The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR) provide that, before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness. The assessment must take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement. The CMCAR further provides that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement. The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which is necessary, sufficient and proportionate. In addition, the Central Bank’s Consumer Protection Code 2012 imposes ‘Knowing the Consumer and Suitability’ requirements on lenders. Under these requirements, lenders are required to assess affordability of credit and the suitability of a product or service based on the individual circumstances of each borrower.
Within the parameters of the regulatory framework, it is a matter for regulated entities to manage their own processes for the various mortgage application, consideration, approval and granting stages, including in respect of validity periods for mortgage “Approval in Principle”.
Lenders continue to process mortgage applications and have supports in place to assist customers impacted by COVID-19. Banking & Payments Federation Ireland (BPFI) has published a Covid-19 Support FAQ which customers can consult, or customers can contact their lender directly, if they have any queries or concerns about the impact of COVID-19 on their mortgage application. The BPFI’s FAQ advises that lenders may extend the period of a mortgage “Approval in Principle” where an individual’s circumstances have not materially changed as a result of COVID-19. This will likely be for 3-6 months, but it may vary depending on the lender’s assessment of an individual’s circumstances. However, if their circumstances have materially changed as a result of Covid-19, lenders may keep the application open on its system for a period of time; but this again may vary depending on the lender’s assessment of an individual’s circumstances. After this period of time, the lender will undertake a review of the application which will likely include a request for the individual to provide an update on their employment and income situation.
It should also be noted that the Central Bank has indicated that it expects all regulated firms to take a consumer-focused approach and to act in their customers’ best interests at all times, including during the COVID-19 pandemic.
