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Dublin: 16 °C Friday 31 October, 2014

AIB may forgive debt for struggling mortgage holders

The majority State-owned bank says it might write off a portion of some home loans, in a bid to help out homeowners.

AIB chairman David Hodgkinson says his bank may consider debt forgiveness for some mortgage holders.
AIB chairman David Hodgkinson says his bank may consider debt forgiveness for some mortgage holders.
Image: Julien Behal/PA Wire

STRUGGLING MORTGAGE HOLDERS have been given some good news this morning, after one of the country’s largest lenders said it would consider writing off parts of some of its mortgages.

Chief executive David Hodgkinson said last night that the government’s latest round of recapitalisations – which will see the bank take on a further €13.3bn in order to be adequately funded through a “worst-case scenario” – gave it the strength to be able to absorb a moderate level of debt forgiveness.

“We are working on initiatives that go beyond just deferring problems,” Reuters quotes Hodgkinson as telling a news conference, adding that the bank was being given the means to “seek better solutions”.

Debt forgiveness, he confirmed, was “one of the options” being considered, adding the caveat that a debt forgiveness deal would “depend on the situation of the customer, how transparent they are with us on their financial affairs, and how deep a hole they are in.”

Simon Carswell of the Irish Times adds that the deal would need the approval of the Government, which now owns over 92 per cent of AIB, and the Central Bank of Ireland.

Hodgkinson also told this morning’s Morning Ireland that economies were usually surprisingly able to cope with property crashes, and did not think that the current circumstances would prove to be much different.

The Irish Independent reports that a similar move was being discussed by the Cardinal consortium when it was arranging its takeover of EBS Building Society, which was later blocked by finance minister Michael Noonan in advance of last week’s stress tests. EBS is now to be merged with AIB.

The announcement came on a day that the bank announced it would be forced to cut 2,000 jobs in the next two years, having run up a €10.2bn loss for 2010 – largely accumulated through NAMA transfers and bad debt provisions.

It also comes after NAMA chairman Frank Daly said his agency was considering offering loans for property deals as part of its efforts to restore some momentum to the property market.

Elsewhere earlier this week, Permanent TSB said it was considering offering discounts to tracker mortgage holders if they were able to increase their monthly repayments.

Government working on plan for mortgage holders according to Brian Hayes >

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