I propose to take Questions Nos. 625 and 626 together.
Following a review of the two existing local authority home loan schemes, the House Purchase Loan and the Home Choice Loan, I am introducing a new loan offering, known as the Rebuilding Ireland Home Loan, with effect from 1 February 2018. The new loan will enable credit worthy first time buyers to access sustainable mortgage lending to purchase new or second-hand properties in a suitable price range. The low rate of fixed interest associated with the Rebuilding Ireland Home Loan provides first time buyers with access to mortgage finance that they may not have otherwise been able to afford at a higher interest rate.
The Housing Finance Agency (HFA) has raised €200 million from a variety of sources, on a fixed rate basis for periods out to thirty years maturity. Based on the pricing achieved, local authorities can offer a first tranche of fixed rate annuity finance to eligible borrowers at rates of 2.0% and 2.25% per annum, for twenty five and thirty years, respectively, up to an aggregate maximum of €200 million. The funding is not allocated to individual local authorities but rather will be drawn down by local authorities from the HFA to match fund their lending under the Rebuilding Ireland Home Loan.
Local authority borrowing from the HFA, that is on-lent to the borrower, is not considered spending by General Government as the borrowing is offset by the financial asset held by the local authority, i.e. the loan to the end borrower.
For the Rebuilding Ireland Home Loan, the Housing Agency will continue to provide a central underwriting and support service to all local authorities, staffed by appropriately skilled personnel, including qualified underwriters. This central service will assess loan applications and report back to the local authorities on the applicant’s ability to repay a loan. All loan applications will be assessed in accordance with the financial criteria set out in the statutory Credit Policy underpinning the Rebuilding Ireland Home Loan. The final decision on loan approval is a matter for each local authority and its credit committee. The local authority must satisfy itself on the financial risk it is undertaking in respect of each loan and must adhere to the requirements of the credit policy.
As has been the case since the introduction of house purchase lending by local authorities, default risk continues to lie with the local authorities, as lenders and as final decision makers on all applications. Where arrears arise, the local authority will follow the established Local Authority Mortgage Arrears Resolution Process (MARP) framework for handling mortgage arrears cases. Local authority borrowers are encouraged to engage with their local authority at the earliest opportunity if they are having difficulty making loan repayments. Information in relation to the Local Authority MARP and the help available to borrowers is available on my Department's website at the following link:
http://www.housing.gov.ie/sites/default/files/migrated-files/en/Publications/DevelopmentandHousing/Housing/FileDownLoad%2C30943%2Cen.pdf.
A Mortgage to Rent scheme, specifically for local authority mortgage borrowers, is available as part of the MARP arrangements. The Local Authority Mortgage to Rent scheme and the wider operation of MARP within local authorities are kept under regular review by my Department.
