Key Post Split mortgages and PIAs compared

Brendan Burgess

Brendan Burgess

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There has been much discussion recently about how the clawback provisions make the PIAs worthless including this post on Askaboutmoney Insolvency act is now redundant


A PIA is still very valuable debt relief.

It's a lot better than a split mortgage.

It is an awful lot better than a deal which makes no adjustment other than to accept a reduced payment.

The clawback provisions are a bit complicated to explain and understand, but I have given examples in this post: How the clawback in a PIA works

I will use the following example to show the difference between the three options.

Mortgage |€300k
Interest rate |5%
Property value at time of PIA|€150k
Write down of mortgage under PIA/ warehouse under split |€100k
Repayments on a €300k mortgage@5% over 20 years|€2,000
Interest on a €300k mortgage @5%|€1,250
Repayments on a €200k mortgage @5% over 20 years|€1,300

The first column is where no deal is done other than to accept a lower monthly repayment. This is the same as a Bank of Ireland split mortgage which charges interest on the warehouse but rolls it up.

The second column is an AIB/ptsb split which charges no interest on the warehouse.

Assume that they sell after 10 years for €200k - €150k above the current value


| No deal/{br}Bank of Ireland split | Split| PIA
Repayments| €1,300 |€1,300|€1,300
Estimated mortgage balance after 10 years|€290k|€114k|€114k
Clawback|||€50k
Warehouse||€100k
Sales proceeds| €200k|€200k |€200k
(shortfall) cash|(€90k )|(€14k) |€36k
 
The PIA has many more advantages over a split

The debt-write down can never be added back to the mortgage. Under a split, the lender can move money from the warehouse if the borrower's earnings improve.

If the borrower holds on for 20 years, the clawback is gone completely.
 
What happens is there is no increase in value? The property sells for just €150k

| No deal/{br}Bank of Ireland split | Split| PIA
Repayments| €1,300 |€1,300|€1,300
Estimated mortgage balance after 10 years|€290k|€114k|€114k
Clawback|||
Warehouse||€100k
Sales proceeds| €150k|€150k|€150k
(shortfall) cash|(€140k)|(€64k) |€36k
 
Brendan Burgess said:
The PIA has many more advantages over a split

The debt-write down can never be added back to the mortgage. Under a split, the lender can move money from the warehouse if the borrower's earnings improve.

If the borrower holds on for 20 years, the clawback is gone completely.
Click to expand...

Hi Brendan,

Do you think the Creditor would agree to a PIA, when asked to vote, if they have already offered a 'Split mortgage'?

The reason I'm asking is it states in the PIA guidelines;

You have co-operated under a mortgage
arrears process for a period of 6 months
with your secured creditor in respect of
your principal private residence and the
result was that no alternative repayment
arrangement was agreed or the secured
creditor confirmed it would not put in
place such an arrangement2

Then it states;
This condition does not apply if the PIP believes that,
even if you were to enter into an alternative repayment
arrangement under such a mortgage arrears process, it is
unlikely that you would become solvent within a period of
5 years.

So if the Creditor has offered 'voluntary sale/surrender' and 'split' only in the recent past as the only options to debtors, and the PIA has not been available, then many will have chosen the 'split' option. The parked/warehoused amount will always be there lurking in the background, but it could be wiped out under a PIA. Do you or anybody else think they would vote for/agree to a PIA if the debtor realistically cannot pay back the parked/warehoused amount?

Thanks.
 
Last edited:
Hi Brendan,

thanks for the reply. I was actually wondering what if you accepted the split, but will not now or anytime soon be able to service the warehoused part?

Will they go with a PIA then in your opinion? Taking into account you have other debts i.e credit union loans and credit cards etc.

Thanks.
 
A very interesting point.

If you go with a split and it turns out to be unsustainable?

I suspect that they wouldn't approve of a PIA in that case, as it would probably collapse as well. I expect a high proportion of PIAs to collapse before the 6 years is up.

Brendan
 
Brendan Burgess said:
A very interesting point.

If you go with a split and it turns out to be unsustainable?

I suspect that they wouldn't approve of a PIA in that case, as it would probably collapse as well. I expect a high proportion of PIAs to collapse before the 6 years is up.

Brendan
Click to expand...

Yes Brendan but let's say the repayable amount on the split is higher than a PIA amount, maybe then the PIA might be sustainable but would the creditors agree to this I wonder.

With a 'split' in place the Creditor always has the potential of the debtor's financial situation improving, making way for increased repayments on the active loan by moving some of the warehoused part.

With a PIA, there is the clawback 20 yrs part, if the debtor sells for profit, but if the debtor's financial situation, i.e salary, improves after the 7 year deal, that money is to remain the debtors as the PIA would have seen some debt write down, as opposed to the 'parking/warehousing' in a split.
 
I am fascinated by the idea that the banks will avoid the PIA's, it almost makes a mockery of the ISI if they are allowed do so. Write downs are inevitable, even if they make people pay until death and then take the property there will have to be a write down then, even if they pursue the rest of the deceased estate such as life policies etc. i can see the failure of the ISI resulting in a profound change of government. i could easily see a far left government ensuring ISI tie in its processes with the various housing assocs that people can sell their houses into, agreeing a "sale" price with the banks, on condition of write down on balance. I think a lot more hangs in the balance re the success of these insolvency processes.
 
Yeah I have to agree with you. It will make a mockery of the whole process. If the people do agree " a sale price" with the banks, chances are they wont receive a new mortgage or credit to move though, which will keep those people in their homes and in their negative equity trap. Hopefully the banks won't be allowed to veto the majority of potential PIAs.
 
Please refer to recent case Roache v Start Mortgages DAC [2024] IEHC 666 where Judge Kennedy has made a decision upon clarification of Clawback Calculations in Personal Insolvency Arrangements. An individual entering into a PIA must be fully informed by their PIP of the Judges decision in this case and its full implications, when considering entering into any arrangement.
 
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