The Deputy will be aware that I in my role as Minister for Finance, have no direct or statutory function in relation to banking policies and decisions made by individual lending institutions at any particular time and these are taken by the board and management of the relevant institution. A Relationship Framework has also been specified that defines the nature of the relationship between the Minister for Finance and each bank. These Frameworks were published on 30 March 2012 and can be found at: http://banking.finance.gov.ie/presentations-and-latest-documents
I have, however, referred the Deputy's question in relation to the Central Bank's approach to reviewing split mortgages to the Central Bank and have received the following response in this regard:
"The Central Bank's Internal Guidelines on Sustainable Mortgage Arrears Solutions details important factors that Central Bank supervisors will consider when assessing the sustainability of solutions being offered by the banks to resolve borrowers in mortgage distress. Sustainability of a split mortgage (of which there are various designs) will be assessed by the Central Bank inter alia with regard both to the affordability of the un-warehoused debt payment schedule and with regard to the treatment of the warehoused loan at maturity. Transparency to a borrower of the terms and conditions of a split mortgage at the outset of such a solution is essential to the sustainability of this solution, in particular how the bank will treat future increase of income and the repayment of the warehoused loan at maturity.
The sustainability guidelines outline the Central Bank's views on the key characteristics that we would expect to see in a split mortgage, including inter alia:
- Treatment of the base loan of a split mortgage;
- Treatment of future increases in income;
- Treatment of term of warehoused part of split mortgage.
The Central Bank's position is that split mortgages will only be considered sustainable if the borrower can service both the base loan and there is an appropriate approach to dealing with the warehoused element. This is consistent with the recognition that each borrower's circumstance will be different and the solutions offered for individual borrower's arrears issues will be driven by their own particular circumstance, so long as this is consistent with the Central Bank's requirements (e.g. CCMA)."
The following is the link to the sustainability guidelines available on the Central Bank's website and I would draw the Deputy's attention to section 2.5 in particular which deals with split mortgages.
http://www.centralbank.ie/regulation/industry-sectors/credit-institutions/Documents/Internal%20Guideline%20-%20Sustainable%20Mortgage%20Arrears%20Solutions.pdf
