Homeowners in arrears must pay 20% debt shortfall after house sale

Permanent TSB customers in mortgage arrears who agree to a voluntary sale of their home will have to pay 20% of the shortfall of what they owe before they can qualify for a debt write-down.

Speaking at the release of the State-owned bank’s results for the first six months of the year, chief executive Jeremy Masding said 500 customers had entered into this arrangement, having failed to agree a sustainable mortgage restructuring plan.

When PTSB has sold the house it will look for the customer to make up a minimum of 20% of the shortfall between the sales proceeds and the amount outstanding on the mortgage. This can be paid over 10 years, at which point the bank would consider a write-off of the balance.

In a situation where a customer hands back the keys of the house without first entering into an agreement with PTSB, then the bank will pursue that person for the entire shortfall.

To date, 80 PTSB customers have handed back the keys of the house.

The bank posted a €171m loss before exceptional items for the period from January to June, which is a huge improvement on the same period in 2013 when it recorded a €449m loss.

The minister for finance, Michael Noonan, welcomed the results. “It is likely to be an investable proposition well ahead of our original timetable given the significant improvements made by management and the continued improvement in the Irish economy,” he said.

The Government has pumped €4bn into Irish Life & Permanent to cover losses. It has recouped €1.3bn through the sale of Irish Life. However, Mr Masding said it was unlikely that the taxpayer will ever see the full €2.7bn investment in PTSB, although he declined to speculate how much the bank would generate for the State when it was returned to the private fold.

He said his focus was on “making it [PTSB] as viable and as valuable as possible”. He predicted the bank would return to outright profitability in 2017, or possibly before then, at which time it would be an “attractive proposition for investors”.