Mortgage lending in Ireland

Commentary – Grave concern over mortgage lending condition

From our Dublin Property Solicitor - MP Moloney Solicitors

The history of our State’s support for mainstream banks when in difficulty goes back decades, from Guinness paying the wages of state employees in the 1960’s, to the Government’s bailout of AIB following the ICI collapse in the 1970’s to most recently the bank guarantee scheme following the global financial crisis in 2009 and 2010.

Following the most recent restructuring of the banks, they were further permitted without restraint to dispose of family home mortgages to largely unregulated private equity funds. Whilst the balance was sought to be addressed after the sale of large loan portfolios had completed, fundamentally successive Governments failed to deliver on the protection of families in their homes. Even the Personal Insolvency process has proven to a large extent to be inadequate. The underlying trend is that Governments will always prioritise their relationships with pillar banks given the banks’ role in a healthy economy. Whilst this policy often fails citizens of the country, on a macro scale it is accepted as responsible governance.

The issue this causes is the sense of preeminence it creates in the Lender’s philosophy. Banks commonly feel that their right and entitlement is to dictate their role on the terms they see fit and ignore the duty they have to an economy that has supported them over nearly a century.

The latest instance of this convenient disregard of social responsibility is a practice that has just come to our attention from one of the pillar banks in Ireland. Recently one of our commercial Clients was approached by an employee applying for a residential mortgage. The employee had been asked by the bank to provide confirmation that her employer was not in receipt of a Covid-19 related State subsidy or was availing of the TWSS Wage Support scheme or equivalent. This is clear evidence of a bank acting with impunity in its role as lender. We are simply aghast at the rationale and the reasoning being employed within any lender that even considers it acceptable to ask employees to garner the financial health of their employer.

As would be expected of any client of our practice the reply from here was not only robust in its rejection of the request by the bank but we have referred the practice to the Law Society of Ireland. We are considering a formal complaint to the Regulator. We are watching developments in the background in the interim.

At a Governmental level, the Minister for Finance has taken a “laissez faire” approach to the latest development. This is equally unacceptable and I would view it as a failure to adequately govern on this particular issue. The Irish Government to its credit did intervene to assist Landlords in the commercial market during the lockdown period. Their request of the banks to provide mortgage payment breaks provided a much needed reprieve to tenants and businesses not in a position to open for trade and ultimately pay their rent. It is clearly the case that the Government can influence the banks on a specific item of reference when the will exists to do so. The will should exist here to immediately eliminate this unacceptable practice.

The precedent being set by the bank is that the future financial health of employers has to be factored in to their employees’ own mortgage applications. Not only does this compromise the norms and importance of commercial sensitivity and confidentiality in business, it has the potential to compromise the ability of businesses to hold on to high value employees. Once any such information is within the employee domain, keeping it confidential is like trying to store water in sieve. That is the reality.

In summary both the Government and the Regulator must act diligently to stamp out the presumptuous disregard being employed by any pillar bank in considering such a request as part of their mortgage process.

For our part our offices are committed to the practice of conveyancing in Ireland with a track record of over 25 years of property transactions. We are equally committed to pushing back on unreasonable mortgage conditions impacting on the ability of our Clients and any purchasers to progress such a major life decision as buying a property.

If you or someone you know is impacted by unreasonable banking practices, we are happy to advise and where necessary step in and help.

Martin Moloney
MP Moloney Solicitors
Dublin Property Solicitor at the Abacus Legal Network

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