Healy O'Connor

Debt to be ‘Priority’ for Noonan

Minister for Finance Michael Noonan has said the Government intends to make the problem of mortgage debts “a priority”.

A report by a group of civil servants and bank representatives on the issue is to be published at the end of next month.

The group, which includes officials from the Departments of Finance, Social Protection and Environment, may recommended the establishment of a debt relief scheme for struggling mortgage holders.

Speaking this morning, Mr Noonan said he could not give a definite timeline for a Government response to the report but insisted the issue was high on the agenda.

He insisted, however, the banks had been recapitalised with money specifically to cover debts that arise on their mortgage books.

“From the Government’s point of view, we’re looking at a number of principles: we want as many people as possible to retain their own homes.

“We also want a principle to distinguish between those who can’t pay and those who won’t pay.”

Mr Noonan said people in negative equity were in a different category to those who could not pay their mortgage. “There are a lot of people in negative equity who don’t have a problem making their repayments,” he said.

Figures published by the Central Bank this week showed that more than 55,000 homeowners were more than three months behind in their payments at the end of June and this will almost certainly top 60,000 by the end of September.

The Cabinet discussed the issue at Government Buildings in Dublin yesterday but agreed to defer concrete decisions. Ministers agreed that a “tailored” approach was needed and that there was no “one-size-fits-all, broad-brush solution”.

On his way into the Cabinet meeting, Mr Noonan placed the spotlight firmly on the banks and their role in resolving the difficulties.

Pointing out that the Government had “put a lot of capital into the banks” to deal with mortgage problems, he added: “The capital is in the banks to allow the banks write off some of that debt”.

Mr Noonan served notice on the banks and building societies yesterday that some measures will be taken by the Government.

The Minister’s comments were described by Noeleen Blackwell of the Free Legal Advice Centres (Flac) as “the first sign of any real urgency from this Government that it is willing to tackle the issue sooner rather than later”.

Taoiseach Enda Kenny told reporters yesterday the Government was “acutely aware” of the seriousness of the situation facing many households. “In all of these cases, people borrowed money, banks lent money and, because of circumstances, sometimes outside their control, there are now difficulties.

“The Government and members of the Cabinet are acutely aware of this because we meet them every day. We have commissioned a report on a broad range of issues here and we’ll make decisions when that comes to hand,” he said.

The 10-member body is chaired by Declan Keane, an accountant seconded from KPMG to the Department of Finance, and includes officials from several departments and the Central Bank as well as expertise from the banking sector.

The Government’s approach is likely to come in for sharp Opposition criticism when Mr Noonan faces the Oireachtas Joint Committee on Finance, Public Expenditure and Reform tomorrow morning.

Central Bank governor Patrick Honohan and head of financial regulation Matthew Elderfield are expected to provide details about the problems with introducing formal debt restructuring when they appear before the committee on Friday.

Mr Elderfield has previously warned that any approach to restructuring needs to take account of the risk that it would create incentives for borrowers to cease meeting their obligations.

(The Irish Times, 1st September 2011)

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