AIB/mortgage holders deal will give genuine cases a chance
A new negotiation service being set up between AIB and the Irish Mortgage Holders Organisation, looks like a win/win all round.
AIB is under pressure from the Central Bank to meet targets for delivering sustainable long term solutions to mortgage customers in arrears.
This takes a bit of organisation, a lot of negotiation, and most likely, the bank having to take some kind of financial hit arising from the solutions agreed.
It may end up in repossessions, courts and acrimony.
AIB’s big problem is that literally thousands of mortgage holders who are in arrears will not come and talk to them. The bank cannot offer a sustainable solution if it doesn’t know what the customers financial circumstances are. In other words, the bank may not be sure what the customer can afford.
It cannot get very tough either. If the bank wants to foreclose and repossess the house, it has to get some kind of response from the customer. In those situations, what does the bank do? It can send out a legal letter threatening to foreclose or it can simply just keep phoning and writing letters.
The big question is how many of these non-communicators are in serious financial trouble and are simply too scared, depressed or worried about things, to engage with the bank? Equally, how many of them have decided to stop paying, do nothing and see what happens for as long as they can.
Bear in mind many of these are mortgage holders of buy-to-let properties, where landlords might pocket the rental income, not pay up on the mortgages and see how long they can hold out. In some cases they may have been holding out for a few years already.
The new initiative will provide a useful free negotiation service where the Irish Mortgage Holders Organisation can act as an intermediary between the customer and the bank. This could help many genuine cases of people who are in trouble and scared.
It might not do much for the smaller group of investor landlords who may be milking the situation while not facing up to their debt obligations. They will continue to lie low for as long as they can.
The big issue is how will contact be made between the customer and the Irish Mortgage Holders Organisation? Those genuine cases will have an opportunity to contact the organisation and open up a line of communication that may lead to a negotiated settlement.
That has to be mutually beneficial for both the bank and the customer. If it costs AIB €150,000 to fund the operation of the scheme, it could be money well spent. It will give decent people a chance to have someone on their side to help them negotiate with the bank.
However, it will also give the bank an opportunity to press ahead with legal actions and repossessions comfortable in the knowledge that those it moves against, have chosen not to come forward directly or through the mediation services of the Irish Mortgage Holders Organisation.
AIB will argue that, through this scheme, it has given genuine cases every possible opportunity to come forward and do a deal. As a state-owned bank, moving against borrowers is particularly sensitive. This initiative will give it some cover to say, we have tried everything. Repossessions are on the way.