Dáil Éireann Debate, Tuesday - 8 October 2013
174. Deputy Noel Grealish asked the Minister for Finance if the general age limit for reaching the end of sustainable insolvency arrangements for a person is pegged at 70 years; if that is the case, his view regarding mortgages issued to persons which do not expire until their mid-70s or later, but which have fallen into arrears; and if he will make a statement on the matter. [42171/13]
View answerAs outlined in the Central Bank of Ireland’s Sustainable Mortgage Arrears Solution Guidelines; “An overall ceiling of 70 years of age will apply for the Central Bank to consider a term extension sustainable unless there is firm evidence that an older age limit can apply”. The Central Bank has informed me that this requirement does not prevent solutions being offered where it can be demonstrated that there is a clear rationale to extend payments beyond age 70. In general, however most borrowers can expect income levels to drop at retirement. In determining whether a proposal constitutes a sustainable solution, the Central Bank has informed me that the lender will need to evaluate both actual and prospective affordability for the distressed borrower, as well as the capital implications for the credit institutions in terms of their prudential responsibility to minimise losses.
While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, there are some fundamental principles that must be respected. These include: An affordability assessment of the borrower based on both their current and prospective future servicing capacity for all borrowings; A realistic valuation of the borrower’s assets, in particular their property, and the use of an appropriate interest rate when discounting future income flows, which should take account of the lender’s cost of funds. The Central Bank has advised that its supervisory audit of compliance with these principles, to be completed in November, will assess compliance with these principles, including through analysis of a sample of modifications.
