Written Answers Nos. 126-145
126. Deputy Thomas P. Broughan asked the Minister for Finance the discussions taking place with partially State-owned banks regarding the sale of non-performing loans to vulture funds; the criteria being used to decide on the make up of the portfolios; and if he will make a statement on the matter. [36133/18]
View answer130. Deputy Thomas P. Broughan asked the Minister for Finance the level of interaction he has with the CEOs of the various partially State-owned banks and the non-performing loans of each; and if he will make a statement on the matter. [36137/18]
View answerI propose to take Questions Nos. 126 and 130 together.
In the first instance, I should highlight for the Deputy that in my role as Minister for Finance, I cannot stop loan sales even by the banks in which the State has a shareholding. Decisions in this regard, as well as the criteria used to decide the make-up of loans to be included, are the sole responsibility of the board and management of the banks which must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents that I cannot change unilaterally. These frameworks which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
Despite the significant progress already made by the Irish banks in reducing NPLs, their ratios are still well above the European average of around 4%. PTSB is a particular outlier in this regard with a ratio of 25%, before the recently announced loan sale – Project Glas. Given this position, banking regulators have tasked each bank with developing and implementing strategies with the expectation that their ratios will be reduced towards the European average. Given the sale of reduction required, it was inevitable though unfortunate, that Project Glas was a necessary action taken by PTSB.
Notwithstanding a loan sale, I wish to highlight that the protections for borrowers in place before the sale remain unchanged. In this regard, it is important to note that there are no changes to the rights of a borrower whose loan is sold by a bank. All terms and conditions attached to their mortgage contract remain in place. In addition, Start Mortgages, the purchaser of the PTSB loan book, is a retail credit firm regulated by the Central Bank of Ireland since 2008. When dealing with borrowers, retail credit firms are bound by the same regulations that currently apply to PTSB. Like PTSB, they are required to comply with the Consumer Protection Code (CPC) and the Code of Conduct for Mortgage Arrears (CCMA) when dealing with borrowers who are in arrears.
I should also highlight that regardless of the protections that are currently in place for mortgage holders, I am prepared to engage with Deputies from other parties in an effort to see if these protections can be strengthened further in a sensible manner. This commitment has been demonstrated recently by the Government’s support for the Bill introduced by Deputy Michael McGrath, T.D., which seeks to regulate the purchasers of mortgage loans.
In addition, earlier this year I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible. I have asked for the report to be completed as soon as is practicable. The Central Bank has stated that it is their intention to deliver the report by the end of September 2018. If as a result of this review, the CCMA requires amendment, a full public consultation process would be required in line with normal guidelines.
The interaction between both Department officials and myself and senior management of the banks in which the State has an investment takes place on a regular basis. As part of their ongoing engagement with the banks, Department officials meet with bank management during which a wide range of topics are discussed, including loan sales where relevant. Subsequent to these meetings, Department officials brief me as required. In addition to these meetings, I meet directly with the CEOs of each of the banks from time to time and loan sales would be included as an agenda item again where relevant.
127. Deputy Thomas P. Broughan asked the Minister for Finance his views on the inclusion of split mortgages in bank sales of non-performing loans to vulture funds; his further views on the inclusion of mortgages of families who are engaging and meeting their arrears arrangements in bank sales of non-performing loans to vulture funds; the measures he is taking to protect these owner occupier mortgages; and if he will make a statement on the matter. [36134/18]
View answerSince the establishment of the Single Supervisory Mechanism (SSM) in November 2014, the focus has shifted from reducing mortgage arrears levels to reducing Non-performing Loans (NPLs). This shift in focus has been accompanied by a new strict Europe-wide definition of what constitutes an NPL by the European Banking Authority (EBA), which means that certain restructures are deemed NPL even if customers are meeting the revised payment schedule.
