Michael Finneran (Roscommon-South Leitrim, Fianna Fail)

More than 1,400 prospective purchasers formally registered interest on the dedicated home choice loan website and to date, 68 applications have been made. Of these, four have been approved, with three of these now drawn down, 36 applications have been turned down, seven have been withdrawn and further information has been sought in respect of 21 applications.

The scheme is demand led. As such, no budget has been set and no moneys that could be deployed elsewhere have been ring-fenced for the scheme. The extent of the loan book arising will depend solely on the level of demand and loans draw down.

The scheme is underpinned by rigorous lending criteria to protect the financial position of local authorities as well as prospective first-time buyers. All applications are assessed having regard to an applicant's ability to pay, credit history and all other aspects of the formal lending policy. An applicant's ability to pay is also stress-tested to assess his or her ability to repay at current rates and in the event of significant interest rate rises.

In order to minimise risk and to ensure that the processing of loan applications is carried out on the basis of the fullest available information on the financial standing and general credit worthiness of applicants, the credit policy includes a requirement to perform credit checks for each application. Credit checks are carried out using information provided by the Irish Credit Bureau. In addition, judgment checks are carried out using information from the Courts Service. These checks are intended to ensure that local authorities are equipped with the fullest information so that they can avoid unnecessarily risky lending while continuing to lend to low-income but credit-worthy households.

As with all other local authority mortgage lending, where a loan stands in default, section 11(10) of Housing (Miscellaneous Provisions) Act 1992 provides that a local authority may make such monetary arrangements with a borrower as it considers equitable to take account of the particular circumstances of the borrower. My Department issued guidance recently to ensure that cases of local authority mortgage arrears are handled in a manner that is sympathetic to the needs of the particular household, while also protecting the position of the local authority concerned. This guidance is closely based on the statutory code of conduct introduced in February 2009 by the Financial Regulator. However, given the comprehensive nature of the credit policy, I do not anticipate significant difficulties with arrears under the home choice loan scheme.

Costs of approximately €280,000 were incurred in 2009 in establishing the scheme, including the setting up of a central processing unit within the Affordable Homes Partnership, AHP. These costs were met fully from within existing resources within the AHP. It should be noted that a significant element of the staffing costs was incurred in the development of the loan processing model which applies to the home choice loan but which has also now been used in the development of revised systems for processing and credit checking of normal local authority house purchase loan applications under other schemes such as affordable housing, shared ownership, etc.

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