Pearse Doherty (Donegal, Sinn Fein)
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188. To ask the Minister for Finance the regulation in place regarding the conduct of equity release and lifetime mortgages; and if he will make a statement on the matter. [36302/16]

Michael Noonan (Limerick City, Fine Gael)
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An equity release scheme may include either a "home reversion agreement" or a "lifetime mortgage".

"Home reversion agreements" are in effect a type of property transaction where the vendor sells an interest in his/her home to a Home Reversion Firm for a discounted sum or an income (or both) whilst retaining the right to live in the home until the vendor permanently moves out or dies. "Lifetime mortgages" (sometimes called lifetime loans or reverse mortgages) differ in that they are credit agreements where a loan is secured on the borrower's home. The loan is repaid from the proceeds of the sale of the home after the borrower permanently moves out or dies. Until then, interest payments on the loan are rolled up on top of the initial loan amount so the repayable amount grows over time as interest is added to the balance. Both of these are niche products, usually provided to those aged 60 or older.

The Central Bank has advised that, since February 2008, it is responsible for the authorisation and supervision of Home Reversion Firms. No specific authorisation requirements arise in relation to "lifetime mortgage" products and firms which are authorised to provide mortgage credit generally in the State may provide "lifetime mortgages" to borrowers. 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 also 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.

Prior to a "lifetime mortgage" being taken out, the CPC provides that the 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 an 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 provides that the 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.

In addition to the above, 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 purchasing such a product may negatively impact on their ability to fund future needs.

It is also worth noting that any other loan to a consumer borrower which is secured on the 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.