Practical measures can help keep families in their homes

Limerick TD, Kieran O'Donnell, believes series of simple and practical measures that can ensure the issue of mortgage distress will be underpinned by the goal of saving the family home where at all possible.  

For many years before being elected a TD for Limerick, I had my own chartered accountancy practice. I had one golden rule for clients, namely the family home was protected at all times.

This was based around a very simple logic — even if a business failed, so long as the family home was secure, a client had a better chance of starting afresh.

As a TD, I still believe home repossessions should be a measure of absolute last resort. Furthermore, I also believe that we do not need to re-invent the wheel to protect the family home.

The fear and distress associated with a threat to the family home is hard to overstate. Indeed, the loss of the family home wreaks havoc from which many people never recover.

I believe we simply should not be seeing as many repossession cases appearing before the courts as we currently are, but this can be addressed by bringing into effect a relatively small number of changes to the insolvency system currently in operation.

We must ensure those families who fell victim to the housing crash are protected as we emerge from the crisis.

I am of the firm view we do not need to waste time coming up with complicated solutions when, maybe, all that is needed is a few practical measures.

We are now at a point where we must ensure the systems we operate are as effective as possible. Families must be able to fully benefit from all the mechanisms for dealing with mortgage arrears and insolvency.

My aim is to ensure that we are making the greatest possible use of the Insolvency Service of Ireland and I am not convinced this is currently happening.

With any new system, it is to be expected that there will be some teething problems. Now is the time to address this. In particular, I believe better use can be made of the six specialist judges appointed under this service as well as the staff working within the insolvency service.

We must introduce changes that will maximise the benefit of the service for the maximum number of families. In doing this, we must also ensure that we do not impair access to the mortgage market or create additional costs for other mortgage holders.

I am putting forward three practical proposals with the specific aim of saving the family home where at all possible. They are as follows:

Firstly, all home repossession cases presented to the courts should be automatically referred to the Insolvency Service of Ireland before any repossession proceedings can be affected.

I am proposing that before any court re-possessions can proceed, cases should first be automatically referred to the ISI to go through its process to see if it is possible to save the family home.

Staff members within the ISI should act as Personal Insolvency Practitioners for these cases. The ISI internally-appointed personal insolvency practitioner should apply for a protective certificate from the courts and seek to put an insolvency arrangement in place if at all possible and retain the family home.

I am hopeful that this measure will ensure that the number of cases being dealt with by the insolvency service greatly increases, and the number of cases going to court will drop.

Secondly, creditors and banks must explain their rejection of an insolvency arrangement to the court which they are currently not required to do.

This is a major weakness in the current process as many of the cases that apply for a protective certificate period never re-appear before the court who granted it.

Indeed, the only current requirement to return before the court is to seek approval for an arrangement that has been agreed.

It makes no sense whatsoever that at present where creditors and banks reject proposed insolvency arrangements, they do not have to appear before the court to provide the rationale for this rejection.

I am proposing that where a case is granted a protective certificate period, this case must always come back before the court with an insolvency arrangement proposal or explain why no arrangement has been agreed and this must be approved by the court.

This new rule would provide transparency and accountability by the banks and creditors on how the negotiation process works. n Finally, the initial protective certificate period should be extended from 70 to 100 days.

In order to give people every chance of using the insolvency service, the initial period for them to prepare their application for an insolvency agreement should be extended from 70 to 100 days.

I believe that 70 days is too short a time period to negotiate an arrangement with banks and creditors.

At the moment, many cases granted a protective certificate period of 70 days under existing legislation never return to court to seek an insolvency arrangement.

The protections I am proposing should apply to all home owners in respect of their home.

This mortgage crisis is something that we need to meet head on with practical measures that are easy to implement and understand. The approach I am advocating meets both of these requirements.

Kieran O’Donnell, Fine Gael TD for Limerick since 2007, is a member of the Oireachtas Banking Inquiry and the Oireachtas Finance Committee

Read more of today’s news here