Thursday, March 14 14:16:27
Banks will now have to write-down at least 100,000 mortgages that have fallen in to arrears and will be made to face up to their "stupid" lending decision of the past, a leading Debt Restructuring Expert said today.
Speaking about the new Mortgage Arrears Plan announced by the Central Bank, yesterday, and how it fits in with the Personal Insolvency Act, Paul Carroll, debt restructuring expert and author of the Guide to the Personal Insolvency Act said that he believes it will make Personal Insolvency arrangements easier.
"The Central Bank and government have finally opened the flood gates for the much anticipated and needed write down of probably more than 100,000 mortgages, whether they are home loans or buy to lets. They have done this by telling the banks if they do not give 'sustainable' solutions to those in arrears they are going to make the Banks make full provisions for the full amount of ALL loans in arrears of 90 days and over," he said.
He added that, as long as the Central Bank imposes the rule, the banks will have to take responsibility for their poor lending decisions.
"But be assured it is not because they wish to help the borrower in difficulty. It is to save their own skin. Because if they do not do this, their write offs would be twice as large and bonuses twice as small."
"We have finally been given the definition of 'sustainable loan modification' as including write downs. Forget about mortgage to rent, split mortgages and all of the other 'bank' driven solutions which were always rubbish solutions. We are finally at the place where an end is in site and maybe a new beginning is upon us!"
"This is why the banks are going to fall in line with the new proposals from the Central Bank. Take Bank of Ireland's recent figures if they were forced to make the full provision for all of its 90+ arrears on home and buy to let loans this would amount to an additional E3.8b provision! That would increase its 2012 losses to E5.8b and wipe out the current shareholders. So the alternative is to be brought unwillingly to the write off table and in so doing saving themselves from bankruptcy," said Mr Carroll.