Dáil Éireann Debate, Tuesday - 23 October 2012
442. Deputy Catherine Murphy asked the Minister for the Environment, Community and Local Government his plans to allow those on shared ownership loans to switch to annuity or other similar loans; and if he will make a statement on the matter. [46461/12]
View answerLocal authorities have long been the lenders of last resort servicing the housing loans needs of less affluent members of society. In the present economic circumstances, it is to be anticipated that the ability of some borrowers to service housing loans may become restricted and that a number of loans may fall into arrears. Section 34 of the Housing (Miscellaneous Provisions) Act 2009 provides local authorities with powers to deal flexibly with distressed borrowers. They have demonstrated sensitivity over the years in dealing with such cases. In March 2010, my Department issued guidelines to local authorities, based on the Central Bank’s first Code of Conduct on Mortgage Arrears, which continued the tradition of handling arrears in a manner that is sympathetic to the needs of the particular household, while also protecting the position of the local authority concerned.
To reflect the content of the Central Bank’s revised Code of Conduct, which replaced the previous code from 1 January 2011 and was informed by the deliberations of the Expert Group on Mortgage Arrears and Personal Debt, my Department issued updated guidance in July 2012 to local authorities in consultation with the County and City Managers Association. This will further enable local authorities to provide a range of flexible repayment options for households in difficulty. In particular, the introduction of a Mortgage Arrears Resolution Process (MARP), which closely mirrors the suite of options available in the commercial sector, will present borrowers in difficulty with a range of alternative payment agreements, which can be accessed to ease the particular circumstances of each case. This process will feature a standard set of options including, in cases of certain unsustainable mortgages, the facility of mortgage-to-rent. Local authorities have been restructuring loans for some time using their own internal practices. The introduction of these revised guidelines will standardise the approach across the whole sector, introduce a systematic structure to this area and provide borrowers with a transparent and accessible model for arrears resolution. I expect that the adoption of these revised guidelines will serve simultaneously to help resolve mortgage difficulties for both local authorities and their borrowers.
In relation to the Shared Ownership Scheme specifically, the rent charged on the local authority’s equity in a shared ownership transaction is to cover the funding costs to the Housing Finance Agency which are based on borrowings at the prevailing interest rates. Any difference between the rent and prevailing interest rate is reflected in the capital outstanding on the property, i.e. if the rent charged in any period is greater than the prevailing mortgage interest due on the local authority’s share the purchase price of the outstanding equity will be reduced accordingly. To take account of the current housing market conditions, the Government's housing policy statement, published in June 2011, announced the standing down of all affordable housing schemes, including the shared ownership scheme, in the context of a full review of Part V of the Planning and Development Act 2000. That review is now under way and is expected to conclude later in the year. Any future changes to legislation governing affordable housing schemes, including shared ownership, will be informed by that review.
