Dail Question on the EU Mortgage Directive

To ask the Minister for Finance if he will outline the impact that the European mortgage credit rules contained in the Mortgage Credit Directive will have on the mortgage industry here; the way it will impact on the rights of future mortgage holders; if these rights will be applied to current mortgage holders; if it is expected to increase the availability of mortgage credit through financial institutions; the level of accountability to the European Council that will be imposed on financial institutions; and if he will make a statement on the matter.

Minister for Finance ( Mr Noonan) :                   Provisional agreement was reached with the European Parliament on the proposed Mortgage Credit Directive on the 22 April last with final agreement expected shortly. The proposed Directive was endorsed by the Council through the EU Member States’ ambassadors at the meeting of the Permanent Representatives’ Committee in Brussels on 8th May. Before its formal adoption it has to be voted on at Plenary by the European Parliament.

The new rules will strengthen the rights of future mortgage holders across the EU. They do not apply to existing mortgage credit agreements. Some of the provisions of the proposed Directive are as follows:

·  Improved pre-contractual information to consumers including a new European Standardised Information Sheet (ESIS) making it easier for people to compare mortgages;

·  New rules for advertising mortgages to include, for example, clearer information on the annual percentage rate;

·  Improved credit-worthiness assessments – tougher rules for credit assessment of people applying for mortgages;

·  Intermediaries should have authorisation from the relevant supervisory authority;

·  New competence requirements for mortgage lenders;

·  Improved knowledge and competence requirements for staff of banks and credit intermediaries providing mortgages;

·  Increased choice for consumers by allowing credit intermediaries to operate cross borders;

·  Consumers will also benefit from a guaranteed period of time before being bound by an agreement for a mortgage (through a period of reflection, a right of withdrawal, or both);

·  Where property valuations are conducted they will need to respect principles in line with the Financial Stability Board;

·  Consumers will be granted a general right to repay their loans early.

The proposed Directive also allows for high level principles in relation to financial education for consumers and in relation to arrears and foreclosure. It imposes a requirement to adopt measures to encourage creditors to exercise reasonable forbearance before foreclosure proceedings are initiated. The new rules, set out in this proposed Directive, will also help improve comparability of mortgage products, greater transparency in the provision of mortgage material across Europe and should help the development of a cross-border mortgage market.

With regard to accountability, Member States will be required to designate the national competent authorities empowered to ensure the application and enforcement of this proposed Directive and will be required to ensure that they are granted investigating and enforcement powers and adequate resources necessary for the efficient and effective performance of their duties.  

Member States will also be required to ensure that the authorities designated as competent for ensuring the application and enforcement of specific articles of this proposed Directive are competent authorities included in Article 4(2) of Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority) i.e. EBA members, and where they are non-EBA members, Member States will be required to ensure they cooperate with the European Banking Authority as required under the proposed Directive in relation to the specific articles in question.

Finally, the agreement on this proposed Directive marks the achievement of another key Presidency goal, contributing to consumer protection and strengthening Europe’s mortgage system.