Mortgage applicants must now be warned about PUP

BANKS and other lenders have been told to be up front with mortgage applicants whose employers are using the State wage subsidy scheme.

It comes after a number of applicants were unable to draw down home loans when additional checks by lenders found their employer was affected by the pandemic.

In the summer AIB was forced into a U-turn after issuing an internal memo to staff outlining how it was “pausing” lending to customers on the Pandemic Unemployment Payment and wage subsidy.

The group found itself at the centre of a storm when it was revealed it was halting all applications for mortgages at AIB, Haven and EBS from those on State supports.

It changed tack and said it would accept new applications from customers on supports. But AIB and the lenders have been reported to be refusing to release funds on mortgage applications that are already approved when additional checks show employers have signed up for the scheme.

In some cases, the applicant’s income is unaffected, but lenders are taking a negative view if others in the applicant’s firm are on the subsidy.

Now the Central Bank’s head of consumer protection in the supervision division, Helena Mitchell, has written to the chief executives of banks and other mortgage lenders telling them to make it clear well in advance whether they intend to refuse applications or drawdowns.

Lenders were told they must make clear to customers a loan offer may subsequently be withdrawn, paused or varied where there has been any material change to their circumstances before the drawdown of funds.

At a minimum, this communication must be included in the loan offer letter.

The Central Bank said it was aware changes had been made by lenders resulting in additional credit checks to ensure there had been no material change to the customer’s financial circumstances and they remained likely to be able to meet their financial obligations.

A number of applicants were unable to draw down home loans