Mortgage holders get part of debt written off
Published 10/02/2011 | 05:00
A NUMBER of heavily indebted mortgage holders have managed to get some of their debt written off.
Bank of Scotland (Ireland), which shut down its operations here last year, last night admitted it was working with customers to "restructure their debt in exceptional circumstances".
It had previously denied it was doing any deals with people to allow them to write off some of their debt. The bank, which also had the Halifax brand here, is doing deals mostly with buy-to-let property investors.
However, brokers said a small number of residential mortgage holders had also managed to get some debts written off.
Brokers said the bank was cutting deals with people who were unable to repay the full amount. However, domestic lenders have so far shown a reluctance to restructure the debts of mortgage holders.
It is understood the bank is prepared to reduce the capital owed by people who are in negative equity and have defaulted on their mortgage repayments.
In a statement it said: "It is Bank of Scotland policy that mortgage customers are required to repay their debt in full. The bank will, of course, work with customers to restructure their debt on an exceptional basis and when the bona fides need arises. It is bank policy not to discuss individual cases in public forums."
Michael Dowling of the Independent Mortgage Advisers Federation said he had dealt with a number of instances where both buy-to-let investors and residential mortgage holders who were in trouble had managed to cut a deal, with the bank writing off part of the capital owed.
He said British banks tended to be far more flexible about debt write-offs than domestic lenders. But he stressed that did not mean they were a soft touch either.
"They (Bank of Scotland) don't want people arriving at their door saying 'I owe €250,000. Here is €200,000 now'. But if you are in default, they will do a deal with you," Mr Dowling said.
He added that if the bank knew or suspected you had assets or cash, it would not cut a deal.
Mr Dowling recently helped a borrower who owed €1.8m on a home that was valued at €2.5m at the height of the boom. The house needed to be sold and went for €900,000.
The bank agreed to take the €900,000 and allowed the remaining €900,000 to be paid off over 25 years, interest-free. Repaying the capital only meant that up to €300,000 will be saved by the borrower in interest over 25 years.
"Bank of Scotland has written off Ireland as an entity. If a deal is to be done, they will do it and do it now rather than in 10 to 15 years' time," Mr Dowling said.