Michael McGrath (Cork South Central, Fianna Fail)
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87. To ask the Minister for Finance the position in relation to equity release loans on a person's home; if they are permitted by the Central Bank; if so, if he will provide a list of regulated entities that provide them; and if he will make a statement on the matter. [29109/16]

Michael Noonan (Limerick City, Fine Gael)
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An "equity release loan" may include either a home reversion agreement, a lifetime mortgage or some other loan provided to a consumer borrower which is secured on the borrower's home. A home reversion agreement is one where an owner sells his/her home to a Home Reversion Firm (in return for a discounted sum or an income or both) subject to the right to continue to live in the residence until the person permanently moves out or dies. In substance, this type of agreement involves an up-front property transaction. Lifetime loans (sometimes called lifetime mortgages or reverse mortgages) on the other hand are credit agreements where a loan is provided and secured on the borrower's home, interest payments on the loan are rolled up on top of the principal amount throughout the term of the loan, the borrower retains ownership of the property and the right to continue to reside in the property and the loan is eventually repaid from the proceeds of the sale of the property after the borrower permanently moves out of the property or dies. Both of these are niche products, usually provided to people aged 60 or older.

The Central Bank has advised that, from February 2008, the Central Bank of Ireland is the body responsible for the authorisation and supervision of Home Reversion Firms. However, specific authorisation as a Home Reversion Firm is not required where the firm is the holder of another authorisation from the Central Bank in accordance with Section 29(1) of the Central Bank Act 1997. Firms authorised to provide mortgage credit in the State may provide lifetime mortgages. The Central Bank has advised that details of Home Reversion Firms currently authorised in the State and firms authorised to provide credit in the State can be accessed via the Registers section of the Central Bank's website.

The Central Bank has further advised that the Consumer Protection Code 2012 (CPC) contains a number of requirements for regulated entities regarding the provision of information to personal consumers relating to lifetime mortgages and home reversion agreements. The CPC also requires that personal consumers are made aware of the importance of seeking independent legal advice. In particular, prior to a lifetime mortgage being taken out the CPC requires that a personal consumer must be informed of:

- the circumstances in which the loan will have to be repaid

- details of the interest rate that will be charged

- an explanation of the impact of the rolling up of the interest over the duration of the loan

- an indication of the amount required to repay the loan at maturity

- the effect on the existing mortgage, if any; and

- an indication of the likely early redemption costs which would be incurred if the loan was redeemed on the third and fifth anniversary of the loan and at five yearly intervals thereafter.

Prior to a home reversion agreement being taken out, the CPC also requires that a personal consumer must be informed of:

- the circumstances in which the agreement comes to an end;

- the effect on the existing mortgage, if any; and

- in the case of a variable-share contract, an indication of the potential change in the breakdown of the ownership of the property between that held by the home reversion company and the personal consumer, over the duration of the agreement

Also, certain warning statements must be provided on advertisements, application forms, the regulated entities website and other documents related to lifetime mortgages or home reversion agreements. For lifetime mortgages, the personal consumer must be warned that while no interest is payable during the period of the mortgage, the interest is compounded on an annual basis and is payable in full in circumstances such as death, permanent vacation of or sale of the property. For home reversion agreements, personal consumers must be warned that the money they receive may be much less than the actual market value of the share in their home. For both lifetime mortgages and home reversion agreements, personal consumers must be warned that the product may negatively impact their ability to fund future needs.

In addition to the above, any other loan to a consumer borrower which is secured on residential property, such as a "top up" mortgage, will also be subject to the relevant housing loan provisions of the Consumer Credit Act, the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 and the relevant Central Bank Codes.