Wednesday, 13 June 2018
Topical Issue Debate
Home Loan Scheme
I am raising the issue of the Rebuilding Ireland home loans scheme. As people are aware, it is a mortgage scheme for first-time buyers backed by the Government. It is now available through all local authorities. A first-time buyer can apply for a Rebuilding Ireland home loan to purchase a new or second-hand property or to build his or her own home. Up to 90% of the market value of the property can be borrowed. That is the background to the scheme.
As the Topical Issue matter I tabled states, I wish to discuss the credit policy 2018 and the Rebuilding Ireland home loans scheme. The wording I submitted deals with the secrecy attached to the credit policy 2018, under which applications are considered. The Minister of State, Deputy Phelan, is aware that well over 600 or 700 applications have been made. There is, approximately, a 50% refusal rate among those that have been assessed. Citizens in a democracy have a right to know how the decision to refuse their application was made. The appeal mechanism is merely internal within the local authority. There is no external appeals mechanism. There is no method for appealing to the Financial Services and Pensions Ombudsman or to the ordinary Ombudsman as to how the local authority conducted the appeal in respect of an application.
There is no external appeals mechanism whatsoever and that is all the more reason that citizens should have access to the criteria under which their application was considered. They could then put in an appeal, even if it is a poor mechanism in the first place because it is internal to the local authority. No doubt it will be dealt with by somebody who was not on the credit committee. I submitted a parliamentary question asking for a copy of the criteria in view of the number of refusals of which I have been made aware. In the reply of 14 April 2018, I was told that it was a commercially sensitive document, it was not in the public interest to publish it and it would conflict with the economic interests of the State. The document remains confidential on that basis.
That is not acceptable. I think the Minister of State knows that. If the Government has learned anything in this day and age, it is that citizens, and the rights of citizens, must be respected. In this case, citizens' rights are being infringed. The Department needs to come into the 21st century. It must know it cannot deal with citizens' information in a secretive manner. The members of this Government must surely have learned that. How can a person put in an appeal if he or she does not know the criteria according to which his or her application was refused in the first place? The current semi-appeals mechanism, internal to the local authority, makes no sense. There should be a mechanism everywhere in the State so that an appeal can be put in and it is known what the appeal is against.
People are appealing on the blind, however, and the idea of a commercially sensitive document by which one's application was judged is nonsense in this day and age. It would not stand up to objective scrutiny anywhere in terms of the rights of the applicants.
I am asking the Minister of State to reconsider the old 19th century approach whereby nobody is entitled to question the decision of a local authority. Local authorities make commercial decisions all the time. They put contracts out for tender and people know the criteria under which contracts are awarded. If people did not know the criteria applied the process would be deemed invalid. This ridiculous requirement for commercial sensitivity around how applications are judged should be removed.
I am taking this matter on behalf of the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy. I feel somewhat disadvantaged because the wording in front of me is slightly different from the wording submitted by Deputy Fleming. I thank him for raising the issue nonetheless.
Following a review of the two existing local authority home loan schemes, the house purchase loan and the home choice loan, the Minister, Deputy Eoghan Murphy, introduced a new loan offering, known as the Rebuilding Ireland home loan, earlier this year to replace the existing schemes. The new loan scheme is being implemented in accordance with the Housing (Rebuilding Ireland Home Loans) Regulations 2018. The regulations broadly set out the criteria for eligibility for loans, the maximum values for properties which may be purchased under the new scheme, as well as the duties of local authorities and borrowers.
The new loan enables creditworthy first-time buyers to access sustainable mortgage lending to purchase new or second-hand properties in a suitable price range where they cannot obtain a mortgage from a commercial lender. Long-term financing, provided by the Housing Finance Agency, has enabled the Rebuilding Ireland home loan to be provided at low fixed rates of interest. These low interest rates enable local authorities to act as lenders to eligible individuals who find themselves in this situation and enable them to purchase their own home. The loans are provided by the local authorities and the applications are assessed by the Housing Agency on their behalf. Each local authority must have in place a credit committee, which makes the final decision on applications for loans. There is also an appeal procedure in each local authority in order that those who are not satisfied with a decision regarding their application can have the decision reviewed.
