ANY mortgage debt forgiveness scheme implemented by AIB could involve the bank taking a share in the ownership of the houses of those in arrears, it emerged yesterday.
AIB executive chairman David Hodgkinson said default is a “painful” thing to go through and it shouldn’t be talked about like it is an easy option. The bank’s chairman said that it is unlikely that it would write-off some mortgage debt and leave the homeowner with a 100% stake in their house.
AIB is considering “all options” for mortgage customers who can’t repay their loans. It said it is “actively discussing” long- term, industry-wide solutions with the Central Bank. The bank would not say what these solutions are but it is understood one of them would be some form of debt forgiveness for homeowners who can’t pay their mortgage.
The Central Bank is meeting today to discuss the proposals.
Mortgage arrears at AIB have increased “significantly” with the lender having sent proposals to the Central Bank on how they can deal with the issue.
Almost 4% of those who have residential owner occupier mortgages have been unable to repay for 90 days or more, up from 2.87% at the end of last year. The arrears figure for buy to let mortgages has however soared from 9.6% to 16.5% in arrears of more than 90 days. The bank said unemployment, wage cuts and high levels of personal debt continue to be the main drivers of increased arrears.
The bank said that it will take time to get to where it wants to be, adding that there is a “huge amount” of work to be done to repair the damage done.
It wants to “reconnect” with its customers and the community and also said it wants to be much better at making credit available but it stressed it had to act responsibly when it came to lending.
The bank is looking at extending its opening hours and increasing the number of services it provides.
Director of personal and business banking, Bernard Byrne said that the bank needs to do more and is also investing in technology with a new focus on the customer.
AIB executive chairman David Hodgkinson said the bank had been damaged by “inappropriate behaviour” in the past and said the bank’s actions had reflected a “herd mentality” rather than driven by any “malevolent” motivation.
The bank reported an underlying first-half loss of €2.6 billion compared to €2.1bn for the same six month period a year earlier. However, when boosted by gains from the sale of its Polish unit, AIB actually posted a profit of €2.24bn.
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