Fianna Fáil Spokesperson on Finance Michael McGrath TD has welcomed the announcement from Permanent TSB that it is prepared to write off mortgage debt in limited circumstances and has called on other banks to follow suit rather than selling loan portfolios to vulture funds for knock down prices.
Deputy McGrath commented, “While today’s announcement is not a seismic shift in terms of tackling the mortgage arrears crisis, it is a welcome recognition by Permanent TSB of the reality that writing off residual mortgage debt is necessary in some cases where the borrower simply does not have the capacity to repay.
“If the banks in Ireland are to make meaningful progress in addressing their large portfolio of non-performing loans, writing off mortgage debt in these circumstances is an option which must be on the table. The banks were recapitalised with tens of billions of euro by the State and some of this money was to deal with the mortgage arrears problem.
“From the perspective of the borrower, this option at least provides some certainty and the prospect of a fresh start. However, many of these buy-to-let properties are rented out and the question of how it impacts on tenants in this situation needs to be addressed.
“In the region of €1.5bn of mortgage debt – relating to both owner occupier and buy-to-let mortgages – has been warehoused to date under the split mortgage ‘solution’. There is no provision as to how the borrower will be able to make the large bullet payment at the end of the warehouse period. In at least some of these cases, the write off option should have been considered.
“There is no prospect – and nor should there be – of some sort of ‘free for all’ mortgage write down in Ireland. However, in certain circumstances where the capacity to repay is simply not there, it is in the interests of both the borrower and the lender that the reality is recognised and writing off some debt is an option on the table.”