Bank says: pay what you can, then walk away from mortgage
Debt write-off proposal throws new lifeline to struggling borrowers
OVER-stretched borrowers are to be given a chance to clear their mortgage debts if they sell their homes or investment properties and pay off what they can of the outstanding balance.
Permanent TSB is testing the new scheme, which could offer a way out of a debt mire for thousands of people, the Irish Independent has learnt.
It will facilitate significant write-offs and bypass personal insolvency deals, which are expensive, can last up to six years and impose strict limits on living expenses.
The new Permanent TSB deal will also allow borrowers to avoid bankruptcy, which still has a massive stigma attached to it despite the borrowing crisis and a shorter time frame before people are discharged.
People who took out loans for investment properties that they are no longer able to meet the repayments on are also likely to see some merit in the new offer.
But the deals are also being offered to families with homes who have been identified by the bank as being unable to ever meet the payments agreed to during the housing boom.
A spokesman for the bank said: "The trial is open to both residential and buy-to-let customers."
Permanent TSB's asset management unit (AMU), which handles all arrears cases, is contacting people with residential mortgages and those with buy-to-let loans who they feel have no choice but to sell their properties.
Typically, these people have been financially flattened by the downturn.
The bank said: "If the loan is deemed unaffordable and/or unsustainable, one of the solutions the asset management unit (like other banks) is proposing to customers is called assisted voluntary sale."
The bank said the biggest problem for people who are heavily in debt, with little or no income, is a fear that by selling up they will still end up repaying any shortfall for decades.
If the bank thinks a family or an investor who sells their property will never be able to pay off the shortfall, it is now prepared to get them to pay off as much as they can manage, with the rest written off.