# New plans will increase unnecessary repossessions dramatically



## Brendan Burgess (13 Mar 2013)

Unfortunately the Central Bank doesn't really understand what a sustainable mortgage is.  This is their definition



> sustainable solution which is likely to enable the customer to meet the original or, as appropriate, the amended terms of the mortgage over the full remaining life of the mortgage, including repayment of the original or an agreed revised principal sum where offered. This may include an interest only or other temporary solution for a period if it is likely that full repayment of the original or revised principal will be achieved over time, or where there is a payment plan to return the account to sustainability through the clearance of arrears;



This seems to suggest that the only solutions acceptable to the Central Bank will be one where  the borrower repays their capital in full. 

There will be many solutions, such as split mortgages, where the capital will not be repaid in full, according to the original term. 

The lender will have a choice of writing off the capital or repossessing the home.  It seems that repossessing the home, especially where there is a tracker will be the main option. 

This is madness.


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## reddanmm (13 Mar 2013)

Hi Brendan did i also hear on drivetime that on the split mortgage issue TSB will charge 1% interest on the parked mortgage and AIB will charge the current variable rate .


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## SparkRite (13 Mar 2013)

reddanmm said:


> Hi Brendan did i also hear on drivetime that on the split mortgage issue TSB will charge 1% interest on the parked mortgage and AIB will charge the current variable rate .




What I heard was that AIB 0%, TSB 1% and BOI current variable rate.

Good old BOI. :-(


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## Brendan Burgess (13 Mar 2013)

reddanmm said:


> Hi Brendan did i also hear on drivetime that on the split mortgage issue TSB will charge 1% interest on the parked mortgage and AIB will charge the current variable rate .



Sorry red

I didn't hear  Drivetime so I don't know what you might have heard. 

As I understand it, ptsb are charging 1% on the parked mortgage and AIB is not charging any interest.

Brendan


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## ashambles (13 Mar 2013)

> or an agreed revised principal sum where offered



That seems to imply there can be cases where the full sum isn't repaid?

I've my doubts over split mortgages, a number of struggling mortgage holders seem to be on interest only tracker mortgages. Certainly many of the BTL mortgages seem to be of this type.

Interest only trackers are so cheap (relatively) that anyone who's genuinely struggling to repay can't handle a capital repayment mortgage even on a split mortgage. Take a 500k mortgage, at 1.5% interest only that's only 625 euro a month, however a 250k mortgage at 1.5% with a capital repayment over 25 years is closer to 1000 euro a month.

On a normal SVR it'd be a substantial saving. So depends on the breakdown of the mortgages and who's defaulting.


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## reddanmm (14 Mar 2013)

Hi Brendan correction from above post ,its Bank Of Ireland that will charge customers the variable interest rate on the parked side of spilt mortgages as per Charlie Weston on Pat Kenny this morning  
Not much use for BOI customers wanting to take this route


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## Brendan Burgess (14 Mar 2013)

Hi Red

From the customer's point of view, paying no interest is the ideal solution. However, I think it's ridiculously generous on AIB's part.  It is crazy that people are repaying capital while getting an interest holiday.

Bank of Ireland is taking the right approach.  However, it needs to be agreed that if after, say, 5 years the property is sold, the shortfall will be written off.


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## Dr.Debt (14 Mar 2013)

In my oppinion, it seems that the Central Bank and other main banks have  finally got a grip on how to solve the mortgage arrears and debt crisis. The  measures announced this week are very welcome indeed and very credible.  There will be no upfront, mass write-off of debt and by in large,  portions of unsustainable mortgages that cannot be paid now will be  parked or warehoused into the future. The warehoused portion of the  mortgage will be largely the negative equity portion of the debt which  really can only ever be considered as unsecured and "doubtful". By  allowing the debtor to park the "doubtful"debt at 0% interest, it  entices debtors to avoid the bankruptcy route and gives the bank an  opportunity to recover some or all of this debt over the next twenty to  forty years. It places the bank in a much better position than having to  write it all off NOW, which is the only other credible option

The AIB approach is the correct one. The 0% interest rate on the parked debt will be enough in most cases to hold Debtors back from bankruptcy
and  they get to pay back a mortgage (interest and capital) based on an  amount that better reflects the true market value of their home.
Brendan,  Its better for the banks to take a pragmatic approach on charging a  zero or low percentage on the "doubtful debt" and SUCCEEDING than  continuing with a head in the sand approach and FAILING (as seems to be  the BOI approach) Somehow I think BOI will revise their stance on this  sooner rather than later. 

The banks have a target to engage with  each mortgage holder who is in arrears and they are obliged to come up  with a sustainable solution for each case within a predetermined time  frame. Failure to do this successfully means that a new Central Bank requirement will kick in, requiring them to write the debt down to the realisable value of the property. The banks will obviously want to avoid this.

These latest measures radically reduce the impact that  the Personal Insolvency Act will play in the resolution of this crisis.  It seems that the PIA will now only deal with the very complex cases  where there are many Creditors involved. I think the banks  were never keen on the Personal Insolvency Act and I think Debtors will  have much less need to use the Act if there is a clear and workable  process being adopted,that satisfies all parties. It seems clear to me hat the banks will try to avoid the PIA as much as possible.

These latest measures wont  suit everyone, especially those who held unrealistic notions of wiping  the slate clean with the minimum of pain but then again the banks were never in a position to weather that type of storm.


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