'The top priority has to be to keep people in their homes'

The long awaited Inter-Departmental Mortgage Arrears Working Group proved to be a major let down for anyone with high hopes of the Government making a serious attempt to solve a mortgage crisis that is being allowed to increasingly worsen. Given that the report was written by civil servants and bankers, maybe we shouldn’t be quite so shocked. Here is an extract from my speech in the Dáil on the subject – “I was always taught that when reading a factual book, the first thing I should do is see who wrote it, when he wrote it and in some contexts, particularly in history, where he came from and his background. When I looked at the Keane report, I was surprised that it came from people who did not have a direct relationship with the problems they addressed. That was a mistake. I am not sure if any of them is struggling to pay a mortgage; perhaps they are. However, I noticed there was no criticism of the banks’ behaviour towards the borrower, despite the fact that there is much evidence of bullying, threats and intimidation from the financial institutions in their relationship with borrowers. It does not take a rocket scientist to figure out that it is a pretty uneven contest between the borrower and the lender at the moment….The Government needs to connect more with civic groups in general, and not just on this issue. The Government has a responsibility to change the level of disconnection between Leinster House and the world outside…..I wish there was a closer relationship between the Government and the people when it comes to mortgages. There is more interaction between the Government and the banks than there is between the Government and the people. The mortgage crisis is getting worse at this stage, and that is not surprising as things are becoming more difficult for many people. They are falling further behind with their payments and they have a great deal of other debt. We still seem to lack a proper way of measuring that debt for some reason. We do not know what they owe, between credit cards, utility bills and so on. We probably do not realise just yet how poor many people are.

The top priority of the Government has to be to keep people in their homes and not to drive them into poverty. Whether the person is in trouble due to his own fault or due to the lender’s fault is a different argument. I am not very happy with the current perception that the borrower is the person who always needs to be forgiven. A great deal of forgiveness is required for the lender as well and we need to have a serious look at how we think about the way banks relate to their customers. I do not see much sense of responsibility shown by lenders towards borrowers, but they should accept responsibility. When a borrower takes money from a lender, there has to be more scrutiny of the agreement and there must be a level of fairness in it. The notion that any lender can demand payment of all money owed at 24 hours notice is outrageous. It is completely unrealistic. Who can come up with it?....There is a sense that borrowers are morally questionable, yet there is not a word in the report about lenders being morally questionable and, God knows, they have not covered themselves in glory…..there is unlikely to be a recovery in the economy until we resolve what is now a mortgage crisis. Until ordinary people can return to economic normality, the real economy will stagnate, which means unemployment, emigration, misery and injustice, too, for a lot of people.

Looking to the future, we must surely rethink our whole philosophy on housing. In the 1940s, 70% of housing built was social but since 2000 of all housing built only 6%was social. That cannot continue. The notion that everybody will be able to afford a home is unsustainable. The State should change its mind-set and consider having a serious social housing programme if it wants to take proper care of its citizens”.

Having spoken the previous week on the need for proper inspection and control of workmanship in the building industry, specifically in relation to Priory Hall in North Dublin, I then managed to get an opportunity in the Dáil to speak of the need for the financial institutions to take some responsibility for what has become a tragic episode for so many people. I said – “I want to raise the issue of Priory Hall, which we all know has become an absolute nightmare for those involved. The madness of it has meant the people there have had to move into hotel accommodation or apartment accommodation, often at quite a distance from where they work or where their kids go to school. It is a frightening scenario and hopefully there will not be too many more, but I would not be shocked if there was.

There is much responsibility involved in this. The builder is the main culprit. The architect signed off on stuff that clearly was not correct. The engineer signed off on stuff that was not correct. The local authority clearly did not regulate the matter or supervise the construction project in the correct manner. I would also argue that the bank must take some responsibility. If anybody wants to get a mortgage for a new apartment or house in this country, the bank will insist on either an architect, engineer or valuer of its choosing inspecting the property before it agrees to part with the money. Whoever went out to inspect this on behalf the bank did not do a good job. The bank must take some responsibility in the whole affair.

For starters, there is no way that the people who have been moved out of these apartments should have to make their repayments while they are not in them. All payments should be suspended. Even if the builder fixes the problems to a certain acceptable level, the apartments in Priory Hall would not be worth the money that they were worth even two weeks ago. They have been downgraded dramatically. Nobody in their right mind would buy an apartment off any of the residents in Priory Hall if they wanted to sell on. It is a complete non-runner. The bank needs to take that on board, given that it is very much part of the equation. The residents deserve a write-down on their mortgage, given that this was no fault of theirs. Like everybody else, the bank has a responsibility and it should accept that”.

The Minister for State for the Environment replied that the banks involved had a case to answer but that it was for each individual to fight his case, rather than the Government get directly involved. I replied – “In arguing the toss with banks and other lending institutions on a case by case basis about whether there is room for manoeuvre on a better deal, a write down or compensation for what occurred, some people will be in a poorer position than others. Unfortunately, the most vulnerable people are likely to get the rawest deal when confronting a powerful financial institution….I agree that people will have to discuss the matter with the lending institution, but given that the taxpayer owns a few of these banks which may be involved, I would like to think that if they were not behaving ethically in this case, the Minister and his colleagues might have a word with them”. Minister Hayes did add that any action the Government can take that will resolve the issue will be taken. Time will tell.

On Wednesday, prior to the latest European summit, I got to speak on the European crisis and Ireland’s disappointing performance in addressing our problems. An extract from my speech – “The politicians of Europe have failed to deal in a substantial way with the crisis facing the eurozone. That is certainly the verdict of the markets, which are running out of patience. Several weeks ago in this House we debated whether €440 billion was an adequate allocation for that great vehicle, the European Financial Stability Facility, EFSF. It is now clear, as we argued at the time, that it will take at least €2 trillion before anything is resolved. Italy represents 20% of the EFSF’s backing, yet that country is far more likely to be withdrawing money from the fund rather than financing it. The entire concept is a joke. Italy and Spain are facing enormous difficulties, but people are slow to realise just how serious the Italian situation is. The one positive likely to emerge in the coming weeks will be the end of Berlusconi’s reign. He has been entirely detrimental to the welfare of the Italian nation.

I am extremely disappointed in how the Government has behaved in its dealings with Europe. Instead of taking the lead and demanding that our situation be improved, we have been at the receiving end of actions taken in response to the latest development. A photograph in yesterday’s Financial Times, showing small groups of European leaders discussing the crisis, struck me as sad in that it depicted the Taoiseach standing alone and forlorn, I felt very sorry for him and there is no question but that his task is a difficult one. However, the reality is that we have shown terrible weakness in dealing with our problems - more so than all the other European politicians, who have also, in general, been weak. We should have played a much more serious role and been far more forceful in demanding a fair deal for Ireland. Time will prove that we should never have been so receptive to the austerity measures imposed on us, which we took on the chin….will the Minister consider an analysis in last week’s edition of The Guardian which put forward the notion that many of today’s problems have come from an unwillingness to re-finance Greece, Ireland and Portugal in the early days? Their share of the euro area public debt to GDP ratio is ridiculously low and cancelling out their debt would have been less painful than the present arrangement. The crisis arose because markets and rating agencies saw the stupidity of European leaders who were ineffective when it came to rescuing indebted countries and who introduced self-defeating austerity programmes. Fear produced a ballooning of the interest rate spread and thus the problems have dramatically got out of control because of poor decision-making by the Europeans in the first place”.