Mortgage write-off scheme ‘could aid 30,000’

Struggling homeowners could see a portion of their mortgages written off by banks under a new split-mortgages scheme.

It is understood that up to 1,100 AIB and EBS homeowners who have been unable to make repayments could see the value of their loans written down based on the current market value of their homes.

AIB did not comment on the scheme last night.

However, the head of the Irish Mortgage Holders Organisation, David Hall, said up to 30,000 people could be eligible.

He said it had taken a lot of negotiation to get the bank around to offering some debt forgiveness.

“It has been a delicate struggle for the last few months,” he said.

The scheme will be offered on a case-by-case basis and will be determined on affordability. The minimum qualifying criteria is that a customer can make repayments on 80% of the current market value of their home.

If a homeowner has a €300,000 mortgage and the house is only worth €200,000 the bank is willing to accept payments based on 80% or €160,000, with €100,000 parked. In other words the bank would to write off €40,000 once the mortgage holder agrees to service a €160,000 mortgage, if that is all that they can afford. If the customer can afford more they will receive a write-off in line with what they can afford.

If a mortgage happens to come into a lump sum within the first five years of the repayment plan people can receive a further €3,000 write-off for every €7,000 they repay on the warehoused portion of the loan. If they can make lump sum repayments between the fifth and 10th year of the repayment plan they will receive a €2,000 write-off for every €8,000 they repay.

Mr Hall said his grouphas been arguing for an incentive scheme to encourage people to engage with the banks. “There are potentially up to 30,000 people who could be eligible for this scheme, but only 40% of them are not engaging with the bank. This is the incentive that we have been calling for all along.”

The scheme will only be used as a last resort before the bank would have moved to repossess homes and customers, cannot apply to the bank but must wait to be made an offer.


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