Officials in my Department met with staff of the SSM at the highest level on two occasions since late 2016. I also met Ms Nouy, Chair of the Supervisory Board of the ECB. In the course of these discussions, my officials outlined the background and history to the restructuring effort in Ireland and made the case against continuing to classify some types of restructured loans, including certain split mortgages, as NPLs. While we have been informed that the SSM is looking into the regulatory treatment of split mortgages across a number of European member states I have no evidence at this point that this categorisation is going to change.
Dealing specifically with Deputy Broughan’s question about the inclusion of these split mortgages in bank sales, the Deputy will be aware that when PTSB first announced Project Glas - its planned sale of NPLs – back in February, the bank confirmed that loans which were restructured by way of a split mortgage were within the scope of the overall portfolio being considered for sale. However, the bank subsequently announced in May that it had withdrawn approximately €0.9bn of principal dwelling houses (PDHs) split mortgages from the sale where borrowers were meeting the terms agreed with the bank. The removal of these restructured loans from the sale was a positive outcome for the borrowers which I welcomed.
In terms of restructured loans that are performing being included in loan sales, most loan agreements include a clause that allows the original lender to sell the loan on to another firm. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. Under the 2015 Act, if the firm who bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank. Credit Servicing Firms are firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.
Credit servicing firms must act in accordance with the requirements of Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank such as the Consumer Protection Code 2012, Code of Conduct on Mortgage Arrears 2013, and the SME Regulations. Contractual terms are not changed by the sale of the loan.
Provision 3.11 of the Central Bank’s Consumer Protection Code 2012 (the Code) requires that, where a regulated lender intends to transfer all or part of its ‘regulated activities’ to another regulated entity, it must provide advance notification to both the Central Bank and affected consumers. Specifically, a lender must provide a consumer with at least 2 months’ notice before transferring all or part of its loan book covered by the Code to another person, including where the transferee is an unregulated entity. Where the transferee is an unregulated entity, the Code requires that the regulated lender also notify the consumer of the name of the regulated entity that will be ‘servicing’ the loan for the unregulated entity. In the event that there is a change in the credit servicing firm, the existing credit servicing firm must also notify the Central Bank and the consumer in advance, in accordance with the timelines set out under Provision 3.11 of the Code. Furthermore, I understand that the Central Bank expects all affected consumers to be informed of the term of their loan agreement which allows the loan to be sold and the identity and address of the new owner.
The Deputy will be aware that a Private Member’s Bill now titled the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2018 was considered by Select committee on 12 July. My officials worked with Deputy McGrath and other stakeholders to develop the Bill as initiated. This Bill will require that loan owners are regulated by the Central Bank. I expect that Report Stage will be taken after the summer recess.
I have also asked the Central Bank to carry out a review of the Code of Conduct on Mortgage Arrears (CCMA) to ensure it remains effective and for the review to be completed as soon as possible.
Ensuring that the interests of consumers of financial services are protected is a key priority for the Government and the Central Bank.
128. Deputy Thomas P. Broughan asked the Minister for Finance if he has requested a report on the number of owner occupier mortgages of a bank (details supplied) that were included in a project in cases in which mortgage holders have been engaging with the bank and meeting the arrangements for repayments and arrears; and if he will make a statement on the matter. [36135/18]
View answer129. Deputy Thomas P. Broughan asked the Minister for Finance the number of non-owner occupier mortgages that are accommodating tenants in the private rented sector that have been sold by a bank (details supplied) to a company; and if he will make a statement on the matter. [36136/18]
View answer131. Deputy Thomas P. Broughan asked the Minister for Finance the number of non-owner occupier mortgages being sold by a bank (details supplied) that are accommodating tenants in the private rented sector and are in receipt of housing assistance payments, HAP, rent supplement, RS, and rental accommodation scheme, RAS, payments; and if he will make a statement on the matter. [36138/18]
View answerI propose to take Questions Nos. 128, 129 and 131 together.
As the Deputy will be aware the decisions around loan sales are the responsibility of the board and management of the banks which must be run on an independent and commercial basis. The Minister for Finance cannot stop loan sales, even by the banks in which the State has a shareholding.
