Amendment No. 266 is related to amendment No. 265 and both may be taken together, by agreement. Is that agreed? Agreed.
SECTION 100.
I move amendment No. 265:
In page 55, subsection (1), to delete line 27, and substitute the following:
"furnished by the mortgage lender with a copy of the report (‘valuation report') made to the mortgage lender on".
The purpose of this amendment is for clarity in drafting to clearly identify the valuation report as the report which the mortgage lender should give to the borrower. The effect of the amendment is to remove the word "any" before "reported" and to substitute "by the mortgage lender with a copy of the report (‘valuation report')". This section requires that a copy of the report on the valuation for the house which has been carried out by the mortgage lender be given to the borrower regardless of whether the loan application is approved or rejected by the lender.
A similar requirement applies at present to building societies by virtue of article 6 of the 1987 regulations. The report referred to in this subsection is that which societies are required to have under section 25 of the Building Societies Act.
Are we saying that if a mortgage lender sought additional advice which he is not statutorily required to obtain——
No, it is the valuation. It is to identify what we are talking about, which is the valuation report, as that which the mortgage lender should give to the borrower.
What reports are not being given to the borrower?
It is not what we are not giving, it is what we are giving, which is the valuation report. We wanted to make that clear and a copy of the report must be given to the applicant, whether the application is approved or not.
Perhaps it is just my suspicious mind but when we remove the "any" it suggests that there is some other secret report that will not be released.
I do not know what other reports one would seek. The main report is the valuation report — one would hardly be reporting on the borrower's lifestyle habits. This is to remove the ambiguity of the word "any" and to focus on exactly what report is referred to in the section — the valuation report.
One would expect this valuation report to be carried out by a professional valuer, and one would be entitled to a copy of that report——
Yes, on the house that one had intended to purchase or for which one made an application.
A borrower who receives that document may have the view that it entitles them later on to——
Claim against a council?
Yes. This has always been a problem where such information was imparted to a borrower by a lender and it stated the valuation, and it was subsequently found that the property was in some way defective. Immediately the lender would pull in its horns, maintain it got the report for its own purposes and that it does not confer any statutory entitlement or protection. The lender has to get their own valuation done.
The local authorities encourage people to employ a surveyor or engineer and get their own findings on the house.
What was the reason for saying to the lender that they must give a copy of the report to the borrower?
I do not see the value of it but it aids transparency. Some consumers might ask if they were turned down because of the valuation. I do not see the condition of its being provided in all cases being needed all that much. One would not, in the main, be turned down because of the valuation but because of personal probity or financial standing. We were encouraged to think that it would be useful in the cause of transparency.
Does the Minister not think it might be necessary, perhaps on Report Stage, to go a little further and request the lender to point out that the report does not entitle the person to make a claim based on the report?
That is a fair point. We are aware that a valuation does not confer any such entitlement although many people innocently might think that the valuation provides them with the bona fides to take a case against the building society should something happen to their houses. Local authorities point out in their loan applications — as I am sure is the case with building societies — that the valuation is not such a guarantee and that the purchaser should seek another opinion. Caveat emptor applies. There is something to be said for making it mandatory to point that out.
That is what I am seeking.
The following clause is included in this section:
There shall be attached to or included in every valuation report furnished to an applicant in accordance with this section a note stating clearly the nature and purpose of the report.
Perhaps that could be strengthened by regulation. I have encountered many sad cases where people have purchased, through local authorities or building societies, houses with flat roofed extensions for quite high prices. Subsequently the roof collapsed or fell away from the main building — and flat roofs are notorious in that regard — and the purchasers protested that they had a valuation report. It is not sufficiently well known that the valuation report is made to cover the lender and not to facilitate an action that might be taken by the purchaser. I will see if we can strengthen that provision through wording or by regulation.
Deputy Flood's suggestion is good. However, the new provision reads that where a mortgage lender refuses to make a housing loan he shall furnish the valuation report. In many cases a mortgage lender does not refuse a loan.
Because of the valuation report?
Valuation reports might never have been sought or obtained.
Obviously this will apply only if it has been sought.
That is not altogether clear. The old provision which said "any report" suggested that if no report had been sought it would not be furnished. Perhaps that was the reason for the use of "any". Now it reads that if one is refused on grounds of income the mortgage lender still must provide a valuation report.
That is the point I made to Deputy Flood. Applicants are refused most often because they simply would be unable to make the repayments.
I will be frank in saying that I do not see great value in what I have put forward. However, we have been encouraged to think that it will facilitate more openness. The debate on the matter has given rise to the excellent point made by Deputy Flood so it has served its purpose.
I presume — although it is not clear from the new drafting — that a mortgage lender is not obliged to produce a valuation report for every refusal.
No, only where a valuation report was sought and obtained.
That is not clear in the section.
We will see if that can be rectified.
Amendment agreed to.
I move amendment No. 266:
In page 55, lines 29 to 31, to delete subsection (2) and substitute the following:
"(2) The mortgage lender shall attach to or include in every valuation report furnished to an applicant in accordance with subsection (1) a note stating clearly the nature and purpose of the report.
(3) There shall be no charge made to the applicant for a valuation report if the loan application is refused.".
Amendment agreed to.
Section 100, as amended, agreed to.