Michael Creed (Cork North West, Fine Gael) | Oireachtas source

I welcome the witnesses to this meeting. I must say I am somewhat sceptical about all of this. Our mortgage market is picking itself up off the floor and all of a sudden we have various companies coming in and dressing this up as something to help individual mortgage holders. It is not that long ago since we were in this room dealing with people who had been mis-sold mortgage protection insurance. The banks and their agents had to be forced, in a David versus Goliath-like fashion, to repay mortgage holders. There was a cohort of people in financial difficulty who, on checking the small print, found that they did not qualify. I am sorry if I am somewhat sceptical about the intent here. I am dubious about the claim that this is something that is good for the mortgage holder. Certainly, risk sharing is something that this committee is interested in and in that regard, there is a role for insurance companies. However, I do not believe that this will ultimately be a lender-paid product. In other words, I do not believe that the banks will pay the insurance companies and the consumer or mortgage holder will have a safety net available should he or she run into financial difficulties. That is just not the way it works. Banks are in business to make a profit, as are the insurance companies. While I am all for profit, the notion that this is a lender-paid product does not stack up.

I ask the witnesses to give their views on the lending institutions only having recourse to 80% of mortgages taken out by first-time buyers, with the 20% non-recourse element being the subject of a separate financial insurance contract between insurance companies and the banks. If, for example, a first-time buyer runs into difficulty with a mortgage for a family home, he or she is on the hook for 80% and the bank cannot pursue the mortgage holder for 100% of the liability. The mortgage insurance requirement would be on the non-recourse element based on a strict contractual arrangement between the lenders and the insurance providers. The historical experience of mortgage insurance here is not a pretty picture. There are thousands of people in this country who would have a very jaundiced view of what they are hearing this morning. The insurers are being portrayed here as knights in shining armour coming to the rescue of an emerging market that is only just picking itself up off the floor and offering something that is good for the mortgage holder, the insurance companies and the banks. However, it would only be good for mortgage holders if they were not on the hook for 100% of their liability, on the back of an arrangement between the banks and the insurance companies.