New wave of families seek debt deals
Jump in struggling mortgage holders asking for help after €150,000 write-off for one couple
Banks and financial advisers have been inundated with mortgage customers who are in arrears and seeking debt deals.
It follows revelations in the Irish Independent that a family got €150,000 forgiven from their mortgage – one of the biggest mortgage debt forgiveness deals in this country.
Now there have been fresh calls for banks to set out the criteria they are using when they write off mortgage debt.
Taoiseach Enda Kenny described the mortgage write-down by AIB as "good news" for the family concerned.
Mr Kenny said banks have got to cut deals that financially distressed borrowers can adhere to, and allow families to get on with their lives.
Banks noted an upsurge in calls yesterday from mortgage holders in arrears hoping to get similar deals.
And David Hall, director of the Irish Mortgage Holders Organisation, the group that negotiated the debt forgiveness deal, said there had been six-fold increase in calls and emails to its offices. "We have had about 1,000 phone calls and emails,"he added.
State-rescued AIB has agreed to write off more than a third of the mortgage debt of a family and allow them to stay in the home.
The write-off represents more than a third of the €400,000 mortgage and will allow the couple, who have two children, to split the outstanding debt.
Some €40,000 of the borrowings has been parked; it will still be owed by the family but will not accrue interest and the couple will pay interest and capital on €200,000. AIB would not comment on the deal, but bank sources said any such arrangements would only be done if the value of the house involved had dropped dramatically and the owners were unable to afford the original loan.
The alternative of repossession would be costly and protracted; and there was a risk the family would declare themselves bankrupt, leaving the bank with nothing, banking sources said.
But Ciaran Phelan, of the Irish Brokers Association, said banks should set out clearly the circumstances in which they will consider writing off substantial mortgage debt.
"This will ensure equity and fairness for other mortgage holders in similar circumstances and transparency for the taxpayer who has injected billions of euro into these banks."
Mr Hall warned others in mortgage arrears that they would more than likely be disappointed if they were expecting a similar deal.
"This case is an exception and there won't be other big writedowns.
"It's very much a case-by-case process."
But he stressed that informal deals, like the one agreed to by AIB, were set to become the norm. This would mean even less take-up for the new Insolvency Service of Ireland arrangements.
Some 96,000 residential mortgage accounts are three months or more in arrears, while another 40,000 are less than three months in arrears.
Last November, the Irish Mortgage Holders Organisation and AIB revealed a tie-up to provide advice and negotiation services to mortgage holders in arrears.
AIB mortgage holders get free and independent financial advice and get an option of opening negotiations with the bank.
Last week, this newspaper revealed a similar arrangement had been agreed with KBC Bank.