I wish to advise the Deputy that while my department has had a number of interactions with PTSB in connection with the sale, it does not hold the specific information that is being sought. Officials from my department contacted PTSB and they provided the following response:
"Permanent TSB plc (the ‘Bank’) has agreed to sell a Non-Performing Loan portfolio to the retail credit firm Start Mortgages DAC, supported by LSF Irish Holdings 97 DAC, both affiliates of the Lone Star Funds. Start Mortgages has been authorised by the Central Bank of Ireland since November 2008 and will become the servicer of the loans when the transaction completes later this year.
The loan sale was undertaken as part of the Bank’s strategy to reduce the ratio of Non-Performing Loans on the Bank’s balance sheet from c.26% in line with regulatory requirements.
The portfolio contains loans linked to c.10,700 properties. In terms of the make-up of the portfolio by loan type (Variable, Fixed, Tracker), the book broadly reflects the make-up of the Bank’s overall loan book.
The loan sale includes circa 3,300 Buy-To-Let (BTL) properties which are classified as Non-Performing reflecting the Non-Performing Classification guidelines set out by European and Local Regulators. Comprehensive occupancy information on this BTL population is not available.
All loans included in the sale are either Non-Performing or are cross-collateralised/connected to another loan which is Non-Performing, reflecting the Non-Performing Classification guidelines set out by European and Local Regulators. Customers will continue to be afforded the protection of existing regulatory protections after the transfer completes."
132. Deputy Michael McGrath asked the Minister for Finance the number of mortgages set to be sold by a bank (details supplied) as part of a project; the number of loans that are standard, variable, fixed rate and tracker mortgages; the number in each category that are performing; the number in each category that are adhering to the restructuring arrangement in tabular form; and if he will make a statement on the matter. [36145/18]
View answer140. Deputy Catherine Murphy asked the Minister for Finance the number of loans sold by a bank (details supplied) to companies that were categorised as tracker mortgage products; and if he will make a statement on the matter. [36324/18]
View answerI propose to take Questions Nos. 132 and 140 together.
As the Deputy will be aware the decisions around loan sales are the responsibility of the board and management of the banks which must be run on an independent and commercial basis. The Minister for Finance cannot stop loan sales, even by the banks in which the State has a shareholding.
I wish to advise the Deputy that my department does not hold the information that is being sought. Officials from my department contacted PTSB and it provided the following response:
"Permanent TSB plc (the ‘Bank’) has agreed to sell a Non-Performing Loan portfolio to the retail credit firm Start Mortgages DAC, supported by LSF Irish Holdings 97 DAC, both affiliates of the Lone Star Funds. Start Mortgages has been authorised by the Central Bank of Ireland since November 2008 and will become the servicer of the loans when the transaction completes later this year.
The loan sale was undertaken as part of the Bank’s strategy to reduce the ratio of Non-Performing Loans on the Bank’s balance sheet from c.26% in line with regulatory requirements.
The portfolio contains loans linked to c.10,700 properties. In terms of the make-up of the portfolio by loan type (Variable, Fixed, Tracker), the book broadly reflects the make-up of the Bank’s overall loan book.
All loans included in the sale are either Non-Performing or are cross-collateralised/connected to another loan which is Non-Performing, reflecting the Non-Performing Classification guidelines set out by European and Local Regulators.
Customers will continue to be afforded the protection of existing regulatory protections after the transfer completes."
133. Deputy Catherine Murphy asked the Minister for Finance if his attention has been drawn to issues raised in correspondence by a person (details supplied); and if he will make a statement on the matter. [36172/18]
View answerI can confirm for the Deputy that the matter referred to has been drawn to my attention and a response has now been issued.
134. Deputy Jackie Cahill asked the Minister for Finance if the case of a person (details supplied) who was an employee of ESB and received a settlement from it in 2009 will be investigated; and if he will make a statement on the matter. [36184/18]
View answerRevenue has advised me that a review of the case in question is already under way and will be concluded as quickly as possible.
Once the review is completed Revenue will make direct contact with the person setting out the correct tax position. Revenue has assured me that any refund due to the person arising from the review will be immediately processed.
