Banks plan debt relief deal for struggling homeowners
Finance minister appoints expert group as one in eight homes fall into arrears
Published 27/07/2011 | 05:00
THE Government has set up a new group to look at debt forgiveness for cash-strapped mortgage holders, it has emerged.
The move comes as AIB and other banks have submitted plans to the Central Bank seeking approval for new plans to write off some of the debt of overburdened mortgage holders.
Proposals put to regulators by AIB are understood to involve the bank taking an ownership share in a troubled mortgage holder's home in return for writing off some of the debt.
It is also understood to be looking at agreeing to deals with people forced to sell up their homes, but who still owe money on the mortgage.
The bank would be prepared to write off some of this debt rather than converting it into a personal loan. How much debt would be written off would depend on the finances of the homeowner.
Any debt write-down schemes, if they are given the go-ahead by the Central Bank and the Department of Finance, would operate under strict rules.
Bankers fear a widely available debt relief process would lead to abuse, with some homeowers deliberately going into arrears to benefit from a write-down of their debt.
AIB chairman David Hodgkinson said on Monday: "We would be using the capital that has been provided by the Government in this process. Clearly, it needs to be an industry-wide, government-supported approach."
Bank of Ireland said yesterday "any agreed forbearance solution depends on the individual circumstances of the customer and what is in their best interests."
Now it has emerged that the Department of Finance has set up a second group to look at what can be done for over-indebted households.
Last November the expert group on mortgage arrears, appointed by the department, threw out the idea of debt relief for households.
Instead, it proposed extending a range of forbearance measures for distressed mortgage holders.
Now Minister for Finance Michael Noonan has asked officials in his department to report to him by September on new policies "to help homeowners who are facing difficulty with their mortgage repayments".
The group, which will be chaired by accountant Declan Keane, may include officials from the Central Bank and other government departments, the minister said.
Around one in eight homeowners are either in arrears or have had to have the terms of their mortgage modified -- typically by opting to pay the interest only on the loan.
This amounts to almost 100,000 homeowners.
AIB said earlier this week that 4pc of its owner-occupier mortgage holders were now three months or more behind on their payments. This is up from 3pc in December.
Finance Minister Michael Noonan leaving the press conference yesterday at the Dail where the new €100 property tax was announced. The Department of Finance has set up a second group to look at what can be done for over-indebted households. mark doyle