Written answers

Thursday, 9 May 2013

Department of Finance

Mortgage Resolution Processes

Photo of Nicky McFaddenNicky McFadden (Longford-Westmeath, Fine Gael)
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80. To ask the Minister for Finance the measures being taken to support variable rate mortgage holders in relation to engagement with banks; and if he will make a statement on the matter. [22098/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Central Bank of Ireland (CBI) has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank hasno statutory role in the setting of interest rates by regulated entities, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. I am informed by the Central Bank that each institution determines the rate it charges its customers, depending on a number of factors such as cost of funds and commercial considerations, such as competition, risk pricing and the impact on deposit rates.

However within its existing powers and through the use of suasion, the Central Bank continues to engage with specific lenders which appear to have standard variable rates set disproportionately to their cost of funds. Also, the Central Bank wrote to all mortgage lenders in October 2011 and asked them to consider the impact on arrears when considering any future interest rate increases.

The CBI has informed me that given the increased financial pressures currently being experienced by mortgage consumers, the CBI was of the view that they needed sufficient time to plan for any increases in their standard variable interest rate. As such, in February 2011, the Central Bank advised mortgage lenders that it expected them to notify these consumers, in writing, at least one month in advance of any increases in their standard variable rate. This notification must include a) the date from which the new rate will apply; b) the details of the old and new rate; c) the revised repayment amount; and d) an invitation for the consumer to contact the lender if he/she anticipates difficulties meeting the higher repayments.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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81. To ask the Minister for Finance if the Central Bank of Ireland has provided the banks with a list of agreed mortgage arrears forbearance solutions or if it is up to the banks to identify their own solutions; and if he will make a statement on the matter. [22107/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Deputy will be familiar with the Central Bank’s announcement of the new measures being introduced to address mortgage arrears, which includes the publication of performance targets for proposing and concluding sustainable solutions for borrowers in arrears over 90 days for the main mortgage banks. The Central Bank has advised that while it is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, there are some fundamental principles that must be respected as follows: the affordability assessment of the borrower needs to be based on both their current and prospective future servicing capacity for all borrowings; assumed prospective future increases in the debt servicing ability of the borrower must be credible and conservative.

The Central Bank will assess compliance with these principles in its supervisory audit of compliance with the targets, including through analysis of a sample of modifications.

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