135. Deputy Jackie Cahill asked the Minister for Finance the reason the Revenue Commissioners valued a second-hand vehicle purchased by a person (details supplied) for €4,000 at €16,719 and applied VRT of €5,979; and if he will make a statement on the matter. [36185/18]
View answerI am advised by Revenue that the difficulty in the case to which the Deputy is referring arose because the person in question incorrectly informed Revenue that the vehicle had been converted from a goods vehicle to a passenger vehicle thereby generating a liability to Vehicle Registration Tax (VRT).
Revenue subsequently made direct contact with the person who confirmed that his concerns related to motor tax and the incorrect classification of the vehicle. He also confirmed that no vehicle conversion had taken place. On foot of these clarifications, Revenue confirmed to the person that there was no VRT due, and no payment was made.
136. Deputy Sean Sherlock asked the Minister for Finance the reason areas (details supplied) are being charged flood insurance premiums for parts of the area in question that have never flooded. [36189/18]
View answerAt the outset you should be aware that the provision of insurance is a commercial matter for insurance companies, which has to be based on a proper assessment of the risks they are willing to accept. This assessment will in many cases include insurers own presumptions based on their private modelling and research. Consequently, neither the Government nor the Central Bank can interfere in the provision or pricing of insurance products or have the power to direct insurance companies to provide flood cover to specific individuals or businesses. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from doing so. Therefore I am not in a position to give a reason as to why an extra flood premium charge is being applied to the area in question, but I do understand that flood defences are been improved in that region and could in time have a positive impact on premiums in the future.
However, you should be aware that a consumer can make a complaint to the Financial Services Ombudsman in relation to any dealings with a Financial Services or Insurance provider during which they feel they have been unfairly treated. In addition, individuals who are experiencing difficulty in obtaining flood insurance or believe that they are being treated unfairly may contact Insurance Ireland which operates a free Insurance Information Service for those who have queries, complaints or difficulties in relation to insurance.
137. Deputy Catherine Murphy asked the Minister for Finance the amount of VAT foregone by the Revenue Commissioners at the 9% rate for each year and to date in 2018 since the rate was introduced; the amount collected in tabular form; and if he will make a statement on the matter. [36196/18]
View answer157. Deputy Richard Boyd Barrett asked the Minister for Finance the amount of revenue foregone each year by maintaining the 9% VAT rate for the hospitality sector; and if he will make a statement on the matter. [36592/18]
View answerI propose to take Questions Nos. 137 and 157 together.
I am advised by the Revenue Commissioners that information provided on VAT3 returns (the primary return filed by VAT traders) does not require a trader to separately identify the yield from specific rates. Based on Revenue data and other third-party data sources, a tentative estimate of the VAT foregone for all goods and services supplied at the second reduced rate of 9% from 2011 to 2017 is provided in the table (an estimate for 2018 to date is not presently available).
|
Year |
VAT Foregone |
|
2011 |
€150m |
|
2012 |
€315m |
|
2013 |
€355m |
|
2014 |
€375m |
|
2015 |
€420m |
|
2016 |
€460m |
|
2017 |
€490m |
As additional information becomes available, these estimates may be subject to revision.
138. Deputy Eoin Ó Broin asked the Minister for Finance the status of work with the credit unions and the approved housing bodies on the establishment of a special purpose vehicle to facilitate the delivery of social housing. [36300/18]
View answer187. Deputy Joan Burton asked the Minister for Finance the work his Department has carried out with the Department of Housing, Planning and Local Government and the Central Bank regarding the establishment of a funding vehicle for credit unions to invest in social housing provision as committed to by the Government under Rebuilding Ireland; if his attention has been drawn to the fact that such a funding vehicle will have to be regulated by the Central Bank and that the Department of Housing, Planning and Local Government may require assistance if ensuring such a funding vehicle for social housing is compatible with Central Bank of Ireland, CBI, regulations; and if he will make a statement on the matter. [36960/18]
View answerI propose to take Questions Nos. 138 and 187 together.
