Dáil Éireann Debate, Tuesday - 18 February 2014
196. Deputy Michael McGrath asked the Minister for Finance if he will provide information on the Central Bank guidance or rules governing the split mortgage sustainable solution to a mortgage arrears problem; and if he will make a statement on the matter. [8037/14]
View answer236. Deputy Michael McGrath asked the Minister for Finance based on the latest information available to his Department, if he will confirm, for each bank separately, the number of split mortgage arrangements currently in place between banks and mortgage holders; the total amount of mortgage debt that has been warehoused under the arrangement; and if he will make a statement on the matter. [8288/14]
View answerI propose to take Questions Nos. 196 and 236 together.
The Central Bank has informed me that in 2013, it shared its internal guidelines ("the Guidelines") on Sustainable Mortgage Solutions with the banks. These have also been published on the Central Bank's website, see (http://www.centralbank.ie/regulation/industry-sectors/credit-institutions/Documents/Internal%20Guideline%20-%20Sustainable%20Mortgage%20Arrears%20Solutions.pdf). The Guidelines, which are subject to change, do not impose formal requirements on the banks. However, they do provide insights into how the Central Bank will judge the sustainability of solutions being offered by the banks. These Guidelines operate in conjunction with the principles set out in the Central Bank's Mortgage Arrears Targets (MART) paper.
The Central Bank has also advised me that central to determining the sustainability of any mortgage restructuring solution is assessing borrower's current and future affordability. The solution offered to the borrower must take into account their individual circumstances, and comply with the policies and procedures of that institution, as well as the consumer protection framework including the Consumer Protection Code and the Code of Conduct on Mortgage Arrears ('CCMA').
Specifically with regard to spilt mortgages, Section 2.5 of the Guidelines outlines the Central Bank's views on the key characteristics the Central Bank would expect to see in a split mortgage, and focusing on:
- Treatment of the base loan of a split mortgage;
- Treatment of future increase of income; and
- Treatment of term of warehoused part of split mortgage.
The Central Bank's MART audits examine the banks' processes of determining and proposing sustainable solutions against the Central Bank's sustainability guidelines.
The Deputy may also wish to note that my Department has requested the six main banks operating in Ireland, and who fall within the Central Bank Mortgage Arrears Resolution Targets (MART) process, to provide data on the restructuring situation in relation to all primary dwelling mortgages, both in arrears and not in arrears, on a monthly basis. This process is separate from the Central Bank quarterly data collection and publication process and is intended to provide certain data on the level of mortgage restructures on a more timely basis. It should be noted that these are voluntary and unaudited returns by the relevant banks, and given the short timeframe in which the lenders provide this information to my Department and more frequent reporting requirements, they have not gone through the lender's quality control process for regulatory return purposes. However, it is considered to be a desirable development to place more timely and frequent mortgage restructuring data into the public domain.
The latest mortgage arrears and restructures data published by my Department for the period ending December 2013 shows that the lenders have 6,239 split mortgages for principal dwelling houses in place. My Department publishes the number of split mortgages in aggregate format and not on an individual bank basis and does not collect data on the amount of mortgage debt warehoused as requested by the Deputy.
Early and effective engagement between borrowers and lenders is key to resolving cases of mortgage difficulty. Where there is effective and meaningful engagement regarding a mortgage difficulty, the data shows that an increasing number of durable long term mortgage restructures is being put in place.
