Brian Stanley (Laois-Offaly, Sinn Fein)
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47. To ask the Minister for Finance if he will consider placing a clause in the code of conduct for mortgage lenders to prevent them from charging interest on the warehoused section of the loan. [12522/14]

Michael Noonan (Limerick City, Fine Gael)
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The "split mortgage" was suggested by the Inter-Departmental Mortgage Arrears Working Group (Keane Report) as one of the possible viable options for restructuring a mortgage in certain circumstances.  As the Deputy is aware, the concept of a "split mortgage" involves splitting a distressed mortgage into an "affordable" mortgage and warehousing the balance.  I am informed by the Central Bank that the majority of lenders have now introduced, a "split mortgage" as one of the alternative repayment arrangements to restructure a mortgage.  While lenders have taken the broad approach set out in the Keane report, the product details vary from lender to lender. The most notable difference involves the interest rate charged on the warehoused element of the split mortgage while the maximum amount that can be warehoused is dependent on each lender's own internal criteria.  

The split mortgage, like all other forbearance and modification arrangements, is based on affordability and sustainability of the arrangement from both the borrower and the lender's perspective.  There is also a commercial and contractual leeway for the lender in formulating the details of any particular restructure or alternative repayment arrangement from the initial contractual requirements.  The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) however cannot mandate that a lender must provide one particular solution, or the terms of one particular solution, as opposed to another.  

As lenders offer split mortgages with differing terms and conditions, the main supervisory issue is one of transparency and the Central Bank is of the view that all lenders should make public all terms and conditions and eligibility criteria for a "split mortgage" to aid both customers and financial advisors.  In addition, the CCMA will require the lender, where an alternative repayment arrangement is offered, to outline the reasons why the alternative arrangement offered is considered to be appropriate and sustainable, as well as the advantages and any disadvantages or potential disadvantages of any arrangement offered, in the context of the individual circumstances of the borrower.  

The new monthly mortgage restructures and arrears data published by my Department shows that some progress has been made in putting permanent mortgage restructures in place.  For example, based on data published by my Department in respect of the MART institutions, the number of permanent restructures of primary dwelling houses (PDH) more than 90 days in arrears has risen from around 41,200 in August to around 54,000 at the end of January.  The data also indicates that at end January, 7,131 split mortgages were put in place in respect of primary home mortgages and a further 384 in respect of buy to let mortgages (this data includes those split mortgages which are initially proposed for a short-term trial period).  

The necessary framework is in place to enable banks to work with distressed homeowners to reach sustainable solutions for dealing with their personal indebted situations.  Early and effective engagement between borrowers and lenders is key to resolving cases of mortgage difficulty.  Where there is effective and meaningful engagement regarding a mortgage difficulty, the data shows that an increasing number of durable long term mortgage restructures is being put in place.  However, it is accepted that it will be necessary for lenders and borrowers to continue to build on this.