As the Deputy is aware, the Programme for a Partnership Government recognises the potential role that credit unions can play in housing finance.
To that end, officials from my Department and the Department of Housing, Planning and Local Government have met with the credit union representative bodies on a number of occasions to examine how credit unions can assist in the area of social housing.
Following engagement with the credit union sector on proposals for credit unions to provide funding for the provision of social housing, the Central Bank undertook a review of the investment framework for credit unions in 2017. On foot of this review, revised Regulations with the addition of investment in Tier 3 Approved Housing Bodies (AHBs) as a permitted investment class for credit unions commenced on 1 March 2018. Since this date, credit unions are permitted to provide funding to Tier 3 AHBs for the provision of social housing.
This new investment framework for credit unions clarifies the scope and the manner in which credit unions can support the development of social housing. The Regulations require that investments by credit unions in Tier 3 AHBs must be made through a regulated investment vehicle. The maximum permitted investment amount per credit union is 50% of a credit unions regulatory reserves where a credit union has total assets of at least €100 million and 25% of a credit unions regulatory reserves for all other credit unions. These limits may facilitate a combined sector investment in Tier 3 AHBs of close to €700 million.
In line with the commitments in the Rebuilding Ireland Action Plan for Housing and Homelessness, the Department of Housing, Planning and Local Government established an Innovation Fund to assist AHBs to develop structures, policies and new funding mechanisms. One of the projects being funded, which is being undertaken by the Irish Council for Social Housing (ICSH), is the development of a Special Purpose Vehicle to facilitate investment into the AHB sector by investors, including the Credit Union movement. The project was approved in May last year and is being undertaken by the ICSH in three phases. The first two phases have been completed and work on the third phase is ongoing.
With respect to any funding mechanisms specific to the Credit Union sector for investing in social housing, ultimately this will have to be put in place in the first instance by the credit unions themselves, with the support of their members, and with the approval of the Central Bank. In this regard it would not be appropriate for me to comment on the status of any regulated investment vehicle which the credit union sector is or could be developing to invest in Tier 3 AHBs.
139. Deputy Róisín Shortall asked the Minister for Finance the financial or other incentives that exist for the construction and delivery of commercial development. [36317/18]
View answerThe payment of financial incentives for construction purposes is not within the remit of my Department. However, there are a number of tax based measures which are relevant to the Deputy's question.
Industrial Buildings Allowances – General Scheme
Industrial Buildings allowances are available for capital expenditure incurred on the construction or refurbishment of various types of industrial buildings in use for the purposes of a trade, such as mills or factories, hotels, laboratories in use for the analysis of minerals and dock undertakings. Expenditure incurred is written off at a rate of 4% per annum over 25 years. In the case of other trades such as market gardening and the intensive production of cattle, sheep, pigs, poultry or eggs, the rate of write-off is accelerated (10% per annum over 10 years). The qualifying period for incurring capital expenditure which would qualify for an accelerated allowance has terminated in relation to the trade of hotel-keeping and the operation and management of a registered nursing home amongst others. However, expenditure incurred may still be written-off at a rate of 10% over 10 years or 15% over years 1-6 and 10% in year 7 in some cases depending on when the asset was first brought into use.
Industrial Buildings Allowances – Living City Initiative
The Living City Initiative is a scheme of property tax incentives aimed at the regeneration of certain areas (known as “special regeneration areas”) in the historic centres of Cork, Dublin, Galway, Kilkenny, Limerick and Waterford. The scheme was launched in May 2015 and provides for tax relief for qualifying expenditure incurred on the refurbishment and conversion of both residential and commercial buildings. In relation to commercial buildings, expenditure is written off at rate of 15% per annum over 6 years and 10% in year 7. Relief is only available for refurbishment or conversion work (not for “new build”) that is carried out during the qualifying period which runs from 5 May 2015 to 4 May 2020 for the commercial element. To conform to EU State Aid de minimis guidelines, a cap is imposed on the amount of capital expenditure that can qualify for relief at the accelerated rate provided for under the scheme.
