Council of Mortgage Lenders – 03 June 2008

Mr Chairman, ladies and Gentlemen, thank you very much for your kind invitation and warm welcome here today. I am always very cautious about accepting invitations that put me between so many people and their lunch. However the good news for you is that I am due back in the Assembly this afternoon to take forward legislation, so I promise to be brief.

When I look around the room today, I see many familiar members of the housing community. In addition to providers of finance, we have representatives from the Construction Industry, leading Academics, Housing Advice providers, those from the Housing Association movement, the Housing Executive and fellow politicians with a particular interest in all things housing. It really is a who’s who from the housing world here.

Today we are being hosted by the Council of Mortgage Lenders, an organisation that provides over 98% of all mortgages across the UK and it is to you, the financial institutions and lenders that I want to address my remarks.

We are living in challenging times: In housing we have record waiting lists, high levels of homelessness and a real problem of affordability. You in the financial community also have your own woes. Who would have believed that the securitisation of United States sub-prime debt could have such devastating effects worldwide? Hopefully the worst of that is over.

Indeed I recently asked one senior Dublin financier if his bank had been badly exposed to the sub-prime crisis. And he replied gleefully. “Oh God, No! None of our guys were sophisticated enough to be that stupid!”

So we appear to have avoided calamity in this part of the world – at least in Ireland - but I know there is still the huge issue of confidence which in turn impacts on liquidity.

However the banks still have options in this difficult time. More so than many of their borrowers. And it is the problems facing ordinary families and communities that really concern me at this time.

For many people, life is increasingly a struggle to make ends meet.

Last week we heard that Electricity prices here will rise by over 30%. We have record price rises in domestic heating bills and is it just me, or does it seems that if you want to fill your car up with petrol, or worse still diesel, these days, you nearly need a mortgage to do so!

Against this backdrop, it is hardly surprising that many people here have simply found it impossible to keep their heads above water. We see evidence of this through the increasing numbers of families now threatened by repossession.

In the first quarter of this year alone, there was a 33% increase in repossession orders here, and there is no sign of the situation easing. In the coming months, more and more of your customers are going to come knocking on your door, asking you to help them through these difficult times.

Today I want to appeal to you on behalf of those numerous home-owners who will undoubtedly default in the coming months; please be patient, please be understanding, take a long term approach and work with me to bring about solutions that may be less attractive to you in the short term, but may ultimately benefit you, your companies and society as a whole in the long-term.

I know that many lenders already offer a variety of choices for those who are struggling to meet repayments. But we need to find ever more flexible solutions. You are obviously seeing more and more default cases before you. There are undoubtedly more to come.

Repossession must be your tool of last resort, not the path of least resistance.

I know, looking across this room today, I may be preaching, largely, to the converted. But we can not escape the fact that our increasing number of repossession orders is in no small way attributable to those lenders, particularly sub-prime lenders, who encouraged borrowing beyond affordability.

Their irresponsible lending of yesterday has helped create the record levels of repossession today.

But I am not here today to ask you to do something that I am not prepared to match myself. Quite literally, I am prepared to put my money where my mouth is.

Back in February, when I unveiled the New Housing Agenda for Northern Ireland, I announced plans to bring forward a not-for-profit Mortgage Rescue Scheme, designed specifically to help those in danger of falling off the housing ladder. Yesterday in a very timely debate in the Assembly I confirmed that I was planning to bring in two specific schemes, developed exclusively to meet the needs of the housing market here.

Firstly I will bring forward a Mortgage to Rent scheme for those home owners who can simply no longer afford to make their repayments to you.

We will use our Housing Associations to buy these properties and then lease them back to the former owners, allowing them to remain in the family home with security of tenure and an affordable rent to pay.

For others with perhaps a much smaller outstanding mortgage who have fallen on equally hard times I will introduce a second option in the form of reverse stair-casing. Once again a Housing Association will be invited to buy out the outstanding mortgage, converting it to an affordable rent based on the proportion of the outstanding balance against the overall value of the home.

Both of these options will allow families to remain in their homes, beside their neighbours, close to schools, extended families, avoiding the often hidden social and economic costs that society must pay when these families become homeless and turn to the state for re-housing.

But this is just one aspect of what our Mortgage Rescue Scheme will seek to deliver.

For those who fall behind in their mortgage, the best way to avoid a repossession order is to seek help and get advice sooner rather than later. The earlier advice is sought, the more solutions there can be. That is why I will be insisting that all applicants for our Mortgage Rescue Scheme must seek specialist advice that is already offered freely across a range of advice providers here.

And that is where you can play a pivotal role. Our Housing Rights Service already have very good relationships with many of the leading High Street Banks and Lenders here. I will be asking organisations like Housing Rights, to work with you and your customers to seek even more imaginative, creative and innovative solutions that stop short of repossession action.

I would also ask you to look again at the way you communicate with your customers, particularly when the issue of default first arises. It is vital that your customers know that help is available and I am sure that more can be done to make this early correspondence shall I say, more user friendly. Again I am encouraged by the discussions the Council has already had with my officials and Housing Rights in this regard and I would like to see this dialogue continue.

I have become increasingly concerned at reports of private companies who offer their own ‘sale and rent back scheme’. These schemes may be helpful for some clients, but frankly I am concerned that consumers are not being given the opportunity to make well informed choices.

I know that many of you here today, including the Council, have had similar concerns. The Office of Fair Trading is currently looking into these transactions, but in bringing forward our own not for profit scheme, we may be able to do better than that and remove the vacuum that currently exists for them to operate so freely within.

Mr Chairman, I am due back in the Assembly this afternoon so my apologies that I will be leaving you during lunch. I am determined however to delay my departure as long as possible as I see that our main course is ‘a rack of Mourne lamb’ from the very heart of my own constituency. So Trevor, my thanks and compliments to the Council of Mortgage Lenders Northern Ireland not just for the invitation here today, but for the fine choice of cuisine which, I now intend to give you time to properly enjoy.

Thank you