Dáil Éireann Debate, Tuesday - 21 May 2013
121. Deputy Pearse Doherty asked the Minister for Finance his views on the use of split mortgages as a tool in dealing with mortgage arrears; and if certain banks here are implementing them in a fair and sustainable way. [23941/13]
View answerThe Central Bank has advised that a number of longer term forbearance/modification arrangements have been introduced by mortgage lenders. These arrangements include mortgage to rent, trade down mortgages, equity participation, interest rate reduction, sale by agreement, and split mortgages. I have been informed by the Central Bank of Ireland that the majority of lenders have introduced, or are in the process of introducing, a split mortgage arrangement. A split mortgage warehouses a part of what remains unamortised from the initial capital sum in what can be called "Part B" of the loan. The Part B is not serviced unless the borrower's financial position improves significantly in the future, in which case the split is revised in line with the new circumstances - with the provision that, in order to preserve incentives, only a fraction of the new resources are applied to the loan. The maximum amount that can be warehoused is dependent on each lender’s own internal criteria. The split mortgage, like all other forbearance and modification arrangements, is based on affordability and sustainability of the arrangement from both the borrower’s and the lender’s perspective and is one of the key measures being introduced by lenders in assisting their distressed borrowers. All of the products offered by the banks have been prepared in the context of the Central Bank’s Mortgage Arrears Resolution Strategy.
As the Deputy will be aware, in the context of the performance targets set by the Central Bank for borrowers in arrears over 90 days, lenders will have to satisfy the Central Bank as to the sustainability and affordability of long term solutions offered given that the Central Bank will be conducting a supervisory audit of compliance with the targets including thorough analysis of sample modifications offered by the institutions.