Property developers or connected persons are precluded from obtaining relief under the commercial element of the scheme where either the property developer or the connected person incurred the capital expenditure on the refurbishment or conversion of the premises or it was incurred by some other person connected with the property developer. The restriction on the offset of unused current year capital allowances against other income of €31,750 applies to individual passive investors (investors who are not actively engaged in the business). Additionally, in the case of passive investors, any unused capital allowances under this scheme which are carried forward beyond the tax life (the period within which the allowances can be transferred to a subsequent owner) of the building to which they relate, are immediately lost. The property relief surcharge may apply to certain claimants under the commercial element of the scheme and relief is not available for any part of expenditure consisting of grants from the State or other State bodies.
Industrial Buildings Allowances – Aviation Services Facilities
Finance Act 2013 introduced a scheme of accelerated capital allowances for the construction and refurbishment of certain specialist buildings and structures for use in the maintenance, repair or overhaul of commercial aircraft. The relief applies to buildings or structures in use for the purposes of such operations at all airports within the State. Relief for capital expenditure incurred is given via industrial buildings allowances at a rate of 15% per annum over 6 years and 10% in year 7. To qualify for relief under the scheme capital expenditure must be incurred during the qualifying period which runs from 13 October 2015 to 12 October 2020. To conform to EU State Aid de minimis guidelines, a cap is imposed on the amount of capital expenditure that can qualify for relief at the accelerated rate provided for under the scheme. Additionally, capital expenditure which is not specified capital expenditure can qualify for capital allowances at the standard rate of 4% per annum over 25 years providing it is incurred on or after 13 October 2015.
Capital expenditure will not be regarded as specified capital expenditure for the purposes of claiming accelerated allowances under the aviation services facilities scheme where the relevant interest is held by a property developer or a person connected with a property developer and the capital expenditure on the construction or refurbishment is incurred by either of those persons or by some other person connected with the property developer. The restriction on the offset of unused current year capital allowances against other income of €31,750 applies to individual passive investors (investors who are not actively engaged in the business). Additionally, in the case of passive investors, any unused capital allowances under this scheme which are carried forward beyond the tax life (the period within which the allowances can be transferred to a subsequent owner) of the building to which they relate, are immediately lost. The property relief surcharge may apply to certain claimants under the scheme and relief is not available for any part of expenditure consisting of grants from the State or other State bodies. However, where such grant assistance has been received the capital expenditure may still qualify for capital allowances at the standard rate of 4% per annum net of any grants.
Industrial Buildings Allowances – Area Based Property Incentive Schemes
These schemes are now terminated i.e the periods during which qualifying expenditure could be incurred to avail of industrial buildings allowances under the schemes have expired. However, allowances may continue to be written off in some cases.
141. Deputy Catherine Murphy asked the Minister for Finance the way in which or the scenarios in which he may intervene in the sale of a portfolio (details supplied) to a company; and if he will make a statement on the matter. [36325/18]
View answerAs the Deputy will be aware, the Minister for Finance cannot stop loan sales, even by the banks in which the State has a shareholding. These decisions are the responsibility of the board and management of the banks which must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents which I, as Minister, cannot change unilaterally. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
The PTSB Relationship Framework can be found at the following link:
http://www.finance.gov.ie/wp-content/uploads/2017/07/PTSB-Relationship-Framework-April-2015.pdf
Although the PTSB loan sale was necessary, I wish to highlight that I have commented on a number of occasions that the protections for borrowers in place before the sale remain unchanged. In this regard, it is important to note that there are no changes to the rights of a borrower whose loan is sold by a bank. All terms and conditions attached to their mortgage contract remain in place. In addition, Start Mortgages, the purchaser of the PTSB loan book, is a retail credit firm regulated by the Central Bank of Ireland since 2008.
