arrogance and once again demonstrated that cabinet members are on a different planet. He accused us of 'foaming-at-the-mouth scaremongering' and "wide-of-the-mark claims" but the facts that we have referred to have been taken from reports such the Threshold and the number of cases of repossessions that are before the High Court on a weekly basis. Last Monday ALMOST ONE-THIRD of cases listed before the weekly chancery summonses resulted in an order for possession. This is not scare mongering it is a simple fact.

"It is clear for everyone but the Minister of State that this is a crisis. Despite all of the reports of the rising numbers of people who are in default of their mortgage repayments, the Minister did not come up with even one new initiative to deal with the emergency.

"The government should introduce a two year moratorium on repossessions, while requiring lenders to conclude an 'affordable mortgage and debt payment arrangement' which protects a 'minimally adequate' standard of living. The Government could also increase the resources to the Money Advice and Budgeting Services (MABS) to ensure that debtors are guaranteed access to MABS personnel when they are negotiating the 'affordable mortgage and debt payment arrangement'. The lending institutions who are responsible for this crisis should be compelled to suspend interest and other charges and penalties as these only exacerbate a family's financial distress.

"Introducing a Court protocol to require lenders seeking a repossession on secured debt to be forced to show they have explored all possible alternatives through the above debt settlement mechanism is another option that should be explored. Repossession should always be the last resort.

"Finally, it seems to me that the proposed recapitalisation scheme may provide a golden opportunity to tackle the impending housing crisis that is before us. Last October while speaking to an Oireachtas committee on the 14th of October, Patrick Neary, CEO of the Irish Financial Service Regulatory Authority told us that speculative lending to the construction and property sectors in the country amounted to €39.1 billion and that he anticipated 'losses on property-related loans' and that 'increased provisions and write-offs will be necessary,'. Mr Neary also revealed that a PWC audit of the six largest Irish banks had found that €15 billion of the property lending was secured on the properties. Can we learn anything form the Swedish experience in the early 1990s where a similar case of ill advised commercial lending in a property boom lead to a collapse in its banking system.

"As part of the Swedish bailout the Government forced banks to write down losses and sell off the distressed assets. In the Irish case some of the assets in question are the land banks amassed by speculators, the unfinished housing estates and commercial retail ventures that should be sold off as bad debts

"The Swedish Government formed a new agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly property, that the banks held as collateral.

"In Ireland, we have a unique opportunity to return control of the planning process and commercial development to local government by breaking up the property cartels that have been holding Dublin and many other towns to their own development strategy wilfully thwarting local council development plans.

"As property prices fall and these assets are sold, local government could have a unique route to dealing with the growing housing crisis, and the taxpayer can be given a better return for the investment in the banks, rather than let cash strapped developers sit on their assets now only to make more profits in decades to come.

"Recapitalisation if it must happen should only be done on condition that the impending mortgage and rent crisis is addressed. It is obvious from the Minister of State's comments last evening that the Government does not even recognise a problem exists. As more and more cases come before the High Court I would urge the Government to finally wake up." ENDS

Full text of Deputy Morgan's speech follows:

Behind the headlines of the banking crisis, bank guarantees and proposals for recapitalisation lives a very human story.

The credit crunch and subsequent recession is not only putting developers out of businesses and constructions workers out of jobs, it is also putting peoples out of their homes.

Every week, according to Threshold, an increasing number of people are having their homes repossessed because of difficulties in paying their mortgages or threatened with illegal eviction as landlords attempt to hike up rents.

Earlier this year, Threshold estimated that at least seven families were having their homes repossessed by the banks every week, and as many as ten families in the private rented sector were being threatened with or actually evicted from their homes.

Indeed yesterday's newspapers reported that almost 14,000 people were unable to meet their monthly repayments on home loans according to the Financial Regulator.

The same report indicated that 1,000 people have run up mortgage arrears with sub-prime lenders. According to the Irish Independent 'Figures gathered from 24 mortgage lenders by the Financial Regulator show that 13,931 mortgage accounts were three months in arrears by June this summer. This was up from 11,252 at the end of December 2006, a rise of 24pc over that period'.

Of course the scale of the crisis is probably worse, as a significant number of cases of voluntary surrenders never make the headlines.

It has been suggested by the certain mortgage experts that there may be a substantial number of voluntary repossessions, but the exact number may not come into the public domain as the banks will have kept a lid on this.

John Monaghan of St Vincent's de Paul had recently spoken of personally knowing of 16 cases of voluntary surrender, one of which involved a sub-prime lender.

The Minister of State in responding to the crisis facing families with mortgage and rent payments, spoke with breath taking arrogance and once again demonstrated that cabinet members are on a different planet. He accused us of 'foaming-at-the-mouth scaremongering' and "wide-of-the-mark claims" but the facts that we have referred have been taken from reports such the Threshold and the number of cases of repossessions that are before the High Court on a weekly basis. Last Monday ALMOST ONE-THIRD of cases listed before the weekly chancery summonses resulted in an order for possession. This is not scare mongering, it is a simple fact.

