Family gets to keep home after €150k debt is written off by AIB
Published 12/03/2014 | 02:30
STATE-rescued AIB has agreed to write off more than one-third of the mortgage debt of a family and allow them to stay in the home.
The bank wrote off €150,000 of the home-loan debt in what is believed to be the biggest residential mortgage write-off to date.
The deal came about through the link-up between the bank and the Irish Mortgage Holders Organisation, the Irish Independent has learned.
There have been large mortgage debt write-offs in the past, but this is believed to be the first time debt was forgiven and a family was allowed to stay in their home.
It is understood the husband works in the private sector and the wife is a public servant, but the couple have seen their income collapse due to pay cuts, hikes in income taxes and other levies.
The couple are based in the greater Dublin area and have two children. They owe €400,000 after borrowing to buy their home during the boom. This figure includes €30,000 of arrears.
While they don't hold any buy-to-let or holiday home mortgages, they are struggling with loans, credit card debt and other borrowings.
Revelations about the huge debt forgiveness deal are expected to give hope to others who are unable to meet their repayments and fear that their family will be forced to give up their home.
Some 96,000 residential mortgage accounts are three months or more in arrears, while another 40,000 are less than three months in arrears.
The deal is just one of 250 completed by AIB and the Irish Mortgage Holders Organisation (IMHO) following a formal agreement announced last November, which sees the IMHO as an independent third party to negotiate between the bank and its mortgage holders in arrears.
AIB also includes EBS and Haven. The bank launched a split mortgage product – where part of the debt is parked with no payments made on it and no interest accruing on this – that also involves debt write-offs.
Approached about the deal, Mr Hall confirmed it but stressed that each agreement was agreed on a case-by-case basis.
He said: "This is a very significant development. It is the first time there has been a large amount of money written off the mortgage attached to a family home while the family gets to stay in that home."
There were no conditions attached to the deal such as requiring the house to be sold for the debt to be written off, unlike other large debt forgiveness deals, he said.
The family owes €400,000 on the mortgage, and is now in negative equity – the house is now worth less than the mortgage borrowings.
Under the new arrangement, AIB has agreed to allow the family to split its mortgage.
Full capital and interest repayments will be made on €200,000.
Another €40,000 will be split off and no repayments will be made on this and no interest will accrue. When their circumstances improve, they will resume making payments on the €40,000 debt. A further €153,000 will be written off, in a deal negotiated by financial expert Stephen Curtis of the IMHO, it is understood.
AIB had no comment on the case. The bank's annual report shows it wrote off just €9m in residential mortgages last year. This was up from €4m in 2012.
The IMHO is providing a similar third-party, independent mortgage advice service to arrears customers of KBC Bank. The organisation is in talks with Permanent TSB about offering its services to that bank also.
In December 2012, nurse Laura White had €152,000 mortgage debt written down on her mortgage after she voluntarily surrendered her home.
Australian group Pepper, which bought the mortgage book of subprime lender GE Money, did a deal with a family in arrears in 2012 where €110,000 was written off, on condition the house was sold.