AIB deal offers lifeline to home owners
The groundbreaking initiative which links AIB with the Irish Mortgage Holders Organisation (IMHO) has been described as a lifeline for distressed mortgage holders.
The IMHO has urged all other major banks to replicate the initiative. It aims to help between 8,000 and 10,000 distressed AIB borrowers work out long-term sustainable solutions without having to engage directly with AIB, which includes EBS and Haven.
If other banks follow with similar schemes, it could help tens of thousands of mortgage holders in arrears.
The initiative, which is free to homeowners, comes into operation on Nov 18. It sidesteps the Government’s costly Personal Insolvency Practitioners’ service which can cost between €1,500 and €6,000.
The IMHO will act as an independent mediator between the AIB Group and customers seeking a permanent restructuring of their mortgage.
“We are independent of AIB but I want to stress we are completely on the borrowers’ side,” said IMHO director David Hall.
“AIB know we are completely biased towards borrowers and this is a golden opportunity for homeowners to prevent any more repossessions than are necessary.
“The objective here… is to keep as many people in their homes as possible.”
Mr Hall, who has been extremely critical of AIB in the past, described the move as very brave and said it was “imperative” all other banks roll out similar schemes.
AIB will provide around €150,000 for the standalone six-month pilot project during which an office will be manned by five staff independent of, but in the same building as, the IMHO. The organisation hopes to strike between 300 and 400 mortgage deals a month. Mr Hall said neither he nor any of his fellow directors at the IMHO will receive any remuneration or expenses for the project.
With one out of five mortgages in trouble, AIB Group’s head of financial solutions Brendan O’Connor said the bank recognised that some of its customers were reluctant to deal with the bank directly and he viewed the initiative as a means for people “to seek free help and advice from an independent party as part of the resolution process”.
The initiative will include unsecured debt such as credit union loans. AIB strongly hinted it will roll out a new split mortgage deal in the coming weeks. Otherwise, current solutions such as longer-term mortgages, debt writedowns, and interest-only will apply.
Financial expert Eddie Hobbs described the scheme as a wonderful initiative which heralded the start of a sustainable economic model and said other financial institutions should follow.
AIB has €17bn of the estimated €50bn of homes that have plunged into negative equity, according to the latest Central Bank figures.
Department of Finance figures released last week showed that of the almost 700,000 mortgages at the country’s six main banks, 82,624 are in arrears, of which 62,210 have not been restructured.
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