One in 10 borrowers will get split home loan deal

Only one in 10 of distressed mortgage holders will qualify for the split mortgage solution that includes a significant debt write-down, head of the Irish Mortgage Holders Organisation (IMHO), David Hall, has said.

Eligibility for these split mortgages, which are only available in certain banks, is based on strict affordability criteria. An applicant must be able to cover the payments of 80% of the current market value of the property and have sufficient funds left over to meet the acceptable living standards set out in the new personal insolvency legislation, he said.

Mr Hall was speaking after it emerged that the IMHO had negotiated the restructuring of an AIB mortgage for a Cork family that included a €195,000 debt write-down and the retention of the family home.

The family consisted of a husband and wife and two children. The husband was working, but the wife had lost her job. The original value of the mortgage was €478,000. Under the terms of the split mortgage, the family will make repayments on a mortgage of €200,000. The remaining €83,000 is ‘warehoused’ until the agreed €200,000 mortgage is repaid. If regular mortgage payments are maintained, further reductions are made to the warehoused loan.

“Only between 3,000- 5,000 mortgage holders will qualify for these split mortgages. A lot of people will be disappointed. However, I would encourage everybody in arrears to make enquiries,” said Mr Hall.

“And of those who do qualify, not everybody will get a big [mortgage debt] write-down. Some people may get as little as €2,000 and some people will get nothing. It is based on affordability.”

The IMHO announced last November it entered an agreement with AIB to work with the bank’s mortgage arrears customers. So far, it has negotiated 100 split mortgages for customers of the bank. The IMHO also entered into a similar arrangement with KBC last month.

Earlier this month, the IMHO negotiated a debt write-down of €150,000 on a €400,000 AIB mortgage.

Overall, it is working with 2,000 AIB customers and 360 KBC customers.

Mr Hall said people in arrears who do not qualify for a split mortgage can look at other solutions, including term extensions; mortgage to rent; and, in some cases voluntary surrender.

Last week, it emerged that the advocacy group, New Beginnings, had negotiated a €170,000 debt write- down for an AIB customer.

Ulster Bank says it will deal directly with customers in arrears or representative organisations but it does not offer debt write-downs.

A Bank of Ireland spokesperson says it has a range of measures for customers in arrears, but not debt write-downs.

A Permanent TSB spokes- person said it has no plans to enter into any collaboration with the IMHO or with any other group. It offers split mortgages and will only consider debt forgiveness when the agreed repayments have been made in full.

According to the Department of Finance, there are 79,500 mortgage holders in arrears over 90 days. Mr Hall says how much debt will be written off in the restructuring process cannot be estimated at this stage.

More in this section