Friday 19 December 2014

Ratings agency Fitch expects more banks to offer mortgage write-downs following AIB

Published 12/02/2014 | 07:51

International ratings agency Fitch expects other banks to follow Allied Irish Banks move to offer write-downs to customers in mortgage arrears.

It said in a new report that this is "inevitable" and that banks would apply "some form" of write-down.

“We expect some Irish banks to introduce products to provide long-term viable arrangements for co-operative borrowers,” Fitch said yesterday.

The report comes on the heels of news that AIB selected to offer debt write-downs, with conditions and under certain circumstances, to arrears customers who were selected for a splite mortgages with some already in place.

“The impact will depend on the ability of the banks to restrict the availability of these products to specific distressed borrowers who co-operate throughout the period of any arrangement,” Fitch added.

It also said that choosing the split mortgage route rather than a full write-off “keeps the possibility of some future recovery on the deferred payment portion of the loan, even if part of it will be written down.”

However, Fitch added that moving a customer to a different product would need to be “managed carefully to minimise the potential for other borrowers to go into arrears in expectation of write downs, or for those who are already in early arrears to try to obtain this type of debt workout”.

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