CALLS FOR a debt forgiveness scheme for householders in mortgage distress have again been rejected by the Department of Finance, as the Cabinet prepares to discuss the issue today at its first meeting since the summer recess.
As Central Bank figures confirmed a big rise in the number of people in mortgage arrears, a Department spokesman said last night there was no “magic bullet” or “one-size–fits-all” solution to the problem.
But he said “suggestions that are circulating such as blanket debt forgiveness are not realistic options”.
Minister of State for Finance Brian Hayes, however, said the Government had not ruled out anything and would await the findings of an expert group on the issue before deciding how to act.
The interdepartmental group is to report to the Government next month.
In an interview with The Irish Times today, Minister for Social Protection Joan Burton has urged the banks and other lending institutions to take a more proactive approach to resolving mortgage arrears and other personal debt problems.
She said lenders “need to engage with individuals who are in difficulty or who are in danger of becoming in difficulty”.
“I actually would like to see the banks becoming active in reaching out to the citizens who have become embroiled in debt because of the recession, losing their job, losing their business,” she said.
The Minister took a cautious attitude to the possible conversion of the Money Advice Budgeting Service (Mabs) into a personal debt management agency with legal powers to enforce debt resolution.
She was anxious to ensure “that the expansion of Mabs services is not done at the expense of the traditional low-income clients”.
The mortgage arrears issue is expected to come up at this morning’s Cabinet meeting but Ministers will await delivery of the report before taking any major decisions.
Mr Hayes, speaking on the RTÉ Drivetime programme, said the Goverment was actively examining the issue and would produce proposals in the autumn once the expert group had reported.
“We haven’t ruled anything out at this stage. It’s an issue for the autumn,” he said.
Mr Hayes also said the Government needed to address the matter with greater speed than had been the case to date. It had taken eight months to put into place a Central Bank code of practice on the issue published last November, he said.
The Mortgage Arrears Resolution Process gave new protections to homeowners in arrears with their mortgages. Under the code banks can no longer impose penalties on customers in mortgage arrears or force them to surrender tracker mortgages.
“Things aren’t happening quickly. We need to up the tempo and we need to ensure that people are given the support the need,” Mr Hayes said.
A spokesman for the Irish Banking Federation said: “We would share the Minister’s objective in doing everything to ensure that lenders and borrowers do engage early and constructively on any repayment difficulties.” Figures on the number of restructured mortgages released by the Central Bank yesterday were “confirmation that this is happening”, the spokesman added.
On reforming the debt-enforcement system, the spokesman said the federation was “happy to work with Government and all other stakeholders” in the context of the Law Reform Commission report on that issue.
The Central Bank said yesterday 55,763 home loans, or 7.2 per cent of all mortgages, were in arrears for more than 90 days at the end of June. This compared to an arrears level of 6.3 per cent three months ago, and 5.7 per cent at the end of last year.