Written answers

Tuesday, 9 March 2010

Department of Finance

Financial Services Regulation

8:00 pm

Photo of Phil HoganPhil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 146: To ask the Minister for Finance if his attention has been drawn to the fact that the figures produced by an organisation (details supplied) on the mortgage market in 2009 highlighted that first time buyers are now the largest market segment; the steps he is taking to ensure that residential mortgage lending, particularly to the first time buyer segment is carried out on a sustainable and prudential basis, particularly for high loan to value borrowing, in view of these figures; the potential role of mortgage indemnity insurance to achieving such sustainability and prudence; and if he will make a statement on the matter. [11074/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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It is a priority to ensure that mortgage lending in particular in relation to first time buyers is undertaken on a sustainable and prudential basis by credit institutions and conforms fully to regulatory requirements both in relation to the financial position of the institution itself and also the safeguarding of the consumer's interest.

As regards the sale of a mortgage product to an individual consumer the Financial Regulator's Consumer Protection Code places requirements on mortgage providers in relation to such sales. These requirements include "Know the Customer" and "Suitability" requirements which must be followed by the lenders at the point of sale. Under the Code a mortgage lender has to demonstrate that it has gathered sufficient information from the consumer to allow it to provide a recommendation to that consumer. The mortgage recommended must be suitable to that consumer having regard to the facts disclosed by the consumer. A written statement setting out the reasons why a mortgage product/selection of mortgage products offered to the consumer is suitable must be given to the consumer.

As regards the suggestion that a mandatory Mortgage Insurance Scheme be introduced, this matter is being considered. However, a good deal of research is required into measuring the feasibility of such a scheme in terms of cost to the borrower and the lending institutions, the most appropriate insurance provider, the benefits it will deliver to borrowers and lending institutions, and the extent to which it will lessen the impact of the current economic downturn on the State through support for borrowers through the Mortgage Interest Supplement Scheme and for lending institutions through the investment of capital to restore their balance sheets.

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