# Why are borrowers not using the ISI to get mortgage write downs?



## demoivre (1 Jun 2016)

Brendan Burgess said:


> This implies that 19,519 borrowers were classified as unsustainable - i.e. they were not offered an ARA.



And yet again it begs the question why aren't these borrowers using the ISI to get debt write down?


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## Brendan Burgess (1 Jun 2016)

In most cases where the lender can't make the mortgage sustainable, the ISI won't be able to do so either. 

The ISI is useful where the borrower has engaged and is paying a meaningful amount and they are in deep negative equity.

Brendan


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## demoivre (2 Jun 2016)

Brendan Burgess said:


> In most cases where the lender can't make the mortgage sustainable, the ISI won't be able to do so either.



Why not? The bank would deem a borrower paying €600 per month on a €300k mortgage on a property worth €150k unsustainable. A PIA could write off €100k , park €100k and pay down the remainder of €100k with the €600 per month. Why are only about 1% of arrears cases being dealt with through the ISI when one of it's main functions was to keep people in their homes ?


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## Brendan Burgess (2 Jun 2016)

Hi demoivre


In the case you quote, the lender would probably have offered a split mortgage of €150k to the borrower. So they would not need to go to the ISI. ( It's unlikely that the lender would accept an effective write down of a mortgage to €100k on a house worth €150k)

If the lender did not offer a split, the borrower could apply for a PIA and the court might enforce a write down of €150k.

We would need to know why 19,000 mortgages were classified as unsustainable. 

I have called for the Central Bank to publish a definition of sustainable mortgage. 
The simple version of my definition is "a mortgage is sustainable for the borrower and for the lender if the borrower can afford to pay the market rate interest on the current value of the property" 

In your example, €600 a month would represent 3% of €240,000.  So the lender should just park the €60k and charge interest on what the borrower can afford. 

In fact, the banks are more generous and would split that mortgage 50/50 so that the borrower actually pays down capital with the €600 a month. 


Brendan


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