The bank outlined four specific schemes which it is to roll out for existing primary residential mortgage customers, according to head of mortgages Jim O’Keeffe. These include:
* Standard/short-term forbearance: Where the difficulty is deemed to be short-term, the solution could be interest only, fixed repayment, repayment break, extension of the loan term, capitalisation of arrears, or deferred interest scheme;
* Split mortgage: This will be considered where a customer can afford a mortgage but their income is not sufficient to fully support it. The mortgage is split into two parts. Loan A, repaid on the basis of capital and interest, and Loan B, which is deferred and becomes repayable at a later date;
* A negative equity trade-down: A customer will reduce monthly loan repayments and overall indebtedness by trading down to a property more appropriate to individual circumstances. Following the trade-down, the maximum loan to value must not exceed 175%, inclusive of the negative equity amount being carried forward from the previous property;
* Voluntary sale for loss: This will be considered where the loan is deemed to be unsustainable and the customer is agreeable to sell the property and put an appropriate agreement in place to repay residual debt.
The memo said further details on the buy-to-let strategy would be communicated separately.
The number of private residential mortgages in arrears of 90 days or more at AIB have risen from 6.9% at the end of Q1 2011 to 7.7% at the end of Q1 2012.
Following publication of the Personal Insolvency Bill, there had been hope that mortgage holders in negative equity would be able to write off some of their debts by cutting deals with banks by threatening to file for bankruptcy. However, director of the Free Legal Advice Centre Noeline Blackwell said she was not surprised AIB was not offering a writedown on mortgage debt.
The concern for Flac is, if a bank owns 65% of a person’s debt, they can block them from pursuing personal insolvency arrangements.