Case study AIB looking for Voluntary Surrender of PPR and "will do a deal" on shortfall

PIA option
This isn't really an option, as AIB would probably veto it.

Reduce mortgage to €140k and write off shortfall after 6 years.

Write off balance on unsecured loans after 6 years.

It's unlikely that you will keep the arrangement, so why put yourself through 6 years of hassle.

Split mortgage option

The best split mortgage they could offer you would be along the following lines

Active mortgage€140kSplit mortgage€220kThe repayments on the active part would be around €700 a month over 30 years. But where would that leave you? You would still owe the deferred part.

When your income increases over the coming years, they would move part of the split mortgage into the active mortgage and your repayments would increase. You would spend the next 30 years paying off your negative equity.

Surrender house now
If AIB agrees to write off the shortfall, then you have a fantastic deal. Sure you lose your home, but you also lose a €220k mortgage shortfall.

You will have to rent somewhere and it will be disruptive, but when your earnings increase, you will be in a position to accumulate savings again.
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I will go requote my original pros and cons of all options.

If the PIP considers your house to be suitable for your needs and you can repay a sustainable mortgage on it, he can put a proposal along those lines. However, AIB is under no obligation to approve it and I suspect that they will reject it.

The PIP will last up to 6 years. I suspect that you won't stick to the conditions and you will be back to square one. The bank will get any gain in the value of the property over the following 15(?) years.

If you really, really want to keep your home, you could go for it.

But AIB is doing deals on mortgage debt now. They have offered you some sort of deal. I would grab it if it means becoming mortgage free.

You will have to be very careful of geting advice from a PIP, as they have a vested interest in you going for a PIA rather than a voluntary agreement with the lender.

Brendan
 
Thanks Brendan and Dr Debt. They have given no details of the "deal" and on last conversation simply advised me that I was liable the shortfall in full. I understand the pip will have a vested interest but I think they will have a better chance at negotiating that I will. They seem to be taking quote a hard line on my particular case, though i may be biased on that
 
Introuble83 said:
. They have given no details of the "deal" and on last conversation simply advised me that I was liable the shortfall in full.

They seem to be taking quote a hard line on my particular case, though i may be biased on that
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Are they a hard line or a realistic line? Far better for you to do what they have suggested and sell voluntarily. My understanding is that banks are going to start selling houses where it is necessary for their bottom line. You wanting to keep it is neither here nor there in that matter. And actually you'd be a lot better off if you get rid of the mortgage. That might seem cold and callous to you but you work in a bank so you know how it is.

In relation to deals, it seems the banks are preaching the mantra, 'liable for the shortfall' but what will happen is that they will look at your income and outgoing and then if you cannot afford too pay them they will in effect write it off but they will never confirm this to you.

As a bank official you are particularly worried about the personal loan you have with your employer. No doubt there are lots like you in banks and you're certainly not the first on AAM in this situation and it might be an idea to chat to someone in your own bank about this and make a clean breast of your situation. Perhaps they can help you with this debt by restructuring or reducing the interest rate etc.
 
I formally applied for a split mortgage which was turn down on the basis that the mortgage is now unsustainable. I spoke with the bank friday and they advised me that they want me to volunatarily sell my family home and "do a deal" on the shortfall.
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If you could get some clarification on what the deal might be, then it would be worth going for. I think you should ask this first.

If they don't clarify it, then it's hard to know. There are risks with both outcomes. On balance, a sale followed by a DSA would be the cleanest.
 
I dont know why others here are repeatedly telling you to agree to sell the house. In my opinion that is completely reckless.

1) You need the house. You have a small family. Do you really want to take them out of their home and into a less secure renting situation. If you give up your house you will find it very difficult to get another mortgage down the road.
2) As Dr.Debt said already, the new laws are presented with strong emphasis on the debtor retaining their home during the debt workout.
3) Your bank has mentioned a deal but in your last meeting has advised you that you will still be on the hook for the NE shortfall. That's not a "DEAL"
4) I think that Brendan is completely wrong when he says that the bank will veto a PIP proposal. If the bank vetos the PIPs proposal and then proceeds to seek a court order to repossess the house, no Judge is going to look favorably on that type of shinanigans. In my understanding (from contacts within the Banking industry) the banks will not veto this type of case.