It is clear for everyone but the Minister of State that this is a crisis and it beggars belief that his only response is to "give people sound advice on what action to take and to warmly welcome the publication of best practice guidance by the Financial Regulator". Despite all of the reports of the rising numbers of people who are in default of their mortgage repayments, the Minister did not come up with even one new initiative to deal with this emergency.

There is no doubt that repossession orders, evictions and defaults in mortgage repayments are tied to rising unemployment. Over 100,000 have been laid off in the last 12 months and the unemployment rate could rise to 10% by the end of 2009.

Because of the Government's handling of the economy and our public finances over the past ten years, take home pay rose at a far a greater rate than the unemployment benefit. There is a substantial difference between people's average pay and the unemployment benefit. What this means is that workers who are now facing unemployment and are on welfare- will take a significant cut in their income.

As we have the highest mortgages and rent payments in Europe, this has obviously placed the homes of hundreds of thousands of people in jeopardy.

What compounds the problem further is the reported delays of up to 12 weeks in processing applications for jobseekers allowance.

If job losses rise as they are expected to over the next twelve months, the delays in processing the jobseekers allowance can only increase.

In addition to the economic impact of all of this, the real human costs in unquantifiable.

Repossessions and illegal evictions significantly increase people's level of housing need and increase their risk of homelessness. As with social housing and homelessness the government is failing to address this specific level of need. And all the indications are that the problems are going to get much, much worse.

So what can be done? Of course many things could be done if the political will existed to do them.

The government could intervene to halt repossessions and illegal evictions. It could use its political and financial influence with both banks and landlords

The government could introduce a two year moratorium on repossessions, while require lenders to conclude an 'affordable mortgage and debt payment arrangement' which protects a 'minimally adequate' standard of living. The Government could also increase the resources to the Money Advice and Budgeting Services (MABS) to ensure that debtors are guaranteed access to MABS personnel when they are negotiating the 'affordable mortgage and debt payment arrangement'.

The lending institutions who are responsible for this crisis should be compelled to suspend interest and other charges and penalties as these only exacerbate a family's financial distress.

Introducing a Court protocol to require lenders seeking a repossession on secured debt to be forced to show they have explored all possible alternatives through the above debt settlement mechanism is another option that should be explored. Repossession should always be the last resort.

To help people who are now unemployed, the Government should increase awareness and access to Mortgage Interest Supplement, to assist those mortgage holders experiencing temporary financial difficulties. This would require a reversal of the cuts made in the Social Welfare Bill which will limit the payment of mortgage interest supplement.

The government must engage in a similar process with private sector landlords and their lenders, securing a protocol on repayments by developers to their banks; a moratorium on evictions; greater access to MABS for those in financial hardship; and a significant increase in the resources of the Private Residential Tenancies Board to deal with those threatened with illegal eviction.

Repossessions and illegal evictions are bad for families, bad for communities and bad for the economy. The government must intervene now, at take the necessary steps to reduce the burden on those currently experiencing such housing need, and to halt the growth of families being placed in financial hardship and at risk of homelessness by lenders and landlords.

Finally, it seems to me that the proposed recapitalisation scheme may provide a golden opportunity to tackle the impending housing crisis that is before us.

Last October while speaking to an Oireachtas committee on the 14th of October, Patrick Neary, CEO of the Irish Financial Service Regulatory Authority told us that speculative lending to the construction and property sectors in the country amounted to €39.1 billion and that he anticipated " losses on property-related loans" and that "increased provisions and write-offs will be necessary,"

Mr Neary also revealed that a PWC audit of the six largest Irish banks had found that €15 billion of the property lending was secured on the properties. Can we learn anything form the Swedish experience in the early 1990s where a similar case of ill advised commercial lending in a property boom lead to a collapse in its banking system.

As part of the Swedish bailout the Government forced banks to write down losses and sell off the distressed assets. In the Irish case some of the assets in question are the land banks amassed by speculators, the unfinished housing estates and commercial retail ventures that should be sold off as bad debts

The Swedish Government formed a new agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly property, that the banks held as collateral.

In Ireland, we have a unique opportunity to return control of the planning process and commercial development to local government by breaking up the property cartels that have been holding Dublin and many other towns to their own development strategy wilfully thwarting local council development plans.

As property prices fall and these assets are sold, local government could have a unique route to dealing with the growing housing crisis, and the tax payer can be given a better return for the investment in the banks, rather than let cash strapped developers sit on their assets now only to make more profits in decades to come.

Recapitalisation if it must happen should only be done on condition that the impending mortgage and rent crisis is addressed. It is obvious from the Minister of State's comments last evening that the Government does not even recognise that there is a problem exists. As more and more cases come before the High Court I would urge the Government to finally wake up.

Connect with Sinn Féin