Michael McGrath (Cork South Central, Fianna Fail)
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259. To ask the Minister for Finance if banks are permitted to rely on certain social welfare income in considering an application for a mortgage to purchase a principal dwelling house; and if he will make a statement on the matter. [47015/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (which transpose the Mortgage Credit Directive into Irish law) imposes certain obligations on lenders in relation to assessment of the creditworthiness of consumer mortgage borrowers.  In particular, the Regulations provide that, before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness.  The assessment must take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement.  The lender must ensure that the procedures and information on which the assessment is based are established, documented and maintained.  The Regulations also provide that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement. 

The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which is necessary, sufficient and proportionate.  The Central Bank of Ireland has indicated that, on 1 June 2015, the European Banking Authority (EBA) published its final Guidelines on creditworthiness assessment.  These Guidelines support the implementation of the Mortgage Credit Directive and are intended to ensure that consumers are protected consistently across the European Union when interacting with creditors. The Guidelines provide greater detail on how creditors should give effect to the relevant Mortgage Credit Directive provisions.  As a further support to the implementation of this Directive, the EBA has also published an Opinion on Good Practices for Mortgage Creditworthiness Assessments and Arrears and Foreclosure, including expected mortgage payment difficulties. 

The Guidelines state, under the heading ‘Verification of Consumer’s Income’, the following:

1.1  When verifying a consumer's prospect to meet his/her obligation under the credit agreement as referred to in Article 18 of the Mortgage Credit Directive, the creditor should make reasonable enquiries and take reasonable steps to verify the consumer's underlying income capacity, the consumer's income history and any variability over time.

1.2 In the case of consumers that are self-employed or have seasonal or other irregular income, the creditor should make reasonable enquiries and take reasonable steps to verify information that is related to the consumer's ability to meet his/her obligations under the credit agreement, including profit capacity and third-party verification documenting such income.

However, neither the Mortgage Credit Directive nor the associated EBA Guidelines make a specific reference to income in the form of social welfare entitlements or payments received. On that basis, there is no legal restriction on a lender taking social welfare entitlements or payments into account in their assessment of creditworthiness.  However, subject to these provisions and also subject to compliance with any other legal or regulatory provision governing the provision of services to consumers, it will ultimately be a matter for lenders to determine their own credit policies and to make their own individual credit and lending decisions.