Operation Digout - Home Choice Loan Action Thread


[code]Background Information

The Irish government announced a scheme ostensibly to help first time buyers obtain mortgages who were unable to get finance from banks despite being employed and having a deposit. The scheme was called Home Choice Loans.

However, some were of the opinion that the government HCL scheme was a thinly disguised bailout for property developers & the CIF, who were left sitting on over 50,000 unsold units after the collapse of the Irish property bubble.

These misgivings led to a complaint being made to the EU on the grounds that the scheme constituted unlawful state aid to Irish property developers, and that it distorted the property market in favour of unsold new builds at the expense of second hand property sellers.[/code]

Over to you Kerrynorth.


OPERATION DIGOUT: Instructions for submitting template complaint online.

Go to ec.europa.eu/comm/competition/fo … nt_en.html

  1. Select: Directorate General for Competition.

  2. Complete the information required. You may select either you wish for your identity to be revealed or not, that is up to yourself.

  3. a) Ireland b) In Central Government enter: Housing Finance Agency.

  4. Write in the following:

a) The proposed scheme that is the matter of this complaint was announced by the Government of Ireland on October 14th, 2008.

b) Potentially between €2.5billion and €6.5billion is to be made available by the Government of Ireland in the form of loans to residential property purchasers who must purchase their property from certain defined vendors to the exclusion of other vendors in the marketplace.

c) The main beneficiaries are those firms of Residential Developers who have built New Build Dwellings in Ireland and who are also likely to have a crossover membership with the Construction Industry Federation (CIF) of Ireland.

d) This aid is being given for the benefit of Residential Developers who have a large overhang of unsold New Build Dwellings in Ireland estimated at circa 40,000 units by various sources and also to artificially prop up residential housing values in a declining market.

  1. Copy and paste template complaint as provided below.

a) The alleged aid does not affect my personal interests directly, but indirectly the alleged aid will add to the National Debt that is ultimately repayable by all citizens and may prolong the deflation of the property bubble to the detriment of Irish society as a whole.

b) As pointed out in the grounds of complaint: the New Build residential housing market is advantaged to the detriment of the second hand and self-build segments of the market; competing mortgage providers are disadvantaged; and, mortgage providers who are headquartered in other Member States are disadvantaged.

  1. Select ‘No’ for both a) and b).

  2. Select ‘Yes’.

  3. Leave blank.

Press Send

All done! 8DD



According to the EC “by giving certain firms or products favoured treatment to the detriment of other firms or products, state aid seriously disrupts normal competitive forces” and it is respectfully submitted that the scheme announced by the Government of Ireland on October 14th, 2008, to provide commercial residential mortgages via the Housing Finance Agency, an agency controlled by the Government of Ireland, constitutes unlawful state aid, contrary Articles 87 (1) (2) of the EC Treaty.

The scheme to provide commercial residential mortgages through the Housing Finance Agency (HFA) (homechoiceloan.ie) breaches the competition law of the EC in these respects: it constitutes a clear distortion of competition; and, it falls outside the scope of the Housing Finance Agency state aid block exemption (State Aid N89/2004 – Ireland).


The proposed scheme would distort the free functioning of the residential housing market in Ireland in a number of respects:

a. Distortion of market in favour of New Build only .
b. Subsidisation of certain Residential Developers together with A failure to ensure that these subsidised entities do not then distort other EU markets .
c. Interference with the EU Internal Banking Market and Market Discrimination against other Member State mortgage product provider entities operating in Ireland .

  1. The central condition underlining the operation and rational of this scheme is that only New Build Dwellings qualify for the provision of subsidised mortgage finance – to the exclusion of the second hand and self-build segments of the residential housing market. A further condition is that only new build dwellings that are registered as being covered by certain insurance schemes qualify for these mortgages.

  2. The impact of these restrictions on access to the finance for these mortgages via the HFA is that it advantages certain defined vendors in the residential housing market in Ireland to the exclusion of others for no other reason than that this scheme has been designed from the outset to advantage a defined cohort of vendors in the market, to the exclusion of other vendors.

The defined cohort of vendors that this scheme seeks to give a competitive advantage to over all other sellers in the marketplace are Residential Developers who will also have a predominant crossover membership with the Construction Industry Federation (CIF) of Ireland, and will be predominantly companies based in the Republic of Ireland. In contrast to the above specified conditions the Energy Rating Directive (EU Directive 2002/91/EC) has been disregarded in its entirety.

Many of these Residential Developers have operations in other Member States which will also benefit from this subsidy in Ireland and in some cases to the detriment of other Residential Developers in those states .

This scheme errs in that it does not require Accounting Separation of subsidised Irish entities from supposedly unsubsidised entities, owned by the same Residential Developers, in other Member States

  1. The proposed scheme also has the potential to distort competition and trade between Member States, and is therefore incompatible with the common market as a number of entities headquartered in other Member States who also offer commercial residential mortgage products in the Irish market.

These adversely affected entities include, but are not limited to, Ulster Bank and First Active (parent Royal Bank of Scotland, UK), Halifax Bank of Scotland (parent HBOS, UK), IIB Homeloans (parent KBC Group, the Netherlands), and the National Irish Bank (parent Danske Bank Group, Denmark).

