Introduction
On 13 February 2006, AIB transferred approximately €13.6 billion of Irish residential loans and related security held by it to the Issuer. Those Irish residential loans were originated by AIB prior to 13 February 2006. They were transferred by AIB to the Issuer on 13 February 2006 pursuant to a scheme made under the 2001 Act and the provisions of the 2001 Act (see Summary of the Programme – Transfer of AIB Irish Residential Loan Book and Business to the Issuer).
The Group’s policy is to originate through the Issuer Irish residential loans which before 13 February 2006 would have been originated by AIB through the AIB branch network.
Since 13 February 2006 the Issuer has originated Irish residential loans which, subject to the requirements of the ACS Acts, may be included in the Pool. See also Summary of the Programme – Transfer of AIB Irish Residential Loan Book and Business to the Issuer.
The Issuer may provide finance to purchasers of affordable housing under certain Irish State housing authority affordable housing schemes. Affordable housing is where a housing authority makes a property available to a purchaser at a discount of its actual market value. The purchaser is subject to a clawback which will arise if and when the purchaser resells the property within 20 years and this clawback is registered as a charge on the property.
No mortgage credit asset that is secured on an affordable housing property will be included in the Issuer’s Pool.
Lending Criteria
The following criteria (the Lending Criteria) are currently applied in respect of the Irish residential lending by the Issuer:
Key Lending Criteria
a) Maximum loan size is determined by the debt service ratio (DSR) based on the applicant(s) main income.
b) Normal maximum loan to value (LTV) is 92 per cent. for principal residence.
c) For holiday homes LTV should not exceed 85 per cent.
d) On a stand-alone basis, the level of finance for a residential investment property may not exceed 85 per cent. of the lower of purchase price or independent professional valuation.
In cases where the Issuer already holds a portfolio of investment properties as security, finance for the purchase of an additional residential investment may be considered up to 100 per cent. of the purchase price plus associated costs and refurbishment, provided the LTV of the portfolio will not exceed 75 per cent. overall.
e) Term normally up to 30 years but up to 35 years will be considered subject to clearance by normal retirement age.
f) Minimum loan €25,000, normally (€20,000 for top-ups on existing loans).
g) Borrowers must have a minimum age of 18 years.
Repayment Capacity
a) Net disposable income (after tax, pay related social insurance (PRSI) and all other outgoings) is the key factor in determining repayment capacity.
b) Repayment capacity is assessed by reference to the DSR. The DSR measures the proportion of ‘after tax’ income required to service the proposed borrowing.
c) The DSR is the monthly mortgage repayment expressed as a percentage of the borrower’s net monthly income (i.e. net of income tax and PRSI).
d) For stress testing purposes, repayment capacity is measured at a minimum of 2.75 per cent. above the prevailing ECB Rate.
Funding Balance of Purchase Price
Documentary evidence to verify the source of funding of the balance of the purchase price is obtained and retained on file.
Security
a) First legal mortgage/charge on the residential property.
b) Life/fire cover to be put in place – the Issuer’s interest noted/assignment taken only where required by security procedures.
Documentation
Evidence of income is submitted with each application. Independent professional property valuation reports are required in all cases. The following documentary evidence is obtained and held on the home mortgage loan file of the sanctioning authority.
P.A.Y.E. Employment:
a) Where salary is mandated to an AIB account, receipt of salary payments over a 12 month period may be regarded as suitable evidence of applicant(s) income and a printout of the account turnover for the relevant period held on the home loan file.
b) Where salary is not mandated to an AIB account a P60 (annual income tax statement issued by employers to employees) (or if unavailable, a statement of income from the applicant’s employer) and salary payment slips for the most recent 3 month period is obtained and copies retained on the home loan file.
Self Employed Applicants:
Minimum of 3 years certified or audited accounts to be provided, indicating the annual drawings of the applicant.
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