It could be described as the kindness of strangers but a remarkable event is taking place in Ireland at present. Bank of Scotland (Ireland) – BoSI – which operated the Halifax banks in Ireland ceased trading in Ireland last year and eight hundred of its former employees now manage its remaining mortgage book and other loans working for a new company called Certus. It is estimated that BoSI could have 50,000 mortgage customers in Ireland.
BoSI has now confirmed that it is restructuring debts owed by some of its buy-to-let customers as well as some ordinary residential mortgage customers where the relevant properties are in significant negative equity and borrowers are unable to repay the debts or maintain mortgage payments. What is truly remarkable is that in some cases the lender is writing off part of the capital owed.
It seems that BoSI have decided that it is possibly easier and cheaper to write-off part of the debt now rather than trying to pursue their customers through the courts for a judgment where it is clear that borrowers simply cannot repay their loans. The CEO of the Irish Brokers Association said that BoSI’s move is based on the realization that you cannot get blood out of a stone.
Examples are also being quoted of properties where the borrower is allowed to sell negative equity property, pay over the proceeds to BoSI and reach agreement with BoSI to limit further liability to the capital shortfall only with liability for future interest being written off.
It remains to be seen if Irish banks will follow BoSI’s lead and begin to restructure mortgages in cases where properties are in serious negative equity and borrowers have no prospect of maintaining contractual mortgage re-payments.