And for Brendan to say that PIPs ONLY have their own interests at heart, that is complete bonkers. If a PIP takes your case on and the bank vetoes the proposal the PIP will receive a big fat nothing for his time and effort.
Why on earth would a PIP sign up for that.

If I was you I would do the following :

1) Try and make regular monthly payments on your mortgage based on a mortgage level of 140K. If you can show that you can afford to repay a mortgage of 140K, it will help you a lot. Make this your top priority.
2) Get it into your head that you want to keep your home and fight tooth and nail for this
3) Engage with the PIA process as soon as it goes live.

Just remember, The banks have their own agenda. The bank will do what's best FOR THE BANK. You need to do what's best for YOU and your family
 
Importer said:
And for Brendan to say that PIPs ONLY have their own interests at heart, that is complete bonkers.
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Hi Importer

I welcome you disagreeing with me. But please do not misquote me and in particular, highlighting words which I did not use.

You will have to be very careful of geting advice from a PIP, as they have a vested interest in you going for a PIA rather than a voluntary agreement with the lender.
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PIPS have a vested interest. They will get a fee from a PIA. They will get no fee from a voluntary arrangement. The OP must be aware of this. I would imagine that most Pips will do what they think is best, but they will be influenced by the prospect of earning fees and it may well colour their judgement.
 
4) I think that Brendan is completely wrong when he says that the bank will veto a PIP proposal. If the bank vetos the PIPs proposal and then proceeds to seek a court order to repossess the house, no Judge is going to look favorably on that type of shinanigans. In my understanding (from contacts within the Banking industry) the banks will not veto this type of case.
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I am going to say it again

PIA option
This isn't really an option, as AIB would probably veto it.

Reduce mortgage to €140k and write off shortfall after 6 years.

Write off balance on unsecured loans after 6 years.

It's unlikely that you will keep the arrangement, so why put yourself through 6 years of hassle.
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The behaviour of the banks is hard to predict, which is why I say that they will "probably" veto the proposal. They have already deemed it "unsustainable". I doubt if the PIP will change that. The PIP may also consider it unsustainable and not recommend that he keeps it.

But even if the PIP convinces AIB to change their mind, would that be a better option? If the OP can convince to write off the mortgage shortfall over a short period or immediately, it's a far better option for him than entering a PIA which may well fail anyway.
 
Brendan To be fair I think you may be a little bit out of touch with the legislation when you say - "The PIP may also consider it unsustainable and not recommend that he keeps it".
Under the legislation the PIP is not permitted to propose anything which involves the debtor losing his/her home unless the PIP forms the view that the costs of continuing to reside there are disproportionately large.
In this particular case I interpret the facts of the case to be that the OP is living in a relatively modest house with normal or average costs of residency.
If that is the case then neither the bank or the PIP is allowed to insist that the house be sold as part of the PIA.

Regarding the veto, I agree with you that the bank's stance on vetos is hard to predict however we have been assured by the Minister time and time again that the veto provision in the act will be revisited "early" if the banks are seen to be misusing it. Not only do I disagree with you that the bank will "probably" veto, I would say that they will not be able to.

The overall objective of the PIA in the 1st place was to assist people like the OP. People who bought houses at the height of the boom and now find themselves in huge negative equity and unsustainable mortgages.
As far as I understand it, Split mortgages will be a large part of the work-out of this unholy mess. Anybody who lives in a normal average modest house who is able to meet mortgage payments based on CURRENT market value of that house will be allowed stay in their homes. I believe the OP to be among that large category of people

Now I will say my piece once again also.
Under no circumstances should the OP agree to surrender her home to the bank and continue to be saddled with an unsecured loan of 220K.
If she enters the PIA process, I believe that there is a very high chance that she will be able to keep her home, enter a split mortgage agreement
with the bank and have some or all of her unsecured debt written off over 5/6 years.

To recommend that the OP would give up her home now, and remain saddled with a loan of 220,000 and have no realistic chance of re-entering home ownership in the medium term will be of no help to her at all and is entirely reckless advice.
Private rent will probably cost more than her mortgage. The bank will be looking for a repayment plan on the 220K and her other unsecured loans will remain. Her overall situation will be immediately worse.
 
