Repossession loophole to be shut
The Government has agreed with the EU-IMF troika that it will fix the legal loophole preventing banks seizing the homes of defaulting borrowers, raising fears of a wave of repossessions in the new year.
The commitment was made in the latest review of the State's bailout programme, published yesterday. The Government has said the Personal Insolvency Bill, which is due to come into effect before the end of the year, will provide "adequate protection" for the family home.
Minister for Public Expenditure and Reform Brendan Howlin denied this morning that there would be any wave of repossessions.
He said the Government had been clear from the beginning that a priority for it was for families to maintain the family home and that the Government's new personal insolvency legislation provided a mechanism for families to reschedule debt.
He added that the banks had received a significant volume of money as part of the recapitalization process specifically to ensure there was a safety net for those who were simply not in a position to pay the full quantum of their mortgage debt.
"I do not expect, in truth, any mass repossessions of houses, certainly not for family homes next year. The Government would set its face against such a move."
Fianna Fáil and a mortgage-holder representative organisation questioned this last night, pointing out that under the legislation banks could veto deals aimed at keeping people in their homes.
Fianna Fáil finance spokesman Michael McGrath said the personal insolvency legislation, as it stands, gives no explicit protection for family homes.
'Families could lose'
"Families could lose under the new arrangement for banks that emerges next year," he said.
Mr McGrath said nowhere in the Bill was there a guarantee that a family’s home would not be lost. He said that with the banks getting more aggressive with borrowers, he would be very wary of the new legislation. "[My concern] is that it will result in a flood of family homes being repossessed," he said.
David Hall, director of the Irish Mortgage Holders Organisation, said there was an absence of stringent conditions in the Bill to give adequate protection to the family home. He said that while the personal insolvency arrangement provided for in the Bill was designed to protect the family home, it was subject to the agreement of the bank involved. He said the bank effectively had a veto.
"There’s a lottery there. You can avail of it but the bank controls the process," he said.
Mr Hall was a member of New Beginnings, the group which took the case last year that exposed the loophole protecting mortgage-holders.
In the case, Ms Justice Elizabeth Dunne found that a failure to save aspects of old legislation when the Land and Conveyancing Law Reform Act 2009 was introduced meant the only registered properties lenders could repossess for failure to pay mortgages on were those for which they had demanded full repayment before December 1st, 2009.
According to the Central Bank’s latest figures, 167,000 mortgage accounts with €35 billion of debt were in arrears at the end of June 2012.
At the same time, some 265 orders for possession were granted by the courts in the first six months of the year, down by almost 32 per cent on the same time last year, when 390 orders were granted.
The Department of Justice, which is responsible for the new insolvency legislation, declined to comment last night.
The latest review of the troika programme, published yesterday, also called for curbs on health spending and greater controls on local government finances. The Government is committed to a new ceiling for the health budget in 2013 of €13.6 billion. Over the remainder of 2012, it said, "the authorities will take the measures necessary to unwind the overrun in health spending".
A new condition, to be completed in the first three months of 2013, is for the Government to prepare a study of "the cost of drugs, prescription practices and the usage of generics in Ireland with comparable EU jurisdictions".
Also new is an obligation on the Government to draw up an interdepartmental "protocol" before the end of this year to ensure local government spending and revenue balance in 2013.