AIB have allowed homeowners to keep their property and it is the largest writedown involving a family home which was not repossessed. The agreement was negotiated informally between AIB and its customer through a third party broker, the Irish Mortgage Holders Organisation.
Last November, AIB entered into an arrangement with the Irish Mortgage Holders Organisation, a group which was set-up to help struggling borrowers. Since the arrangement was put in place, a number of deals have been done between the bank and its customers which involve debt writedown. This latest deal involves a married couple, who have two children, with a mortgage of €400,000, which had become unmanageable and would have resulted in the family losing their home.
Under the deal, AIB agreed to write off €150,000 of the loan, as well as parking a portion of it on condition that the owners continue to pay capital and interest on around €200,000. AIB would not comment on the deal but bank sources confirmed that it had been agreed. Sources also said any such deal would only be done if the value of the house involved had dropped dramatically and the owners were unable to afford the original loan.
There have been large mortgage debt write-offs in the past, but this is believed to be the first time debt was forgiven and a family was allowed to stay in their home.
It is understood the husband works in the private sector and the wife is a public servant, but the couple have seen their income collapse due to pay cuts, hikes in income taxes and other levies.
The couple are based in the greater Dublin area and have two children. They owe €400,000 after borrowing to buy their home during the boom. This figure includes €30,000 of arrears.
While they don’t hold any buy-to-let or holiday home mortgages, they are struggling with loans, credit card debt and other borrowings.
Revelations about the huge debt forgiveness deal are expected to give hope to others who are unable to meet their repayments and fear that their family will be forced to give up their home.
Some 96,000 residential mortgage accounts are three months or more in arrears, while another 40,000 are less than three months in arrears.
The deal is just one of 250 completed by AIB and the Irish Mortgage Holders Organisation (IMHO) following a formal agreement announced last November, which sees the IMHO as an independent third party to negotiate between the bank and its mortgage holders in arrears.
AIB also includes EBS and Haven. The bank launched a split mortgage product – where part of the debt is parked with no payments made on it and no interest accruing on this – that also involves debt write-offs.
Approached about the deal, Mr Hall confirmed it but stressed that each agreement was agreed on a case-by-case basis.
He said: “This is a very significant development. It is the first time there has been a large amount of money written off the mortgage attached to a family home while the family gets to stay in that home.”