Thursday 22 March 2018

Main banks ordered to explain plans on mortgages

Charlie Weston Personal Finance Editor

THE main banks have been ordered to tell the Government what they are prepared to do to help home- owners in trouble with their mortgages.

Lenders including Bank of Ireland, AIB/EBS, Permanent TSB, Ulster Bank and KBC Bank told Taoiseach Enda Kenny and Tanaiste Eamon Gilmore how they will now offer a range of changes to existing mortgage deals to prevent people declaring themselves bankrupt.

Banks are desperate to avoid people availing of the provisions of a new Bill, which will be published on Friday, to declare themselves bankrupt.

The Cabinet yesterday signed off on the new Bill. It will cut the time someone has to wait for their bankruptcy record to be cleared from 12 to three years.

The Bill will also include a new personal insolvency arrangement (PIA). This arrangement will be agreed outside the courts and will mean some distressed mortgage holders will get some debts written off if they keep to a deal with their banks. But few of these are expected to be offered by banks.

And only in really limited circumstances will distressed homeowners be offered a new debt writedown deal.

The new insolvency laws are designed to force banks and distressed mortgage holders to the negotiating table to deal with out-of-control arrears situations.

Consumers will have the bargaining card of threatening to declare themselves bankrupt if the bank does not come up with a realistic deal to tackle the problematic home loans.

Banks are set to have a veto on any debt writedown deal.

To avoid having to do deals as part of the new insolvency laws, banks are set to offer a new range of mortgage arrangements.

AIB told the Government last night it would offer:

• Split mortgages, where some of the mortgage is parked for a while.

• It will also offer mortgage-to-rent schemes where the bank takes the house and rents it back to its former owners.

• Trade-down mortgages, where some negative equity is taken on to a new mortgage on a smaller home.

• And it will offer voluntary 'sale for loss', where the house is sold and the homeowner pays back the balance to AIB through a personal loan.

Only in limited circumstances will banks offer distressed homeowners a new debt writedown deal, or PIA.


Mortgage holders who fail to engage with their banks will be excluded from the new debt writedown laws.

A PIA is for those with debts, including mortgage debt, of between €20,001 and €3m and involves a deal with the banks outside of the courts.

Some of the mortgage debt can be written off, if the bank agrees, at the end of five to six years, provided the customer has met a new agreed repayment schedule.

Those trying to avail of the new PIA scheme will be forced to make a full and honest disclosure of all their assets, income and liabilities, according to government sources. PIA debt deals are expected to be mainly agreed where people give up ownership of their homes.

Irish Independent

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