Tuesday, 11 June 2019
Ceisteanna Eile - Other Questions
Home Loan Scheme
40. To ask the Minister for Housing, Planning, and Local Government when extra funding for the Rebuilding Ireland home loan scheme will be allocated; the changes proposed for the scheme following interaction between his Department and the Department of Public Expenditure and Reform; and if he will make a statement on the matter. [23685/19]
47. To ask the Minister for Housing, Planning, and Local Government if his attention has been drawn to delays in approving and the drawdown of funding under the Rebuilding Ireland home loan scheme; and if he will make a statement on the matter. [23989/19]
74. To ask the Minister for Housing, Planning, and Local Government the reason some local authorities are still not accepting or processing new applications for the Rebuilding Ireland home loan scheme; the number of loan drawdowns, offers and refusals to date from the first tranche of funding; and if he will make a statement on the matter. [23995/19]
93. To ask the Minister for Housing, Planning, and Local Government his plans to ensure that Meath County Council has sufficient funding to approve applications for the Rebuilding Ireland home loan scheme; and if he will make a statement on the matter. [23489/19]
This issue was earlier raised on Priority Questions. I am trying to find out exactly when the Minister will announce extra funding for the Rebuilding Ireland home loan scheme and if there will be changes to the scheme. Specifically, if there are changes, for example to the interest rate, what happens to people who have tried to apply and been told they cannot apply in certain local authorities under the original scheme?
I propose to take Questions Nos. 40, 47, 74 and 93 together.
When the Rebuilding Ireland home loan was initially being developed, it was estimated that the drawdown of loans under the scheme would be approximately €200 million over three years. From the data collated on the scheme to date, the home loan has proven to be more successful than initially anticipated, as a result of which the scheme requires a further tranche of funds to be borrowed by the Housing Finance Agency in order to enable its continuation.
My Department is currently in discussions with the Departments of Public Expenditure and Reform and Finance about this amount, which I anticipate will be finalised very soon. As I said in response to an earlier question, I hope to finalise that amount this week.
I will be in a position to make an announcement on the matter when the discussions are concluded. Ahead of such announcement, the operation of the scheme is not affected. The scheme remains open and all local authorities have been advised to continue to receive and process applications up to and including the issuing of loans.
The Housing Agency, which provides a central support service to assess loan applications, has confirmed that 4,193 applications were assessed up to the end of May 2019, of which 2,153 or 51% were recommended for approval. The latest information indicates that 823 loans totalling some €139.9 million had been drawn down at end March 2019. Funding is still available in the first tranche that was originally borrowed by the Housing Finance Agency more than two years ago.
My Department continues to publish information on the overall number and value of each local authority loan approval and local authority loan draw down on a quarterly basis. Information for the first quarter of this year will be published on my Department's website today and will show that in that period 280 loans, amounting to €47.7 million, were drawn down and a further 270 loans, amounting to €46 million, were approved. This information will continue to be updated and published on a quarterly basis as additional data are compiled.
Although the Minister stated that there is still money in the scheme, some local authorities have run out of money. What are officials in those local authorities being told to do? Can they approve loans even though their local authority has run out of money? Can they get more money from the Department? What specifically have they been told to do? Deputies stated that some people's applications have been returned. If there is a change to the terms of the scheme under the new announcement, such as a change to the interest rate, will people who applied but whose local authority had run out of money qualify under the old scheme because they sought to apply before the scheme was changed or will they be subject to new conditions which may mean they cannot buy the home they had intended to buy?
No local authority ran out of funding. They were each given an allocation which some met early because of higher demand in their areas. As those allocations were met, they were topped up. However, because of the concern expressed publicly, I issued circular 7/19 in March of this year, which directed local authorities to continue issuing and approving loan applications. In addition, where certain Deputies raised concerns in the House that their local authorities were not doing so, the Department has been in touch with them directly.
After the scheme had been in operation for a few months, several proposals were made as to how it might be improved. There was a lack of consistency in its application across different local authorities. I engaged a small group of people to carry out a semi-independent review of the operation of the loan scheme, engaging a couple of local authority managers from outside the Department to work with officials on the reforms that might be made to ensure it was being operated consistently. The group returned two sets of proposed reforms: those that could be acted upon immediately, such as clarification of the forms that constitute a refusal from a bank or confirmation of the need for mortgage protection, and proposals to extend the scope of the scheme or what would be applicable under it in terms of for what one was borrowing the money. Those types of reforms are still being examined for application in a future iteration of the scheme.