The Housing Agency undertakes a detailed credit analysis, based on credit information furnished by the borrower, such as employment history, salary and financial statements; available information, such as the borrower's credit history, which is detailed in a credit check; and an evaluation of the borrower’s credit needs and ability to pay. The agency then makes a recommendation to the local authority as to whether a loan should be made to the applicant, which is then considered and decided upon by the local authority’s credit committee. The regulations provide for the Minister to issue a statutory credit policy, giving detailed guidance to local authorities for the processing of loan applications and the making of loans under the regulations. This updated document replaces the credit policy that was in place for the previous local authority lending schemes, which have now been superseded by the new home loan scheme.
I am aware that the Deputy has in the past raised the issue of publishing the credit policy. The revised policy is an internal document designed to provide written guidance to local authorities for managing and processing loan applications. Decisions by local authorities as to whether to advance a loan to an individual are taken on a case-by-case basis within the criteria as set out in the credit policy. As such, the policy is a commercially sensitive document, as would be the case with any other lender. Therefore, it would not be in the public interest to publish it, as this would conflict with the economic interests of the State and could seriously compromise the ability of local authorities to lend in an effective manner or otherwise impair their functions in this regard. On this basis, the Minister intends to continue the approach, which has been in place in respect of credit policies that governed previous local authority loan schemes, and treat the credit policy as confidential.
The operation of the new home loan scheme is still at a very early stage. However, the Housing Agency has indicated that by the end of last month, it had received a total of 1,150 valid applications from local authorities for assessment since the launch of the loan scheme. Of these, 876 have been assessed and 52% of the applications which have been assessed have been recommended for approval. The Department has been working closely with local authorities, the Housing Finance Agency and the Housing Agency to ensure that the new mortgage scheme is understood, accessible and operating as effectively as possible, particularly to address some initial teething problems that arose. Indeed, the Minister, Deputy Eoghan Murphy, has met the chief executive of the Housing Agency and the Housing Finance Agency. The Department has put in place a number of measures to ensure that information on the scheme is widely available. The dedicated Rebuilding Ireland home loan website includes a helpful frequently asked questions document and a borrower information booklet, which may answer any questions people may have.
The Minister of State has confirmed that the rejection rate is approximately 50%. If another Department was operating a scheme and its rejection rate was 50%, with no appeal to the Ombudsman or the Financial Services and Pensions Ombudsman available, the Minister of State would not be able to stand over it. He should ask his officials to come into the 21st century. There is no level of commercial sensitivity involved in this. People have only sought a loan from the local authorities because they have not been able to get a commercial loan on the open market. The local authorities are a place of last resort for them. As for the rejection rate, the Minister of State stated the Housing Agency undertakes a detailed credit analysis and considers credit history, ability to pay and the borrower's credit needs. That should be spelled out in the criteria and people should be informed which element of the criteria they failed to meet. The idea of having secret criteria about which people will not be informed and which will not be shared does not make any sense in this day and age. I note it is a substantial document.
We have had enough of public bodies refusing to tell the public, particularly people dealing with the public bodies, that they cannot have access to information. Personal information and the reason for decisions are being concealed. Public bodies are refusing to pass on information. If the Minister of State has learned anything from the actions of another Department in recent months, he must know that there is no basis for a public body operating in secret when it comes to the information of citizens. Those days are over. That manner of operating might have been valid in the last century. It is not acceptable now. Any independent person looking at this could not stand over it.
This scheme is failing because it is disjointed. The Minister of Finance answered a parliamentary question I had tabled last night on the help-to-buy scheme, which suggested that people who are divorced and who previously owned a house cannot access that scheme. Those people, thankfully, can avail of this scheme in special circumstances. We have two schemes which are designed to help people to buy houses. The Department is saying some people are eligible but they are then refused, and they are then allowed access to this scheme. There is a lack of joined-up thinking between the State agencies on this matter. The fact that the Ombudsman and financial ombudsman have been excluded from any independent review says it all. This matter must be revisited.
I will certainly talk to the officials and the Minister. I disagree slightly with Deputy Fleming in the sense that when one is dealing with the private information of citizens, there are reasonable circumstances in which that information must remain private. That certainly applies to financial information. Two freedom of information requests for the credit policy were submitted to the Department in March but were refused under the Freedom of Information Act on the grounds that the documents were commercially sensitive and that their release would be contrary to the financial and economic interests of the State. Perhaps a balance can be struck regarding the rights of citizens to access their own personal information but equally, commercial sensitivity is attached to lending decisions by whatever organisation - in this case, an arm of the State - makes that decision. It may well have other impacts on the wider public good.
I will speak to officials about the possibility of whether there can be some meeting of minds but the information is quite sensitive and its release could have other negative effects.