  1. The proposed scheme will also disadvantage commercial mortgage providers to the residential market in Ireland. It is proposed to market the HFA mortgages through mortgage intermediaries where the HFA provided mortgages will be competing side by side with mortgage products from commercial residential mortgage providers:

The HFA provided mortgages will have a competitive advantage in this marketplace due to the fact that the HFA, as a State body, can access finance in the marketplace cheaper than other competitor mortgage providers (Irish government backed borrowing is AAA rated);

it can offer mortgage intermediaries greater incentives than competitor entities (Note: in Ireland it is the convention that the mortgage provider and not the mortgagor who pays the mortgage intermediary for arranging the mortgage product);

and, the HFA can, and is indeed marketing the HomeChoiceLoan mortgage product, on the basis that it can and will offer mortgages at a higher Loan to Value (LTV) than what a competitor commercial mortgage provider is presently prepared to offer, or considers prudent, in current marketplace conditions.

  1. There is also the added issue of the fact that the Government of Ireland proposes to place two Directors on the boards and credit committees of the financial undertakings that avail of the States’ Deposit and Liabilities guarantee scheme (S.I. No. 411 of 2008 Credit Institutions (Financial Support) Scheme 2008) including all the major commercial residential mortgage product providers in Ireland.

  2. The proposed scheme will also have the effect of placing an artificial ‘floor price’ on residential property values in Ireland and thereby distort the free and fair functioning of the marketplace. This can be achieved through the ‘comparative method of valuation’ that is the valuation industry norm for assessing the valuation of residential properties. This is achieved whereby the sale price of a property in a particular estate, location, or of a particular type sets a ‘price standard’ that both buyers and sellers use as a gauge of open market value. As the HFA mortgages of up to 92% LTV have a higher LTV than what is commercially available for particular residential mortgage types (e.g. a typical commercial mortgage for apartments would be circa 80% LTV) the mortgagor will have a greater ‘ability to pay’ than is presently the case in a fair and open marketplace. Accordingly, the market can be distorted via the HFA mortgages by placing an artificial ‘floor price’ on residential properties in Ireland.

  3. The government has also indicated that they are prepared to extend the HFA’s borrowing limit by anywhere between €2.5billion-6.5billion to €6-10billion from its’ present €3.5billion to fund this and the Affordable Housing scheme. This scale of funding will make the Government of Ireland the single largest provider of new commercial residential mortgages (as distinct from refinancing mortgages) in the Irish market over the coming years as at a time that commercial providers are retrenching and replenishing their capital base.


Under the terms of its state aid block exemption (State Aid N89/2004 – Ireland) the HFA is generally permitted to provide home loans to “disadvantaged households” in need of “social housing” in order to fulfil public policy objectives. However, the proposed HomeChoiceLoan scheme does not constitute ‘social housing’ for ‘disadvantaged households’. The proposed mortgage scheme contains conditions that specify a MINIMUM income requirement of €40,000 pa (compared to an average industrial wage nationally of circa €34,000), however, there is no maximum level of income in order to be excluded from the proposed scheme. This is in stark contrast to the existing Local Authority Mortgage Scheme which specifies a MAXIMUM income of €36,800 for a single person, and €92,000 for a couple subject to a maximum of 2.5 times the main earners salary and once the secondary earners.

At its upper mortgage limit of a €285,000 a mortgagor would require a gross income of circa €85,000 to qualify on the maximum repayment of 35% of net income requirement (5.4% 30 year mortgage = €1600/month less tax relief plus stress testing) as specified under N89/2004. A gross income of €85,000 pa is the equivalent of circa 2.5times the average industrial wage. For comparative purposes a member of Dail Eireann (the Irish Parliament) receives a salary of circa €100,000 pa.

Accordingly, under the terms of this scheme, and that of the N89/2004 block exemption. a household headed by a member of Dail Eireann would have to be considered as a ‘disadvantaged household’ in ‘social housing’ need in order to avail of this scheme under the existing N89/2004 state aid block exemption. Clearly, by any definition this is an unsustainable contention in accordance with state aid regulations, and accordingly, this scheme cannot be considered to come under the scope of the HFA state aid block exemption N89/2004. Also, if a Member State fails to give notification of aid that does not qualify for an exemption of the notification procedure under one of the block-exemption regulations, or the de minimus regulation, and which does not come within the scope an existing aid scheme which has been approved by the Commission, the aid must be disqualified as unqualified aid.

For the reasons set out above, it is submitted that the proposed measures must be considered to be unqualified aid and therefore must be disqualified under Article 87 (1) (2) of the EC Treaty.


Absolutely outstanding work KerryNorth. Many thanks and grats on your efforts.

I’ll be sending mine off later today.


And Sent.

Outstanding work by the team of pinsters on this.

Virtual pints all round BD




And done!


All done and sent. Well done to all involved who drafted this. I urge everyone else to take the few minutes to fill this in.


This is brilliant - my complaint is in & I’m forwarding this to everyone I know.


Sent, outstanding work to all involved.


submitted, Thanks!


Sent. Fantastic job lads.


I’ll be doing mine later guys, and recommending it to people I know.

Sensational work.

Well done to all involved.


well done to all involved


I will submit a complaint once I get home. Great work.


Nice work KN and to all involved. Now I would think about applying to Enterprise Ireland for a grant for all your hard work, knowledge Economy and all that stuff.


Submitted, thanks.


Done, well done. See you in the gulag.


Done and sent - well done to Kerry North (and his supporting cast) in putting this together.

I have sent on to several other people to have them complete and submit also - please do likewise as this issue is too important to ignore and if we can give the CIF and FF a bloody nose on this one, it will be a very sweet blow to land (much like the grey vote embarassed the shit out of FF yesterday and today !)

Quick question for the organisers - given that there’s a couple of typos in the original (which therefore will presumably have been replicated in subsequent individual submissions based on cut & paste), is the criteria here just the sheer volume of submissions which will make the EU sit up and take notice, or do they require a particular threshold or number of “individual” complainants before they react (in which case they might view our overall submission as merely one big petition ) ??


If there are typos point them out and we’ll amend the text if necessary.