Insolvency regime needs overhaul, says committee

The Government needs to overhaul the new insolvency regime and amend the mortgage-to-rent scheme to help resolve the mortgage arrears crisis in Ireland, according to the Oireachtas finance committee.

These are two of the main recommendations included in a 36-page report on arrears published by the committee yesterday.

On mortgage-to-rent, the committee said: “The scheme...is not fit for purpose. The scheme needs to be simplified and the number of agencies involved streamlined.”

It added that the valuation system requires careful “reconsideration and recalibration” to reflect current market conditions and that banks should not have the sole authority to recommend a customer to the scheme.

On the insolvency service, the committee said the “barriers to bankruptcy” needed to be addressed, including the “current prohibitive price of application”.

It said the cost of engaging a personal insolvency practitioner (PIP) was too high and acts as a “potential barrier” to the application of the legislation.

“The committee recommends provision be made to ensure people are not denied access to insolvency solutions due to a lack of money,” it said.

It also noted the public refusal of some financial institutions to engage in any write-down of secured debt and called for a review of the existing legislation to “mitigate against such practice”.

In total, the committee produced 47 recommendations on how the processes around mortgage arrears might be improved. Another key proposal was that retired people should be allowed to continue with their repayment schedules into old age, on a case-by-case basis.

In addition, the committee said there was “no justification” for a family that had voluntarily surrendered their home to be expected to pay whatever residual debt was left on the loan once they had vacated the property.

Consistent approach

The committee said there was also a need for a more consistent approach to the arrears problems by the banks, and urged the

Central Bank

to continue its “robust monitoring” of all lending institutions to ensure “proper scrutiny and prudential lending practices are in place”.

It also called on the Financial Services Ombudsman to utilise all existing powers to “ensure optimal outcomes for homeowners”.

And it called on the Government to develop a national plan to assess both the risks and potential supports for families at risk of repossession.

Committee chairman Ciarán Lynch called for “renewed vigour and purpose” in accelerating the resolution of the mortgage arrears crisis. He said that “new and innovative” proposals were required.

Independent TD and committee member Stephen Donnelly said that if the recommendations were accepted by the Government, it would go some way towards correcting the "imbalance" between the rights of the banks and of those people in arrears.

None of the banks was willing to comment on the specific recommendations in the report.

In a statement, the Central Bank said: “The bank will examine the committee’s report and its recommendations and will consider them in the context of its ongoing work on mortgage arrears.”

David Hall, who heads the Irish Mortgage Holders Organisation, an advocacy group for those in arrears, described the report as "powerful" and said the new insolvency and bankruptcy regime was not working and needed reform.