Thursday 19 October 2017

Banks want State to put mortgage strugglers into penury

Fury as lobbyists say 'dole-level pay enough' in bid to claw back arrears

John Drennan and Philip Ryan

BANKS are seeking to force homeowners who are struggling to pay mortgages to live on nothing more than the basic social welfare rate, the Sunday Independent has learnt.



The suggestion by the banks that those attempting to resolve their mortgage difficulties should be made live off no more than about €188 -- the equivalent of the maximum level of the jobseekers' allowance -- is said to have invoked fury among government ministers.

One of the key negotiating issues facing homeowners looking to settle their mortgage arrear problems is the percentage of their income they need for basic living expenses such as food, heat, medical expenses and basic utilities.

Banks lobbied the Government hoping to have a draconian fixed-income rate imposed on hard-working homeowners who have been left in negative equity thanks to the reckless lending policies of the same banks.

The Irish Banking Federation sought to have the financially crippling stipulation introduced as part of the Insolvency Bill -- legislation the Government is hoping will offer a solution to the country's escalating mortgage arrears crisis.

Ministers were astonished and furious over the banks' proposal that the amount of income those who were trying to resolve their mortgage difficulties should "equate to the basic social welfare rate''.

A government source said it was initially "taken aback" by the suggestion but "once the 'full implications of the proposal were understood' the banks were told in no uncertain terms the proposal would not be supported and it would be unworkable".

Another senior figure confirmed "such a position simply is not government policy, it is in fact contrary to and does not reflect government thinking on this issue''.

Social Protection Minister Joan Burton said the Cabinet was united on the importance of the Insolvency Bill and it was intent on ensuring "that the most productive generations of the State are not mired in debt for decades with no way out'' -- a view echoed by Minister for Finance Michael Noonan.

The Sunday Independent understands the proposal was made in the early part of the year as part of suggested "fixed procedures" in the insolvency legislation.

At that time, the Irish Banking Federation proposed a fixed amount of income should be "granted'' to debtors who come to agreements with banks on distressed mortgages and the basic social welfare rate was suggested as a sufficient standard of living.

Responding to a series of queries from the Sunday Independent, an Irish Banking Federation spokesperson said: "It is important that a sufficient standard of living is agreed upon, in order to ensure that the system works fairly for debtors and creditors alike".

The Irish Banking Federation spokesman added: "It is up to Government how they devise a consistant standard of living with regard to a personal insolvency regime and there has been no detailed consideration of this issue".

However, government sources made it clear it had taken "a definite decision on this" and added that "those who are involved in a resolution process should be entitled to an income that allows some quality of life".

Another source confirmed the current position is that the indebted should be allowed, "social welfare plus what is required for a decent standard of living".

Fianna Fail Justice spokesperson Dara Calleary slammed the banking sector, which he said was in "total denial about the correct approach to resolving the mortgage crisis".

He warned the banks that "reducing compliant individuals to penury or putting in procedures which left mortgage holders with no alternative outside of emigration or unemployment was not acceptable".

The Sunday Independent has also learnt that the Government was equally scathing about the bankers' position.

One source noted the suggestion had been dismissed as representing a case of "unreality on a grand scale".

They added: "You could not invent a greater disincentive for people to resolve their mortgage difficulties than this particular proposal."

One top-level figure noted: "What person in their sane mind would work for 40, or in many cases these days 60, hours a week for nothing more than social welfare?

"The banks cannot have thought through the implications of this stance."

Sunday Independent

Editor's Choice

Also in Irish News