I thank the Leas-Cheann Comhairle. Does the Department monitor how the scheme is implemented by the various local authorities? The information we have received from colleagues and so forth is that they are implementing the scheme differently and that there are varying degrees of delay in the processing of applications and the drawdown of funding.
The Minister put several figures on the record. He stated several times that the scheme is open because there is €60 million left. The problem is that local authorities are concerned that although there is €60 million left, there is €220 million in loans yet to be drawn down and they have not seen the colour of the back-up money to underpin that. That is causing concern for local authorities that do not want to pay upfront without seeing what type of scheme is envisaged. The announcement to be made this week by the Minister is crucially important. Everybody knows the scheme is grossly oversubscribed, but the underlying reason for the delay is that local authorities do not know how much money will be provided this year or next year or for what period they might have to carry this loan. The €60 million the Minister stated is available is not sufficient comfort when local authorities know there are other loans in the system and €220 million in loans have been approved.
There are national criteria for how the Rebuilding Ireland home loan is to be implemented. As I stated, I brought together a group of people to ensure those criteria are being applied consistently across local authority areas. Each local authority has its own credit committee. After an application is approved by the Housing Agency, which acts as a clearing house or backstop, it is up to the local credit committee to make a decision on approval of the loan. That responsibility must rest with the committee.
Data for quarter 1 of 2019 will be published and show exactly what has been happening in each local authority in respect of approvals and drawdowns in that period. We will continue to publish such data. One of the issues about which I am in discussion with the Minister for Public Expenditure and Reform, Deputy Donohoe, is more accurate and up-to-date data to be provided more regularly than on a quarterly basis to see whether we can get a much clearer picture as the loan develops over the coming months. That is happening.
Further significant funding is coming. All approvals that have been given will be honoured. I made that commitment several months ago to a colleague of the Deputy's at a meeting of the Joint Committee on Housing, Planning and Local Government. The Housing Finance Agency has a significant loan facility available to borrow more funding as needed. Every comfort has been given to local authorities, either in the circular I issued or through direct contact, that they can continue to issue and approve loans and that those loans will be honoured by my Department, working with the Housing Finance Agency. There has been no delay on this. The scheme is not oversubscribed. The rate of approval is different from the rate of drawdown because some people apply in multiple local authority areas and not all approvals are drawn down within a six-month period
The Minister stated that approvals will be honoured. However, a person living in a particular local authority may receive approval quite quickly, whereas it may take longer, for whatever reason, including those outlined by Deputy Curran, for a person living in another local authority to receive approval. There is an equity issue, which is why I am asking whether conditions are likely to change when the next tranche of the scheme is announced. If they are, will persons who have applied to local authorities that are slower to grant approval be disadvantaged in spite of being in the same circumstances as a person who received approval from a local authority that is quicker to grant approval? That is an important question in respect of fairness to people in various parts of the country.
This is a good and necessary scheme, which has surpassed the Minister's wildest expectations. We all want to see it succeed. We also want a level playing pitch. It is important that the Department plays a key role in the oversight and monitoring of implementation across various local authorities and that there be a reasonable expectation that loans are processed and funding drawn down in similar timeframes in each local authority. The Minister stated that €60 million is available and he has repeatedly stated that he informed local authorities that loans will be honoured. Local authorities know that. However, they do not know when additional funds will come on line when the €60 million is spent. There has been an air of uncertainty in recent months, which has contributed to the delay in some drawdowns.
No one who sought approval under the new loan scheme, received approval from the Housing Agency as the first clearing house and their local authority credit committee has been prevented from drawing down that money to buy their home. We have very good timelines in place. However, each local authority has its own credit committee and different demands on it depending on the number of applications it has received. Part of the review we carried out sought greater consistency in timelines across local authority areas.
On the question asked by Deputy O'Sullivan, all loans approved are approved at a rate that is subject to change at the time of drawdown, as is the case with any loan from a financial institution. If four or five months pass following initial approval before one draws down the loan - the mortgage for a house in this case - the conditions may have changed somewhat. The initial €200 million was borrowed at a particular rate and that will not change. As the Housing Finance Agency goes to borrow a further tranche of funding, it may do so at a rate that is higher by in the region of 25 basis points or 0.25%.
This still has to be clarified with the Housing Finance Agency in the context of the amount it will seek to borrow and the rate at which it thinks it can borrow it. Loans will then be approved at the approval rate the Housing Finance Agency sets with each local authority.