Family receive €200,000 write-off and allowed to stay in home
A family have had close to €200,000 written off their mortgage while keeping their home in the latest debt deal to come to light.
AIB – including its subsidiary EBS – has now agreed 100 deals with mortgage holders which have involved some form of debt write-off.
EBS has told the family that it will write off €195,000 of their €478,000 mortgage and seek repayments on less than half of the money owed. The family will remain in their home in Cork.
The couple have two children and are in their late 30s. The mother is not working, and the father is in the building trade but has seen his income fall sharply, the Irish Independent understands.
The latest deal tops the €150,000 write-off revealed exclusively by the Irish Independent last week, which saw a Dublin family end up with more manageable monthly repayments and being able to stay in their home.
Now the Irish Mortgage Holders' Organisation (IMHO) has got agreement from EBS to allow about €195,000 of the mortgage debt to be written off.
The family owes €478,000, which is made up of about €50,000 in arrears (all figures have been rounded). But their home is now only worth €200,000.
The family will pay interest and capital on €200,000, at the same interest rate that they were being charged – a variable rate of 4.58pc. This is one of the highest variable interest rates in the market and is almost four times higher than a typical tracker rate. Another €100,000 owed by the family will be set aside as part of a split mortgage for a period of 30 years. IMHO's David Hall said the fact that €100,000 was put into a split arrangement meant "the family were on the hook for this".
A split mortgage is where part of the money owed is put to one side, to be paid at a later date, or dealt with when a house is sold at retirement.
AIB and EBS do not charge interest, or require repayments, to be made on the amount put to one side.
If after 30 years the family were unable to repay the amount put into a split arrangement then the bank would force the sale of the property to recoup the money.
The bank would probably end up with a total return of €450,000 from the Cork family over 30 years, whether or not the family can raise the funds to pay off the amount put into the split mortgage or it is dealt with by the sale of the house, he said.
"Affordability is the key criteria being used on deals like this," Mr Hall said. The bank declined to comment.
Asked why so much was lent to the family during the boom, Mr Hall said: "Sure banks went mad. I had a taxi driver in here today who can't read and he was given €2.5m to buy properties by the banks."
The IMHO said it was dealing with 2,000 clients of AIB and EBS. It is also assisting 360 clients of KBC Bank.
AIB recently announced a split mortgage product, which involved an automatic writedown of some mortgage debt. About 450 split mortgage offers have been sent out this week to customers in arrears with AIB, EBS and Haven, although most of these do not involve a debt write-off.
Writedowns being offered to distressed mortgage holders by banks are becoming more common, but Bank of Ireland told TDs recently it was reluctant to forgive home-loan debt. Banks and financial advisers have been inundated with mortgage customers in arrears seeking debt deals since the Irish Independent revealed a family's €150,000 write-off last week.