I think I'd want to see what the bank offer is in writing and in detail.

There's only a couple of reasons for them being vague on it. I can't imagine any of those reasons are not to the advantage of the bank.
 
The content of the "deal" would be very important however the OP already mentions in post No.22 that the bank has informed her, in her last meeting with them, that she would be responsible for the shortfall "in full". This would match my understanding of how the banks are operating at the current time. They might be offering "deals" but they are not offering "write-offs" In fact they are offering very very little. I suspect that the bank's idea of a "deal" in this particular case is allowing her to sell a house that is in negative equity.
 
Personally I would ignore what's not in writing. Unless the bank writes off a lot of this debt, it looks unsustainable to my untrained eye.

The bank don't seem to be offering anything here. Other than to take the house off the OP and leave them with no house but still with the full amount of the debt. But the bank get back a little bit from the sale of the house.

It would make more sense to leave the OP in the house and make back more of the money over a longer period. That they don't want to do that, suggests to me the bank realise its not sustainable either. Especially over a longer term.
 
Importer said:
If she enters the PIA process, I believe that there is a very high chance that she will be able to keep her home, enter a split mortgage agreement
with the bank and have some or all of her unsecured debt written off over 5/6 years.

.
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Can you show us how this would work with figures please so that we can understand if what you are suggesting is sustainable for the OP.
 
Yes, I would agree that the 360K mortgage is unsustainable but a split mortgage might be manageable for the OP.

My guess is that the bank has introduced this talk about taking back the house to try and get the OP to pay more towards her mortgage and less to her unsecured debts. At least I have seen other variations of this along a similar theme, recently.

My advice to the OP would be to sit tight where she is, for now.
 
To recommend that the OP would give up her home now, and remain saddled with a loan of 220,000... is reckless
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Who is recommending this?

The heading suggests that AIB will "do a deal" on the shortfall, although, the story changes later on.

If AIB agrees to write off the shortfall in full immediately, would you agree that the OP should go for this? Or would you prefer to see them saddled with negative equity for many, many years?

I think that he should check out what deal is on offer, and then decide.
If they don't commit in advance, he has to balance up the pros and cons of a DSA vs a PIA.

If I was his PIP, I would propose a DSA where the debt is written off immediately or over one year. I am guessing, and it's only a guess, that AIB would probably not veto that.

So after one year he is debt free and solvent again.
 
Maybe I'm not reading it right, but its not just the mortgage either, there's other loans as-well. If you're on the back foot like that, it just doesn't seem realistic to keep that up long term. Considering increasing taxes and family expenses. I think I would be looking for a better deal/plan that keeps your sanity going forward.
 
Hi Brendan

I have noticed a reference by you on a few occasions that a DSA can be used to write off a debt immediately or within one year. I wasn't aware of it. Where is that said in the legislation ?
 
Brendan, as above why do you keep mentioning the 1 year on the dsa? surely if a bank does agree on a dsa they will want every penny they can get, why let me off with 1 year if they can drag it out until 5? Regaridng the "deal" they advised me they wont give any details until the house is up for sale, futhermore, the following conversation they advised me that i am liable in full for the shortfall. I still havent received the letter from them outlining their intentions, that was 3 weeks ago now. Im only going to correspond in writing going forward as in not taking vague details given to me as material facts. Even if i dont propose a dsa or pia I may get a professional to negotitate or at least speak on my behalf. Im fairly well vearsed with dealing with banks but even I am hitting a brick wall with the case.
 
Dr.Debt said:
Hi Brendan

I have noticed a reference by you on a few occasions that a DSA can be used to write off a debt immediately or within one year. I wasn't aware of it. Where is that said in the legislation ?
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Hi Dr Debt

The legislation says that the DSA must be for a period not in excess of 5 years. This does not mean that they must be for 5 years, although many assume that.
 
sahd said:
Apart from that - a DSA (Debt Settlement Arrangement) is only for unsecured debts - so would it be evan valid in this case?
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Hi sahd

My recommendations are based on the expectation that lenders will be much more flexible with DSAs than with PIAs.

The recommendation in this case is to sell the home. The mortgage shortfall will then be an unsecured debt and he can apply for a DSA.
 
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