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Write-Off Debt for Homeowners

Eligible customers will have mortgage split in two and bank will discount loan.

AIB is set to write-off debt immediately for homeowners in arrears who are deemed eligible for a new split mortgage product.

Under the plan, a customer deemed eligible for a split mortgage will have the loan broken into two tranches. The first part, which the customer will be expected to repay, will be based on the current market value of their home, while the other will be warehoused, interest free, for settlement at a later date.

For example, if someone owes €300,000 but the current value of their property is assessed at €200,000, that €200,000 figure becomes the first tranche, with the balance of €100,000 parked for repayment.

It is understood that AIB will, in addition, write-off up to 20 per cent of the first tranche. That means up to €40,000 of the €200,000 in the example above will be written-off by the bank immediately – leaving troubled homeowners servicing a mortgage of €160,000, nearly half the €300,000 outstanding. AIB is calling the write-offs a “partial compromise of principle debt” and a “right-sizing of the loan”.

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