A DUBLIN COUPLE who won a write-down of €200,000 on their mortgage debt were not an isolated case, according to an industry source.
A financial industry insider has told TheJournal.ie that it is “not exceptional” for banks to agree to accept a much reduced figure for mortgage debt – but the lenders do not want it to become public.
The couple made headlines yesterday after it emerged that they had successfully persuaded their home lender Stepstone Mortgages to let them off the hook to the tune of €200,000. After managing to sell their house, they paid back €154,950 on a mortgage debt worth €360,000.
But the industry source said such reductions are not uncommon. “It’s not exceptional. I’ve done it myself,” he said, adding banks do not want the settlements revealed.
Lenders don’t want to have it known, because it undermines the value of their loan book. It could incentivise people to be in a worse financial situation. But Stepstone alone have got to have thousands of cases, and this isn’t a one-off.
The source said settlements can be a pragmatic option for lenders, as pursuing court proceedings is costly and time-consuming. “The time it takes to get through the courts – I’ve experienced case of three and a half years,” he said. “Costs to us can be €15,000 upwards, more if the case is well defended. Then once you do take possession the amount you’ll achieve through auctioning off the home is less, because people aren’t attracted to distressed property.” An example partial copy of a settlement agreement was provided to TheJournal.ie.
If the borrower has no other assets and is not working, the source continued, it is a simple business decision for the lender. “It’s not debt forgiveness,” he said.
It’s just taking a full and final settlement. It’s basically saying we’re not going to pursue further – but if somebody has no means, what’s the point? There is no better option out there [than settling].
He added that repossessions, by contrast, are relatively rare. “I can count the repossessions I’ve dealt with on one hand. I know a lot of people are up in arms about repossessions, but the lenders, especially the prime lenders like Bank of Ireland and AIB, are in no way being aggressive.”
To embed this post, copy the code below on your site
have your say