It goes without saying that repossessions should be the very last resort in cases of mortgage default or mortgage arrears. However, to be a last resort a measure must actually be possible. An unintended consequence of the Land and Conveyancing Law Reform Act 2009 has prevented repossession from being the last and final option for financial institutions. This became apparent as a result of a High Court case, which I believe is currently on appeal to the Supreme Court, involving a non-traditional mortgage lender. With the current events in our political system, this is another reminder of the centrality of the courts in our legislative system and an indication of the pervasiveness of judicial decisions.
It is very likely that this Bill will be vociferously opposed by the Opposition and will be portrayed in an incorrect light. Without doubt legislation must always be carefully constructed and rigorously analysed. This ought to be the aim. At times, however, unforeseen developments can emerge which need to be addressed. The Bill will rectify an unintended consequence of legislation and restore the previous position.
Furthermore, the Bill introduces a new provision to enable a court to adjourn repossession proceedings and seek an examination to determine whether the personal insolvency arrangement can be utilised. As Members will be aware, the personal insolvency arrangement is a new remedy available to heavily over-indebted people and is a non-judicial alternative to bankruptcy. It has been specifically designed to better handle large debts such as those associated with mortgages.
We must recognise, despite our hopes to the contrary, that some mortgages are simply unsustainable. Whether they should have been approved by the financial institution or whether the applicant should have applied for a mortgage in the first place are irrelevant factors. The unfortunate fact is that some mortgages are unsustainable and will probably never be repaid in full.
With this in mind it is important to consider what will happen if a financial institution is unable by law to seek repossession of a property purchased with a mortgage. There is a real danger that some unscrupulous people would adopt a laissez-faire attitude towards meeting their financial commitments. This would in turn endanger the stability of the financial institutions and possibly require further intervention and investment at the expense of the taxpayers.
The focus of the Bill must be the same as that with the personal insolvency legislation which radically overhauled our personal debt laws. The emphasis must be on differentiating between those who will not pay and those who cannot pay – of whom, unfortunately, there are too many – and in concentrating solutions on those citizens who cannot meet their mortgage repayments but are making genuine efforts to do so.
The Government has correctly committed to a number of actions to address the mortgage arrears problem including providing advice, information and guidance to people in arrears; reforming our personal insolvency legislation; requiring the financial institutions to develop and implement operational plans for addressing mortgage arrears; and updating the Central Bank’s code of conduct on mortgage arrears which protects borrowers.
Today, the Free Legal Advice Centres, FLAC, published its analysis of the Bill which contains a number of sensible, common-sense suggestions which will maintain and-or increase protection for borrowers in advance of the re-introduction of repossession mechanisms. A requirement that a lender seeking repossession fully complies with all steps of the Central Bank’s code of conduct on mortgage arrears is a very welcome suggestion. It would make no sense at all for a court to allow a lender to secure a repossession order if this same lender had not bothered to comply with the Central Bank’s regulations.
Another suggestion with which I agree, and I urge the Minister to consider it seriously, is to extend the time permitted for exploring the personal insolvency arrangement option from two months to between four and six months. A personal insolvency arrangement is a significant undertaking and should not be entered into lightly. Therefore it is vital that time and space are afforded to all concerned parties.
While it is often quoted that ignorance of the law is no defence, I concur with the concern of FLAC and others that there exists an inadequate and incomplete source of advice and information for borrowers who find themselves in financial difficulties or mortgage arrears. To be clear, MABS and other organisations provide an exceptional service to people, providing advice, information and support. However, I am concerned by the pressure on these organisations which are experiencing unprecedented levels of demand for their services. I appeal to the Minister to enhance the State resources available for MABS. If a person is aware of all the facts, obligations, rules, requirements and regulations from the very outset it will benefit all concerned and will reduce costs, both economic and social, that may arise if financial difficulties emerge.
While I appreciate and understand why the Bill is being introduced, and I agree that repossession has to be part and parcel of a normal, properly functioning financial system, we must also ensure that genuine, honest borrowers receive all the support necessary to navigate their way out of their financial difficulties.