Professor Patrick Honohan:

The policy the Senator outlined is very much consistent with what I have been talking about - with prudential tools, loan-to-value limits and debt-to-income limits. Often debt-to-income limits are neglected in favour of loan-to-value limits. I will not name a specific ratio now, but as I said to Senator Barrett, this plan is part of the tool-kit we imagine using in the future. In the current situation, in the case of the distressed mortgages, the ratios are not valid. What we are talking about here is about re-underwriting loans at loan-to-value ratios that in many cases are still well above 100% because of the situation. Therefore, this plan is not really a tool for the immediate present, except for new fresh lending, where one could imagine it coming in more quickly.