ptsb attitude to mortgage shortfall

Brendan Burgess

Brendan Burgess

Founder
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i have copied this from the main thread on ptsb's appearance before the Oireachtas Finance Committee as it's very important.



Ciaran Lynch: You have very high Assisted Voluntary Sales - 1,300
After the disposal, what are you doing with the shortfall

Shane O'Sullivan : 1) The shortfall is the responsibility of the borrower. If they can contribute to the shortfall , we would expect that. If they can't, we won't pursue it. We have learned a lot on our journey. We have no monopoly on good ideas.

The AVS has the least take up. We are piloting an idea now with up to 200 customers about doing a deal on the shortfall, before the Assisted Voluntary Sale.

We have not written off anything yet. We just don't pursue it.

Masding: We do write off the shortfall on a case by case basis.
 
This approach is more standard than not within the banking sector. When a property is sold either voluntarily or by reposession, without any prior agreement in respect of the shortfall a judgement call is generally made internally. If there is some scope for recovery of the shortfall then the bank will commence discussions with the clients in order to reach an agreement. This will generally involve some element of future write-off (capital/interest or both) provided that the clients comply with the agreement. In the event that no agreement can be reached and the bank view is that legal action would not be worth pursuing then no action is taken. The shortfall is not technically written off, but it is fully provided for in the bank books. In time it will be w/o but the clients will not be made aware of this as the bank will retain the right to pursue the clients until the statute of limitations makes this an impossibility.
There are 2 types of write-off!
 
Hi brendan

Yes, but it makes little sense in the Irish context where repossessions are so difficult

I lobbied the banks and the IBF to come up with a Protocol for Unsustainable Mortgages. This would encourage borrowers to realise that their mortgages were unsustainable and they would agree to sell them in an orderly manner in exchange for visibility on the shortfall. Everyone would win.

AIB is now doing that.
ptsb is doing a pilot on it.

Brendan
 
I lobbied the banks and the IBF to come up with a Protocol for Unsustainable Mortgages. This would encourage borrowers to realise that their mortgages were unsustainable and they would agree to sell them in an orderly manner in exchange for visibility on the shortfall. Everyone would win.
Click to expand...
This would require an exact definition of an "unsustainable mortgage". Obviously there are many cases where unsustainability would be regarded as a no brainer. Large level of negative equity, poor property location and little or no chance of an increase in repayment capacity. However, for the bulk of the mortgagage book, unsustainability is effectively a moveable position. This would depend on potential upward movement in the property market, potential for increase in net funds available for repayments, and/or reduction in real value of the loan through inflation. For those loans classified as unsustainable, there is scope to deal with some clients on the basis of agreement to sell within a defined timeframe. Your commentary on the response from Ulster, accurately represents the closed mind attitude taken by many banks towards the process. i.e. an attitude of "we don not write-off debt" is utterly useless in obtaining voluntary sale agreements from clients.
 
Hi brendan

My protocol was aimed at cases where both the borrower and the lender agreed that the mortgage was not sustainable.

However, I have also lobbied on the need for a definition of sustainable mortgage for the benefit of both lender and borrower.
 
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