Header Item Local Government Reform (Continued)
 Header Item Other Questions
 Header Item Local Authority Housing Mortgages

Tuesday, 23 October 2012

Dáil Éireann Debate

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(Speaker Continuing)

[Deputy Phil Hogan: Information on Phil Hogan Zoom on Phil Hogan] Then people will have much more opportunity to be able to decide their own destiny in Waterford in conjunction with greater co-ordination between the counties in the south east.

When I was a member of a local authority there was a great deal of co-ordination. We used to have a lot of meetings between Waterford and Kilkenny. A predecessor of the current Waterford city manager decided to stop such meetings. Perhaps we should resume the process in order to have a better relationship. Waterford could start to have a better relationship with Kilkenny; I would welcome that.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The time for Priority Questions has expired. We will take Question No. 52 in ordinary time.

Other Questions

Local Authority Housing Mortgages

 52. Deputy Bernard J. Durkan Information on Bernard Durkan Zoom on Bernard Durkan asked the Minister for the Environment, Community and Local Government Information on Phil Hogan Zoom on Phil Hogan the extent to which he continues to receive information from the various local authorities in respect of arrears of shared ownership or annuity loans; if as a result he will initiate legislation to address the on-going situation whereby borrowers are expected to meet repayments in respect of the rental equity which are greater than that applicable to the mortgage equity; and if he will make a statement on the matter. [46187/12]

Minister of State at the Department of the Environment, Community and Local Government (Deputy Jan O'Sullivan): Information on Jan O'Sullivan Zoom on Jan O'Sullivan My Department has recently commenced the collation of data from local authorities on the number of loans in arrears broken down by the length of time in arrears. The data from the second quarter of 2012 indicate that 6,280, or 28% of all local authority mortgages, including those drawn down for the purpose of purchasing houses under the various affordable housing schemes such as shared ownership and tenant purchase, are in arrears of more than 90 days.

The use of 90 days as a comparative metric in considering the level of arrears is consistent with the approach adopted by the Central Bank in compiling information in respect of private lenders' loans. The Central Bank's data for the same period showed that 10.9% of mortgages in the private sector, including those whose accounts were restructured, were in arrears for more than 90 days. A further 5.28% of mortgage accounts had been restructured and were performing in accordance with the revised terms.  It is to be expected that the rate of arrears among local authority mortgage holders would be higher than the rate of arrears generally, given the position of local authorities as lenders of last resort.

Section 34 of the Housing (Miscellaneous Provisions) Act 2009 provides local authorities with powers to deal flexibly with distressed borrowers, and they have demonstrated sensitivity over the years in dealing with such cases. In March 2010 my Department issued guidelines to local authorities, based on the Central Bank's first code of conduct on mortgage arrears, which continued the tradition of handling arrears in a manner sympathetic to the needs of households, while also protecting the position of the local authority concerned. To reflect the content of the Central Bank's revised code of conduct, which replaced the previous code from 1 January 2011 and was informed by the deliberations of the expert group on mortgage arrears and personal debt, my Department issued updated guidance in July 2012 to local authorities in consultation with the County and City Managers' Association. This will further enable local authorities to provide a range of flexible repayment options for households in difficulty.

  Additional information not given on the floor of the House

In particular, the introduction of a mortgage arrears resolution process, MARP, which closely mirrors the suite of options available in the commercial sector, will present borrowers in difficulty with a range of alternative payment arrangements that can be accessed to ease the particular circumstances of each case. This process will feature a standard set of options including, in cases of certain unsustainable mortgages, a mortgage-to-rent facility. Local authorities have been restructuring loans for some time using their own internal practices. The introduction of these revised guidelines will standardise the approach across the whole sector, introduce a systematic structure and provide borrowers with a transparent and accessible model for arrears resolution.

With regard to the shared ownership scheme specifically, the rent charged on the local authority's equity in a shared ownership transaction is to cover the funding costs to the Housing Finance Agency which are based on borrowings at the prevailing interest rates. Any difference between the rent and prevailing interest rate is reflected in the capital outstanding on the property - that is, if the rent charged in any period is greater than the prevailing mortgage interest due on the local authority's share, the purchase price of the outstanding equity will be reduced accordingly.

To take account of the current housing market conditions, the Government's 2011 housing policy statement announced the standing down of all affordable housing schemes, including the shared ownership scheme, in the context of a full review of Part V of the Planning and Development Act 2000. That review is now under way and will conclude later in the year. Any future changes to legislation governing affordable housing schemes, including shared ownership, will be informed by that review.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt I call Deputy Durkan. For a moment I could not find him in the Chamber.

Deputy Bernard J. Durkan: Information on Bernard Durkan Zoom on Bernard Durkan I know I am nearly invisible.

I thank the Minister of State for her reply. However, there is an issue that needs to be dealt with, and I ask her to clarify whether it has been dealt with by the expert group. I refer to the fact that the rental part of loan repayments has increased way beyond what was anticipated. The situation is no longer as was envisaged and indicated to purchasers in the first place. For example, purchasers were told initially that the rental part of the equity would remain at a certain level. The condition was that within a 25-year period an agreement had to be entered into to purchase the second part of the equity. That has changed; purchasers are now told they must purchase the second part of the equity within a 25-year period. Was any account taken of that by the expert group with a view to pulling the repayments into line with ordinary mortgage repayments in the private sector?

Deputy Jan O'Sullivan: Information on Jan O'Sullivan Zoom on Jan O'Sullivan I am conscious of the difficulties faced by distressed home owners, particularly, as Deputy Durkan has said, those involved in the shared ownership scheme. The Deputy spoke of the rental part of the agreement being different to what was originally understood. Many Deputies have brought this issue, and the difficulties people are having, to my attention. We will examine the matter to see what can be done. The difficulty is that local authorities borrowed the money initially through the Housing Finance Agency and we do not wish to impoverish them, but at the same time we wish to deal sympathetically with the difficulties those who have taken out loans are experiencing.

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