Bankruptcy threat ‘forcing banks to offer mortgage-holders writedowns’

Mortgage lobby group New Beginning has said that the only reason Permanent TSB has decided to offer writedowns on mortgage debt is to discourage people from entering the insolvency process.

Permanent TSB is testing a new scheme which would allow debtors to clear their mortgage debts if they sell their properties and pay off what they can of the outstanding balance. The bank will then write off the remaining debt allowing homeowners to avoid bankruptcy.

Ross Maguire of New Beginning said that the banks are terrified of people taking the insolvency route and have been forced into offering deals to homeowners.

“This is just the start. Banks are really frightened by bankruptcy and insolvency and are now being forced to face up to the fact that the law has changed and people have the power to rid themselves of unsustainable debt.

“In the UK in 2009 alone there were over 90,000 bankruptcies and even more individual voluntary arrangements — the same must happen here if we are to return to normality.

“While banks clearly have a role in the overall solution they are being dragged to the table.

“It is time for people to stop waiting for the banks and to take the law into their own hands. As people do this in greater numbers the deals will get better and better,” Mr Maguire said.

It is understood that Permanent TSB is contacting people who it deems are in trouble and offering them a voluntary assisted sale.

“If the loan is deemed unaffordable and/or unsustainable, one of the solutions the asset management unit (like other banks) is proposing to customers is called assisted voluntary sale,” the bank said.