# Central Bank to relax rules on Credit Unions giving mortgages?



## TheJackal (19 Dec 2017)

*Credit unions to take on banks with mortgage lending offers
*
https://www.independent.ie/business...ks-with-mortgage-lending-offers-36420248.html


Loan rates are expected to be in line with the average offered by banks, but will not undercut them, a person familiar with the situation said.


Global loan servicing firm Link ASI, which used to be called Capita, has been signed up by the league to provide administrative services for the loan offering.

The underwriting and assessing of the applications will be done by Link ASI, but the final decision on whether to grant the mortgage will be made by the individual credit union, and the funds will come off that credit union's balance sheet.

Current rules mean credit unions can only issue 10pc of their individual loan books in long-term lending, such as mortgages.


However, the Central Bank is reviewing these rules, and a successful mortgage pilot project will be key to persuading regulators to relax the rules.


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## Brendan Burgess (20 Dec 2017)

This is nonsense.

Let's take one of the largest Credit Unions -  St Raphael's - the Garda Credit Union.

They have around €300m in shares and €100m in loans to members.

Let's say that the Central Bank allows it to double the long-term lending from 10% to 20%. That would be €20m in mortgages.

If the average mortgage is €200k - that is just 100 mortgages.  Or 10% of its shares, would be 150 mortgages. And St Raphael's is a giant by comparison with most other credit unions. 

There is no way that it is viable for a lender to set up the infrastructure for 100 mortgages.  The assessment, even if it is done by Link ASI, would need to be processed by the Credit Union.  If the CU administers the loan, they will need to comply with all the regulations. If the loan goes into arrears, they will have to comply with the CCMA.

Anyway, it's not a good idea to lend 20% of your loan book to so few loans to a very undiversified group.  A long Garda strike and these mortgages would be in deep trouble.  This probably doesn't affect the Gardai so much, but what about a large Community Credit Union.  A closure of a local factory would have a disproportionate impact on the ability to repay the mortgages.


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## Brendan Burgess (20 Dec 2017)

The Credit Unions should set up a Building Society and fund it with some of their capital. They should encourage their shareholders to put their money on deposit in the Building Society rather than in the Credit Union. 

Then  the Building Society could gear up to being a proper lender with a diversified mortgage book. 

Brendan


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## MrEarl (29 Mar 2018)

Hello Mr. Burgess,

I recall you mentioning this idea to me previously and I thought it made a lot of sense.

Out of interest, have you ever approached anyone at ILCU to suggest this as an alternative approach to providing mortgages (and perhaps other financial services) ?


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## Brendan Burgess (29 Mar 2018)

Yes, I included as part of a presentation to a conference in 2016 I think. 

I have found that the Credit Union movement generally to be totally rejecting of all suggestions for reform, so I don't bother with them anymore.

Brendan


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## MrEarl (30 Mar 2018)

Brendan Burgess said:


> ....I have found that the Credit Union movement generally to be totally rejecting of all suggestions for reform, so I don't bother with them anymore.
> 
> Brendan



Sadly, I've had similar experiences myself.

That said, if we all don't keep pushing them, they'll just go from bad to worse and that ultimately has a negative impact on us.


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## 24601 (30 Mar 2018)

Brendan Burgess said:


> There is no way that it is viable for a lender to set up the infrastructure for 100 mortgages.  The assessment, even if it is done by Link ASI, would need to be processed by the Credit Union.  If the CU administers the loan, they will need to comply with all the regulations. If the loan goes into arrears, they will have to comply with the CCMA.
> 
> Anyway, it's not a good idea to lend 20% of your loan book to so few loans to a very undiversified group.  A long Garda strike and these mortgages would be in deep trouble.  This probably doesn't affect the Gardai so much, but what about a large Community Credit Union.  A closure of a local factory would have a disproportionate impact on the ability to repay the mortgages.



The infrastructure is being set up collectively by the credit unions that are sharing this platform so the costs are spread among all participants. The processing of the assessment and administration of the loan will obviously be quickened and made more efficient by the relationship with Link ASI as they will be doing most of the heavy lifting. For example, the CCMA process for these loans is managed by Link ASI as part of the arrangement as no individual CU is likely to have the internal resources to manage it correctly. 

I agree on the concentration point. There's a requirement to develop credit risk appetite and provisioning policies with such matters in mind, but in practice this tends to be ignored by credit unions. I don't think the common bond rule for credit unions really facilitates effective management of credit risk; it builds in an inherent over-exposure to local environmental factors that can't really be offset.


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## Sarenco (17 Apr 2018)

The Central Bank wouldn't appear to be terribly enthusiastic about credit unions entering into the mortgage market in any meaningful way (I love the coded reference to mortgage defaults as "payback activity").

https://www.irishtimes.com/business...ge-in-mortgage-lending-central-bank-1.3464457


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## Brendan Burgess (17 Apr 2018)

It's a very odd analysis 

_he suggested that specific features of the mortgage market, such as its low margins and payback activity, mean that “this is not a product for smaller or weaker credit unions”._

The margins are high in mortgage lending. 

