Keane says report did not pander to banks

THE KEANE report on mortgage arrears did not “pander” to the banks, which do not favour many of its proposals, its chairman Declan Keane said yesterday.

Addressing the Oireachtas Joint Finance Committee, Mr Keane rejected repeated suggestions from members that his group’s report had sought to protect financial institutions.

“I don’t think we’re actually pandering to the banks . . . I wouldn’t accept that,” Mr Keane said. He later told the committee the report “isn’t meant to be” pro-bank.

“The mechanisms in there are things the banks do not want to see,” he said. On questions about sharing the burden of distressed mortgages with lenders, he said: “There will be losses for the banks.”

Mr Keane, a KPMG accountant, was appointed by the Government to chair a group considering measures to alleviate the growing problem of mortgage arrears. At the end of June, some 45,000 households were in mortgage arrears for more than 90 days.

Measures recommended by the group when it reported last month included allowing mortgage-holders to trade down while retaining their negative equity, sale by agreement and a structure whereby borrowers would surrender their property and rent it back through their local authority. The last scheme would cost the State about €35 million per year.

The report also suggested “split mortgages”, where a loan would be separated into two parts, with the affordable portion repaid as normal and the remainder “warehoused” and tackled at the end of the mortgage term.

The group did not recommend blanket debt forgiveness, stating it would cost about €14 billion to clear negative equity across the Republic’s entire mortgage book.

“We need to accept the reality that some situations are unsustainable,” Mr Keane said, adding that there was no “one-size-fits-all solution”. He highlighted split mortgages, noting that a borrower should not accept such a structure if the outstanding sum at the end of the loan was too high.

The committee had earlier heard from New Beginning, the group which represents homeowners in repossession cases. It wants a solution based on borrowers repaying 35 per cent of their post-tax income, with this escalating each year.

It would also involve “parking” a portion of the overall loan, but which, unlike the split mortgage, would not accrue interest for the parked period.

Mr Keane said his group was “not opposed to interest reductions or rebates” on the warehoused portion of a split loan.

The Keane report also recommended the establishment of a specialised mortgage advice body – with links to the Money Advice and Budgeting Service (Mabs) – for homeowners in difficulty. Mr Keane said he did not believe Mabs had the capacity to offer the service, but this was rejected by representatives of the advice group itself.

Carol Dunne of Mabs National Development Limited said the service already provided independent mortgage advice and warned of overlap with any new agency. Paddy Lavery, Mabs co-ordinator, meanwhile, urged a “holistic” approach, adding that isolating mortgage debt was not the answer.

The Citizens Information Board, which oversees Mabs, is not in favour of the service fulfilling the mortgage-advice function. Tony McQuinn, its chief executive, told the committee he did “not foresee a service that would be absorbed into Mabs”.

26,249active cases in first half of year

30,000helpline calls last year

69%of cases dependent on welfare

50%in mortgaged accommodation

91.5%of clients with mortgage problems have at least four other debts