BANKS have been ordered by Taoiseach Enda Kenny to spell out exactly what they will do to help troubled mortgage holders.
The country's main banks were last night hauled before a Cabinet committee as the Government prepares to publish a new Bill aimed at dealing with the mortgage crisis.
The Bill includes a new personal insolvency arrangement, which will mean some distressed mortgage holders will get some debts written off if they can reach a deal with their bank. The idea is to force lending institutions and mortgage holders to negotiate a deal without resorting to the courts.
Under the plan, the crippling bankruptcy period will be slashed from 12 years to three.
But it is expected that only in really limited circumstances will homeowners be offered a new debt writedown deal.
The main banks held a final crunch meeting with the Taoiseach, the Tanaiste and the Ministers for Finance and Public Expenditure last night.
Lenders including Bank of Ireland, AIB, Permanent TSB, KBC and Ulster Bank are keen to avoid people availing of the provisions of the new Bill to declare themselves bankrupt.
The Bill, which will be published on Friday, proposes to set up a new service to help people manage debt.
However, Michael Dowling, Chief Exec of Independent Mortgage Advisers Federation said that the proposed legislation leaves the banks with too much power.
The proposed legislation indicated that where secure debt, ie a mortgage, was involved, 75pc of creditors have to approve.
"Very simply that means that the bank has to approve," Mr Dowling said.
"In the proposed legislation, the banks will have a veto in terms of any proposed solutions. In our opinion that is not going to work, if the banks have the ultimate veto in the solution.
"If the banks in each case have that power, this legislation won't work.
"We need an independent party to look at the solutions that are there, and allow them, if there can't be agreement between the bank and the borrower, to review that situation."
Mr Dowling said that the solution will help mortgage-holders who have been frustrated with their dealings with banks as they struggle to get their affairs under control.
"It has improved in the sense that there is engagement between customers and banks," he said on RTE this morning.
"The difficulty you have is that there is no common approach, equally depending on who you meet in the bank, different solutions will be proposed.
"The legislation will help borrowers, in that there will be defined solutions, and it will compel the banks to reach those solutions sooner rather than later."
After the meeting last night, the banks were said to be keen to outline their own solutions.
AIB said it had proposed a number of potential options for its customers in arrears. Its options include Split Mortgages, Trade Down Negative Equity Mortgages and a Voluntary Sale for Loss option.
In a statement, KBC Bank said it would be piloting medium-term mortgage arrears options, to include loan-term extensions and a three-year "interest only" solution.
Bank of Ireland outlined that its policy was to deal with arrears on a case by case basis.