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FF finance spokesman Micheál McGrath said banks retain an effective veto on whether a struggling borrower can enter an insolvency regime. Mark Stedman/Photocall Ireland

FF publishes bill to remove bank veto from insolvency regime

Fianna Fáil’s legislation would also create an independent Mortgage Resolution Office with the power to make binding orders.

FIANNA FÁIL HAS published legislation which would remove the ability of banks to put a veto on the new personal insolvency regime.

The party has this afternoon released the Mortgage Resolution Bill 2013, which – if enacted – would change the current rules which require a majority of creditors to approve a person’s entry to the new system.

Opposition parties have previously complained that the rules mean that people who are burdened with high mortgage debts are effectively barred from entering the insolvency process if their bank, which accounts for most of their debts, disapproves of it.

The bill would also create a new Mortgage Resolution Office which would have the power to issue binding orders to lower interest rates, extend the repayment period by up to 20 years, enforce a repayment ‘holiday’, defer part of the loan for up to 10 years, or to lease a home back to its occupiers at market rates.

“One of the biggest barriers to growth and recovery in Ireland is the number of families and communities struggling under the weight of unsustainable mortgage debt,” said FF’s finance spokesman Michael McGrath.

“Legislators have a responsibility to come forward with a response to this crisis which does not put the banks in control.”

Other orders could be issued to demand interest-only repayments for up to four years, swap part of the debt for a stake in the house, or participate in a deferred interest scheme.

“We believe that there is a fairer way to recovery and that our plans on restoring balance to the relationship between banks and their customers could and should be an important step in that process,” McGrath said.

The bill is likely to be rejected by the government, which has denied that banks have a veto under the current system – which has not fully entered law yet – and which claims that the Central Bank will have adequate supervisory powers in its new mortgage arrears resolution process.

Read: Mortgage write-offs ‘could be subject to 33pc tax’

More: Bruton: No ‘global strategy’ for telling homes how to make deals with banks

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