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IMHO Reports an Increase in Debt Write-Down Agreements

The Irish Mortgage Holders’ Organisation (IMHO), which brokers deals between banks and mortgage holders experiencing difficulties, has reported a dramatic upswing in activity.

The group has arranged nearly 100 deals that included some variety of debt reduction. These particular arrangements involved Allied Irish Banks customers.

One case involved a Cork couple whose €195,000 in mortgage debt was written off by the bank, which also permitted them and their two children to remain in the home. The couple had originally borrowed €478,000 to buy the property.

The arrangement is believed to be one of the biggest mortgage write-downs that the bank has agreed to. Under its terms, the family will be required to service a new 30-year variable rate mortgage amounting to €200,000. €195,000 will be written off and an additional €100,000 will be warehoused, or essentially parked until a later date.

David Hall, a founder of the IMHO, confirmed that there has been a huge increase in activity related to mortgage debt.

He said that after six years of inactivity, the banks are suddenly either commencing repossession proceedings or restructuring mortgage deals.

In November 2014, the IMHO agreed to participate in an initiative with AIB to supply negotiation services to mortgage holders who had fallen behind in their payments.

Mr Hall said that the IMHO was presently dealing with over 2,000 clients from either AIB or EBS, its building society, as well as 360 customers from KBC bank.

He admitted that there was anecdotal evidence that hundreds of customers were negotiating debt write-down deals with the banks without brokerage involvement.

AIB has declined to comment on its policy regarding debt write-down or the published IMHO figures.

The bank recently launched a new split-mortgage offering that includes a form of automatic debt write-down.

The deal allows eligible customers to break their loan down into three stages.

The first stage, which the customer will be required to repay, will be based on their home’s current market value. Another will be parked, interest-free, for later settlement, and the third will be written off.

Mr. Hall said that this new split resolves the uncertainty regarding tenure security in the property, but the more noteworthy aspect is the fact that the product itself contains a debt write-off.

Structural Defects Insurance

Michael McGrath, finance spokesman for Fianna Fáil, said that greater consistency is needed in the way that mortgage arrears cases are being dealt with. He pointed out that the AIB’s decision to write-off mortgages for around 100 distressed borrowers presents a sharp contrast to the country’s other banking pillar, the Bank of Ireland, which does not offer any kind of debt forgiveness.

He stated that a workable solution for one bank could easily be unsupportable for another, resulting in some homeowners staying in their homes while others in similar circumstances experience repossessions.

The latest figures from the Central Bank suggest that 12.6 percent of the mortgage market, which amounts to 96,474 loans, were in arrears of at least 90 days during the final quarter of 2014.

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