Mortgage lending by banks 'not responsible'

PEOPLE TOOK out 35-year mortgages after their wedding during the Celtic Tiger, but some of the marriages might not have lasted 35 months, Fianna Fáil Laois-Offaly TD Seán Fleming told the Dáil.

“The situation is that, clearly, there was irresponsible lending by the banks,” he said.

Mr Fleming said that while one could not generalise on the issue, banks gave out loans based on projected incomes that were not going to materialise.

“They calculated that each young person to whom they gave a loan would take in three tenants at €10,000 a year each and they factored in a make-believe extra income of €30,000,” he said.

Mr Fleming said that in such cases the banks should be made to pay a heavier contribution to resolving the problem because the loans were unsustainable.

“I do not blame the 20-year-olds who took out such loans,” he added.

“When one is dealing with a big financial institution that is in business for donkey’s years, one expects it to know that end of the business.”

Mr Fleming, who was speaking during the resumed debate on the Keane report on mortgages, suggested there was a need for an intermediary between banks and individuals because the relationship was unequal.

Independent TD Stephen Donnelly referred to the case of a self-employed woman in his Wicklow constituency who had worked for more than 20 years and had paid her taxes. She was a single mother with a daughter in university and, during the boom, she bought a semi-detached house in a new estate in Wicklow.

Her business clientele comprised mainly of young professionals, but she was badly affected when the recession hit.

Mr Donnelly said his constituent was in arrears and in negative equity to the tune of between €200,000 and €300,000.

She had received several phone calls daily from the bank about her repayments, while one of its debt collectors had called to her front door. She was absolutely distraught, not sleeping, and did not know what she was going to do in respect of her business.

“What really struck a chord with me was when she said she feels violated by what her bank has done.”

Caoimhghín Ó Caoláin (SF) said there were tens of thousands of families trapped in “mortgage slavery”, having bought houses and apartments at grossly inflated Celtic Tiger prices.

He said the Keane report was a bitter disappointment. “Once again, it is a cringing approach to the banks, a genuflection to the boardrooms where many of the grossly overpaid culprits are still in positions of power.”

Clare Daly (Socialist Party) said she fully supported the need to have a general writedown of all properties in negative equity.

“People who purchased their homes between 2003 and 2007 paid an uneconomic price in a false market,” she added.

Minister for Finance Michael Noonan said that while he was not ruling out debt for equity, “if one decides to write off debt, a lot of the time one is transferring it from the mortgage holder to the taxpayer because, at the end of the day, that is what happens”.