Mortgage holders get part of debt written off

Rabidlamb

http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-holders-get-part-of-debt-written-off-2533407.html

By Charlie Weston Personal Finance Editor

Thursday February 10 2011

A NUMBER of heavily indebted mortgage holders have managed to get some of their debt written off.

Bank of Scotland (Ireland), which shut down its operations here last year, last night admitted it was working with customers to "restructure their debt in exceptional circumstances".

It had previously denied it was doing any deals with people to allow them to write off some of their debt. The bank, which also had the Halifax brand here, is doing deals mostly with buy-to-let property investors.

However, brokers said a small number of residential mortgage holders had also managed to get some debts written off.

Brokers said the bank was cutting deals with people who were unable to repay the full amount. However, domestic lenders have so far shown a reluctance to restructure the debts of mortgage holders.

It is understood the bank is prepared to reduce the capital owed by people who are in negative equity and have defaulted on their mortgage repayments.

In a statement it said: "It is Bank of Scotland policy that mortgage customers are required to repay their debt in full. The bank will, of course, work with customers to restructure their debt on an exceptional basis and when the bona fides need arises. It is bank policy not to discuss individual cases in public forums."

Michael Dowling of the Independent Mortgage Advisers Federation said he had dealt with a number of instances where both buy-to-let investors and residential mortgage holders who were in trouble had managed to cut a deal, with the bank writing off part of the capital owed.

He said British banks tended to be far more flexible about debt write-offs than domestic lenders. But he stressed that did not mean they were a soft touch either.

Default

"They (Bank of Scotland) don't want people arriving at their door saying 'I owe €250,000. Here is €200,000 now'. But if you are in default, they will do a deal with you," Mr Dowling said.

He added that if the bank knew or suspected you had assets or cash, it would not cut a deal.

Mr Dowling recently helped a borrower who owed €1.8m on a home that was valued at €2.5m at the height of the boom. The house needed to be sold and went for €900,000.

The bank agreed to take the €900,000 and allowed the remaining €900,000 to be paid off over 25 years, interest-free. Repaying the capital only meant that up to €300,000 will be saved by the borrower in interest over 25 years.

"Bank of Scotland has written off Ireland as an entity. If a deal is to be done, they will do it and do it now rather than in 10 to 15 years' time," Mr Dowling said.

No real figures, only hearsay & conjecture, they are forms of evidence.
I'd like to see how they work out these write offs on a case by case basis.
It seems they'll write off some of the debt then leave you with an unsecured personal loan for the remainder.
I know they've pulled out & this is a winding up operation but what about other banks doing the same ?.

seamus

Rabidlamb wrote: »

No real figures, only hearsay & conjecture, they are forms of evidence.
I'd like to see how they work out these write offs on a case by case basis.
It seems they'll write off some of the debt then leave you with an unsecured personal loan for the remainder.
I know they've pulled out & this is a winding up operation but what about other banks doing the same ?.

It's unlikely that other banks will do the same. BOSI are basically looking to get the flock out of here ASAP.

In "restructuring" people's debt, they're probably transferring mortgages over to another company, or a holding company under BOS. If anyone is an serious negative equity and/or default, it will be either impossible or ill-advised to transfer the mortgage as-is, so they're more than likely offering to take whatever the market value is for the house and write off the rest of the debt (assuming it's not huge money), rather than go through protracted court battles to get the rest of the money from someone who doesn't have it. This winds up their business here quickly, saving administrative costs in the long run.

Though despite my first sentence, I can see Irish lenders having no choice but to become "softer" about write-offs than they are. UK lenders went through the property collapse there in the 80s, so they know the score and how to get things sorted quickly. Irish lenders have never had to deal with a collapse on this scale and so will retain their hardline on "pay back every cent" until they realise that it's costing them more in legal and admin fees than simply writing off chunks of the debt.