When dealing with borrowers, retail credit firms are bound by the same regulations that currently apply to PTSB. Like PTSB, they are required to comply with the Consumer Protection Code (CPC) and the Code of Conduct for Mortgage Arrears (CCMA) when dealing with borrowers who are in arrears
I should also highlight that regardless of the protections that are currently in place for mortgage holders, I have confirmed that I am prepared to engage with Deputies from other parties in an effort to see if these protections can be strengthened further in a sensible manner. This commitment has been demonstrated recently by the Government’s support for the Bill introduced by Deputy Michael McGrath, T.D., which seeks to regulate the purchasers of mortgage loans.
In addition, earlier this year I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible. I have asked for the report to be completed as soon as is practicable. The Central Bank has stated that it is their intention to deliver the report by the end of September 2018. If as a result of this review, the CCMA requires amendment, a full public consultation process would be required in line with normal guidelines.
143. Deputy Catherine Murphy asked the Minister for Finance if his attention has been drawn to the practice of banks removing persons from tracker mortgages that are in arrears; and if he will make a statement on the matter. [36331/18]
View answerThe Central Bank has strong consumer protection requirements covering tracker rate mortgages which are set out in the statutory the Code of Conduct on Mortgage Arrears (2010 and 2013) and Consumer Protection Codes (2006 and 2012).
In the case of tracker mortgages on a primary residence in financial difficulty, such borrowers are covered by the protections of the CCMA. For the purposes of the CCMA, ‘primary residence’ means a property which is the residential property which the borrower occupies as his/her primary residence in the State, or a residential property which is the only residential property in the State owned by the borrower. Therefore, the protections of the CCMA only apply to buy-to-let mortgages if the residential property is the only residential property in the State owned by the borrower.
Provision 41 on the CCMA provides that the lender must not require the borrower to change from an existing tracker mortgage to another mortgage type, as part of any alternative repayment arrangement offered to the borrower, except in the circumstances set out in Provision 46. (Please see attached link: https://www.centralbank.ie/docs/default-source/Regulation/consumer-protection/other-codes-of-conduct/24-gns-4-2-7-2013-ccma.pdf?sfvrsn=4 )
Provision 46 provides that, in the case of an existing tracker mortgage, if following consideration of the options in accordance with Provision 39, in conjunction with Provision 41, the lender concludes that none of the option(s) that would allow the borrower to retain his/her tracker interest rate is/are appropriate and sustainable for the borrower’s individual circumstances, the lender may, but only as a last resort, offer the borrower an alternative repayment arrangement which requires the borrower to change from an existing tracker mortgage to another mortgage type, if that alternative repayment arrangement:
a) is affordable for the borrower, and
b) is a long-term sustainable solution which is consistent with Central Bank of Ireland policy on sustainability.
For mortgages in arrears that do not fall within the scope of the CCMA, (e.g. buy-to-let properties which are not the only residential property in the State owned by the borrower), the provisions of the Consumer Protection Code 2012 (the Code) apply.
Under the Code there are clear obligations on lenders to act in the best interests of customers, to disclose relevant material information to customers and/or to bring key items or key information to the attention of customers. Further, the Code sets out specific requirements in respect of the treatment of personal customers exiting tracker rate mortgages. (Chapter 6 Provision 6.9 – 6.11 of the 2012 Code: https://www.centralbank.ie/docs/default-source/regulation/industry-market-sectors/brokers-retail-intermediaries/supervision-process/consumer-protection-code-2012.pdf?sfvrsn=4).
With respect to arrears resolution, the Code requires a lender to seek to agree an approach that will assist the personal consumer in resolving the arrears. However, it does not specifically prevent a lender from removing or amending a tracker rate on a buy-to-let mortgage in arrears.
As Minister for Finance I have not been made aware of any specific examples of the practice the Deputy refers to. If the Deputy is aware of such instances of banks removing persons that are in mortgage arrears from their tracker mortgage that are in breach of either the Code of Conduct on Mortgage Arrears or the Consumer Protection Code 2012 then I would urge the Deputy to bring this information to the attention of the Central Bank.
