There is no blanket ban on applications or drawdowns for Rebuilding Ireland Home Loan (RIHL) applicants. All local authorities are receiving and processing RIHL applications and are incorporating increased flexibility to accommodate applicants during the COVID 19 Pandemic.
As is the case with any lender, local authorities must lend mortgages on prudent basis, taking into account the most recent income and employment data available. This is both for the protection of the lender and the borrower, in particular to seek to ensure that borrowers are not left with unsustainable debt burdens, as a mortgage is a long-term commitment and it would not be appropriate to lend when there is a identifiable risk that the person’s income and ability to pay might not return to the level required to support the borrowing requested.
The Covid-19 situation has had an unprecedented economic impact and unfortunately some applicants for the RIHL have been affected. In order to address this issue, my Department has issued guidance on 21 May to local authorities on the process for dealing with applicants already in the application/approval process whose economic circumstances have changed for the worse. These options could include reducing, suspending or withdrawing the amount that can be borrowed. However, there is no one size fits all approach, it depends on the individual circumstances.
Nevertheless, the fact that an applicant’s income is supported by the Temporary Wage Subsidy Scheme (TWSS) is a factor that must be taken into account. As noted on Revenue’s website, employers’ participation in the scheme is ‘a declaration which states that, based on reasonable projections, there will be, as a result of disruption to the business caused or to be caused by the COVID-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.’ Given that the ability to repay a mortgage is based upon a careful assessment of an applicant’s employment situation, the fact that their employer has declared that they are unable to pay normal wages must be taken into consideration.
Therefore, on 6 July, my Department issued a Circular including additional guidance on the treatment of persons whose employers avail of the TWSS as a result of the Covid-19 pandemic. Where such persons are approved for a RIHL loan, draw down would not commence until their unsupported income post TWSS has returned to the level specified in the original application for a period of time, usually up to three months. This is line with the requirement to lend prudently. Local authorities can, however, use their judgement and knowledge of local employers to advance loans to applicants before the end of this three-month period, where appropriate.
There are exceptions to this approach.
In the case of a joint application where only one party is on TWSS, the application can also proceed to drawdown if repayment capacity can be assured based on the other person’s income.
For applicants whose post-TWSS income is lower (e.g. due to reduced hours) than stated on their application, their application can be re-assessed to determine the most appropriate borrowing amount for them.
In addition, persons currently on the TWSS can continue to apply for a RIHL mortgage based on their pre-TWSS 19 Income. This will provide clarity to applicants regarding their eligibility for the loan and will enable them to commence the property search.
Therefore, it is not correct to state that there is a blanket ban on the drawdown of RIHL loans for persons on TWSS. The Guidance of 21 May and the Circular of 6 July are complementary and will remain the approach for local authorities to take.
