Tuesday, 27 May 2014

Questions (123)

Michael McCarthy

Question:

123. Deputy Michael McCarthy asked the Minister for Finance the supports available for mortgage holders whose life assurance or mortgage protection policy might have lapsed due to illness or unemployment; the responsibility banks have in this regard; if there is a duty of care to ensure that customers have sufficient policies in place to cover the value of mortgages; if they are required to ensure that customers are made aware of the risks of falling into arrears on their insurance policy; and if he will make a statement on the matter. [22744/14]

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Written answers (Question to Finance)

I have been advised by the Central Bank that Section 126 of the Consumer Credit Act 1995 requires that, subject to certain exemptions set out in the Act, a mortgage lender shall arrange a life assurance policy providing, in the event of the death of a borrower before a housing loan made by the mortgage lender has been repaid, for payment of a sum equal to the amount of the principal estimated by the mortgage lender to be outstanding in the year in which the death occurs on the basis that payments have been made by the borrower in accordance with the mortgage.

In the case of mortgages in arrears, under Provision 42 of the Code of Conduct on Mortgage Arrears, where an alternative repayment arrangement is offered by a lender, the lender must provide the borrower with a written explanation of how the alternative repayment arrangement works including a statement that the alternative repayment arrangement may impact on the borrower's mortgage protection cover.  In addition, the terms and conditions of the relevant mortgage contract(s) may set out any obligations of a borrower in this regard. I would advise anyone whose financial situation puts insurance policies in jeopardy to seek the advice of the Money Advice and Budgeting Service.