Minister for Finance Michael Noonan has said he is disappointed at the speed at which Irish banks have move to address the mortgage arrears crisis.
Mr Noonan was speaking last night following the publication of Central Bank figures showing that while the pace of growth in mortgage arrears is slowing, about 23,500 mortgages have not been paid for two years or more.
The Central Bank figures showed that mortgage arrears continued to rise in the last quarter of last year, albeit at a slower pace than in previous quarters. Almost 12 per cent of private residential mortgages were three months behind in payments at the end of December, rising from 11.5 per cent in September.
Mr Noonan told RTÉ’s Primetime last night the Government was committed to speeding up the pace of settlements with struggling homeowners and urged banks to do more to help them. He noted the Government has recapitalised the banks and they were now in a position to function normally.
“They have been in constant contact now over recent weeks with the Central Bank. And the Central Bank is bringing forward a timeline against which they will operate,” he said. “We are committed and we are going to accelerate the level of settlements with people."
AIB said in recent weeks that it would restructure 2,000 loans each month, with other banks also promising greater effort on the issue.
Meanwhile, Siptu has reacted strongly to comments from the secretary general of the Department of Finance John Moran, who told the Public Accounts Committee yesterday that the level of repossessions in the Republic was “uncharacteristically low”.
Uncharacteristically low
Mr Moran told the committee that banks should soon be able to “move forward” on tackling problem home loans.
The Republic has a repossession rate of about 0.25 per cent of mortgages, compared with 3 per cent in the UK and up to 5 per cent in the US.
“It’s surprising to us that there are so few repossessions in the system at the moment, given the extent of the crisis,” Mr Moran said. “Ultimately, it is the other people in the country who are paying for these people to stay in their houses.”
In a statement this morning, Siptu general secretary Jack O’Connor described Mr Moran’s comments “reprehensible and barbaric”.
“The Government must to come up with better solutions to the mortgage crisis than reverting to the tactics of colonial lackeys in nineteenth Ireland. The parallels between the graphic images of post-famine Ireland and the prospect our own authorities evicting people from their family homes to pay off debts to those at the top of the European banking system are striking,” he said.
“I suspect that the recent intensification in calls for such unspeakable cruelty is about pandering to the vultures of the global banking system in the context of the effort to return to the markets. We desperately need to escape the troika’s strait jacket and access funding ourselves, but descending to the crucifixion of ordinary families is a step too far. “
Yesterday, the European Central Bank hcalled on the Government to step up its banking reforms. Its governor Mario Draghi yesterday urged “further action”.
Speaking in Frankfurt after the ECB’s governing council meeting, Mr Draghi praised Ireland for its economic progress but said the banking sector was a key concern.
“The Irish Government has undertaken very, very significant progress, very significant results on several fronts... but further action is needed, especially on the banking side, in the financial sector,” Mr Draghi said.
The remarks place renewed pressure on the Government to focus on its banking policy. They follow comments made in this newspaper by the head of the International Monetary Fund, Christine Lagarde, raising concerns about a "relapse" in the global economy. Ms Lagarde is in Dublin today for talks with the Government.
Mr Moran said a “large range of different options” were needed to solve the problem but noted that a workable system was almost in place as the Department of Justice moves to close a legal loophole preventing many repossessions and the new personal insolvency service prepares to launch.
He said it would be “typical” to see a greater incidence of repossession, either through voluntary surrender of a home or through the court system, where the economics of paying a mortgage no longer work.
Repossessions to rise
Mr Moran acknowledged that the rate of repossessions could be expected to rise but added that “we are starting from a base which is uncharacteristically low”.
“Maybe we will move to those levels,” said Mr Moran, referring to repossession rates in the US and the UK. “We have had as serious a crisis as everybody else.”
He said full information on borrowers in difficulty was still unclear, even to the banks themselves, and needed to become more accessible. Options such as deferring repayments on a portion of a loan, or making interest-only repayments could be sufficient to address many problem situations, he said.