Dáil Éireann Debate, Thursday - 9 May 2013
81. Deputy Michael McGrath asked the Minister for Finance if the Central Bank of Ireland has provided the banks with a list of agreed mortgage arrears forbearance solutions or if it is up to the banks to identify their own solutions; and if he will make a statement on the matter. [22107/13]
Amharc ar fhreagraThe Deputy will be familiar with the Central Bank’s announcement of the new measures being introduced to address mortgage arrears, which includes the publication of performance targets for proposing and concluding sustainable solutions for borrowers in arrears over 90 days for the main mortgage banks. The Central Bank has advised that while it 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 as follows:
- the affordability assessment of the borrower needs to be based on both their current and prospective future servicing capacity for all borrowings; assumed prospective future increases in the debt servicing ability of the borrower must be credible and conservative.
- Lenders need to apply a realistic valuation of the borrower’s assets, in particular their property. This also applies to any assumption of potential asset price appreciation, as well as the estimated costs related to a potential foreclosure of property; and
- Lenders need to use an appropriate interest rate when discounting future income flows, which should take account of the lender’s cost of funds.
The Central Bank will assess compliance with these principles in its supervisory audit of compliance with the targets, including through analysis of a sample of modifications.
