People in mortgage distress have been warned not to assume AIB’s decision to write off almost half the value of a loan taken out on a Dublin couple’s home while allowing them to retain ownership will set a precedent in any future negotiations.
Under the agreement brokered by the Irish Mortgage Holders’ Organisation (IMHO), the bank has written off €150,000 of a €400,000 mortgage and allowed the couple, who have two children, to split the outstanding mortgage in two.
Some €40,000 of the loan has been parked and while the balance will remain outstanding, it will not accrue interest. The couple will pay interest and capital on the remaining porting of the loan.
Irish Mortgage Holders Organisation (IMHO) director David Hall described the deal as an exceptional case and said while it reflected "massive progress", it was an "exception" rather than the norm. "If you can't afford to pay anything in your mortgage, there's no automatic write-off," he warned.
He said AIB had decided to allow the level of debt forgiveness on the property, which is deep in negative equity, after working out the cost of repossession and the property's current market value. "The family are paying what they can afford," he said, warning others who might feel they are in a similar position not to get their hopes up that they would qualify for a similar arrangement. "It's very much a case-by-case process," he said.
Speaking to The Irish Times this morning, he warned this or any future deal that would be struck between banks and distressed borrowers would come too late for hundreds of people who have already been forced to surrender their homes.
Last November, the IMHO and AIB agreed an initiative to provide advice and negotiation services to mortgage holders who were in arrears or pre-arrears. Under the agreement, AIB mortgage holders received a free advisory service and independent financial advice on their mortgage situation and were provided with a facility for negotiation with the bank.
The service is being provided from a dedicated IMHO office and was funded by the bank, although the IMHO has insisted the service is “completely independent”. Last week the organisation announced a similar arrangement had been reached with KBC.
All told there were 96,474 loans - or 12.6 per cent of the total mortgage market - in arrears of more than 90 days during the final three months of last year. While this represented a decline of 2,262 compared to the previous quarter, the Central Bank warned a fall in the overall number of arrears cases masked continuing increases in very long-term arrears.