The Deputy may also wish to note that the Central Bank’s Tracker Mortgage Examination requires all lenders, which offered tracker interest rate mortgages to their customers, to review all mortgage accounts, including accounts in arrears, to identify any tracker related failings both from a contractual and transparency perspective.
The Central Bank provided a comprehensive update on the Tracker Mortgage Examination in April 2018, which is available at: https://www.centralbank.ie/docs/default-source/consumer-hub-library/tracker-issues/update-on-tracker-mortgage-examination---april-2018.pdf?sfvrsn=4.
144. Deputy Catherine Murphy asked the Minister for Finance if an assessment of the impact of the Budget 2018 capital gains tax changes to tackle land hoarding has been conducted; the way in which the effectiveness of these changes has been determined; and if he will make a statement on the matter. [36359/18]
View answerBudget 2018 and Finance Act 2017 provided for changes to the Section 604A CGT relief which was intended to allow owners of qualifying land or buildings the option of selling those assets after the fourth anniversary of their acquisition and enjoy a full relief from CGT. It remains open of course for individuals to retain ownership of such land or buildings up to and beyond the 7 year qualifying period.
To the extent that any disposals may have occurred as a result of this change to the relief they would only have commenced on 1 January 2018. The filing of returns are required by 31 October in the year after the date of disposal. In the case of disposals made in 2018 returns therefore would be due to be filed by 31 October 2019.
It is therefore not possible at this stage to determine the impact of the Finance Bill 2017 change in the section 604A CGT relief in the absence of appropriate data.
145. Deputy Catherine Murphy asked the Minister for Finance the action ISIF is taking to boost the supply of affordable housing here; the definition of affordable housing it is working to in this regard; his plans to change the remit of ISIF to give it a much clearer responsibility for the supply of affordable housing; and if he will make a statement on the matter. [36362/18]
View answerI am informed by the Ireland Strategic Investment Fund (ISIF) that it is making a very substantial contribution to new private housing supply generally which is critical in terms of meeting the pent-up demand for housing across all sectors of the market.
In line with its double bottom line mandate, ISIF has already invested and approved over €726 million in a number of significant financing platforms and projects in the construction sector, covering both the ‘Build to Sell’ and ‘Build to Rent’ space. This represents one of the largest investment commitments by ISIF in any sector, alongside more than €850m of external co-investment capital. These investments are, in all cases, focused on new housing supply and therefore on making much needed additional supply available to purchase and rent. Collectively, ISIF’s investments are expected to support the supply of 15,000 new homes by 2021, with to date specific funding commitments made by ISIF platforms for over 3,500 residential units. All such housing projects financed by ISIF capital include, in line with the wider market, an element of both Part V housing and, in the case of rental properties, Housing Assistance Payment (HAP) tenancies.
As the Deputy is no doubt aware, ISIF is required by legislation to ensure that all of its investments meet both commercial criteria and are off-balance sheet from the Exchequer perspective. In that context, investment in social housing supply is particularly challenging, although ISIF continues to engage intensively with the market to examine the potential for social housing investment that is both commercial and off-balance sheet.
ISIF’s contribution therefore, in line with its mandate, is focused particularly on helping to overcome barriers to new housing supply, particularly through the provision of equity for investments that may not otherwise happen, and in this way is helping, as part of a wider range of Government policies and actions, to narrow the gap between housing supply and housing demand which is at the heart of both access and affordability issues.
On July 4th 2018, following extensive review, the Government decided to refocus ISIF funds on the priorities that will support Project Ireland 2040 and have a more direct and positive impact on the economy’s long-term growth potential. Housing supply is one of the identified priorities. The reallocations of ISIF funds requires the passage of legislation, including the legislation establishing Home Building Finance Ireland for which €750 million of the original ISIF fund has been earmarked. On foot of the recent Government Decision, I will soon be writing to the Chief Executive of the NTMA to request that ISIF prepare the necessary proposals to operationalise the decision for my consideration. My officials have already held discussions with ISIF so as to allow it to begin preparatory work on the refocused investment strategy.