The losses are low if they stick to the Central Bank guidelines. 

I am not sure why they would be suited for stronger credit unions if they are not suited for weaker credit unions. 

No credit union in Ireland is large enough to set up the systems to do mortgages on their own. 

Brendan


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## WizardDr (18 Apr 2018)

Having designed systems for Wellington IT who provide IT services to the largest Credit Unions - they have systems supporting Mortgages available so that statement is incorrect. 

In fact the sophistication of the electronic services provided many of the large Credit Unions is a surprise to those unfamiliar.


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## MrEarl (18 Apr 2018)

WizardDr said:


> Having designed systems for Wellington IT who provide IT services to the largest Credit Unions - they have systems supporting Mortgages available so that statement is incorrect.



Hello,

I think you may find that Mr. Burgess was referring to overall systems, to include CCMA procedures, correct credit analysis, arrears management etc. and that's before you consider the true risk being underwritten by one individual CU.  That's how I took his post, anyway 

Wellington IT may have lots of great features, but that doesn't really matter if the staff do not have the skills and experience to fully utilize what's available. It's much the same with those CUs using Progress, lots of features, reporting etc. and most credit union staff barely know how to log into it and set up a new customer.  Oh and btw, that's a view shared privately with a couple of people who provide some of the software we are talking about here


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## WizardDr (19 Apr 2018)

Mr Earl

Having waded through all the matters pertinent to mortgage including CCMA, arrears management I can confirm that the matter of how one manages mortgages is greatly exaggerated.

A second point not widely known is that 83 CUs were claiming TRS on behalf of members. So the hidden Ireland may be a surprise to some.

In point the systems support all the analysis required.

It is good to remember that it was predicted a few years ago that the Credit Unions would all collapse and when it turned out it was 9 maybe 10 out of 400 I think there is very little real evidence supporting the contentions you are stating.


The private views of Banks stating that CUs were being prioritised by mortgage payers was also in the end unsupported.

The dismissal of the skills is simply saying that find one CU that is as you say and then the conclusion is that they are like that. Some of these are very sophisticated.


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## TheJackal (14 Sep 2018)

Credit union mortgage lending rules may be loosened

https://www.irishtimes.com/business...tgage-lending-rules-may-be-loosened-1.3628519

The Central Bank is preparing to loosen restrictions on credit unions providing home loans, almost a year after the Oireachtas finance committee called for a review of lending limits amid concerns about the viability of the sector.

Ed Sibley, a deputy governor with the Central Bank, said at an event in Trinity College Dublin that credit unions “have significant headroom” for mortgage lending, relative to limits.

However, he added: “Shortly, we will be consulting on ways to allow them loosen that.”

The regulatory authority told credit unions on Thursday that a consultation paper on its proposed changes to the framework will be published “within the coming weeks”, adding that it was “encouraged” by the level of feedback from credit unions during a pre-consultation period on the matter.

The small number of credit unions that have moved into the mortgage market in recent times are bound by a general ban on firms in the sector having more than 15 per cent of their loans at more 10 years to final payment.


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## WizardDr (24 Sep 2018)

er good man Ed. Though another interesting stat is that 20% of 2015 suspicious transaction reports were generated by Credit Unions.
Only three conclusions:
1. They seriously over report (refer this to Ed)
2. The others under report (refer this to Europe)


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## TheJackal (9 Jan 2019)

Over a year and still no sign of this being rolled out


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## 24601 (9 Jan 2019)

TheJackal said:


> Over a year and still no sign of this being rolled out



It has been rolled out in a number of credit unions.


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## TheJackal (10 Jan 2019)

24601 said:


> It has been rolled out in a number of credit unions.



Hadn't spotted those. Any idea which CU's are now offering new mortgages?


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## WizardDr (11 Jan 2019)

83 claimed TRS for their members.

But there are about 5 areas of market and they are all different. I would be starting with low LTV remortgages and equity release.
But when Brendan forces them to hand their cash back they wont be able to lend and all that.


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## RedOnion (12 Jan 2019)

TheJackal said:


> Hadn't spotted those. Any idea which CU's are now offering new mortgages?


A lot of the bigger ones are, but with different rules. And they have effectively gone ahead and done it themselves, rather than waiting for the rollout of centralised functions.

For example Wexford have a pilot scheme with a max of 100k.
St Canices have a max of 200k.
The Garda Credit Union, and Revenue credit union both offer mortgages (CANA switcher mortgage at 2.9%).

I know there is a waiting list in some of the Credit unions already, as they have reached the maximum long term lending very quickly.


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