Friday 2 December 2016

Will these new loan arrangements affect my situation?

Published 12/01/2012 | 05:00

Q&A

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QI can't pay my mortgage and want to walk away from it. Is there any chance of a deal for me?

AA debate has been raging with government on the shape of a new debt write-down process that would avoid consumers going before a court.

The big argument has been around including mortgage debt in this non-judicial debt settlement scheme. Justice Minister Alan Shatter has been pushing for home loan debt to be included.

The Department of Finance, the Central Bank and banks argue that in no other country is mortgage debt included in non-court debt settlement deals.

QWould the scheme be worthwhile for those no longer able to meet their debts?

A That depends on how badly indebted you are. Those prepared to give up ownership of their home and pay back what they can over a five to seven-year period may be able to get a chunk of their debt written off.

And anyone benefiting from the new arrangements will have to get agreement from the bank before they get a debt deal.

All this means it will not be an easy or attractive option for those expecting some easy-peasy debt writedown.

Q I hear some people can afford to meet their mortgage repayments but won't. Is that true?

A Banks claim that talk of upcoming debt writedown deals is encouraging some to strategically default.

This is where those who can pay, won't pay. They are holding out in the hope their debts will be wiped out in any new debt arrangements.

As many as 12,000 homeowners may be strategic defaulters. This situation may be inflating the arrears data.

It was recently revealed that some 150,000 homeowners are either in arrears or have done a deal with their lender to lower the repayments. The sooner we see the shape of the new insolvency legislation the sooner arrears problems will ease.

QBut are banks not dragging their heels on doing deals with homeowners?

AThe absence of personal insolvency legislation means banks are reluctant to write down debts at present.

Patrick Honohan has accused banks of not moving fast enough to restructure loans. The introduction of new legislation may shift the balance of power a little in favour of mortgage holders.

Irish Independent

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