Business Property & Mortgages

Monday 22 September 2014

Mortgage talks near collapse as banks and credit unions dig in

Charlie Weston Personal Finance Editor

Published 18/04/2013 | 05:00

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Fiona Muldoon: trying to broker a deal on debt

ATTEMPTS to broker a deal between banks and credit unions on who should take a hit when a mortgage is not being paid are on the point of collapse.

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Central Bank official Fiona Muldoon has been trying to secure a deal, but a refusal to budge on both sides has created a logjam, the Irish Independent has learnt.

The process is an attempt to work out which lenders will take the most losses when those unable to meet their repayments have loans restructured.

Bankers attending the meetings won't move from their position that mortgage holders in arrears should give 100pc priority to paying the mortgage, people familiar with the now-stalled talks process told this newspaper.

Unsecured lenders, like credit unions and credit card providers, should take a hit on their loans, bankers argue.

But the credit unions are also digging their heels in and insisting that they did not dole out the excessive mortgage loans.

The representatives from the Irish League of Credit Unions and its smaller rival, the Credit Union Development Association, have said the co-operative lenders should not get burned as the problem was not of their making.

"The talks are close to collapse. The banks are insisting on 100pc priority being given to mortgage debt and the credit unions are asking why they should take a hit," one source said.

Banks have been told they must make long-term mortgage-repayment offers to half of their customers who are in arrears by the end of this year.

Bankers were hoping that Ms Muldoon's move would have ended with a formal protocol in place that would see the emphasis on troubled borrowers paying the mortgage first, with any remaining cash paying off unsecured loans.

They have been telling distressed borrowers for months now to pay the mortgage ahead of personal loans and credit-union loans.

Some one in four residential mortgage holders are either in some form of arrears or have had to reschedule their monthly repayments. Around one-third of buy-to-let mortgages are either in arrears or have had repayments restructured.

The talks, which have been going on since the start of last month, involve representatives from AIB, Bank of Ireland, KBC Bank, Ulster Bank, Permanent TSB and the Irish Banking Federation.

Arrears

The head of the new Insolvency Service Lorcan O'Connor was at some of the meetings.

The introduction of the new Personal Insolvency Service in the summer is set to ramp up pressure on banks to do deals with over-burdened borrowers.

Up to 25,000 people are expected to avail of the personal-insolvency procedures in the first 12 months of the new service.

But the banks have been told by regulators to try to agree their own deals with mortgage customers ahead of the new insolvency services coming into operation in the summer.

Irish Independent

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