Ulster Bank has no plans to write off debt

Louise McBride, Sunday Independent  04 August 2013

Ulster Bank boss Jim Brown has said that the lender does not want to write off the debt of homeowners struggling to repay their mortgage – a stance likely to dash the hopes of distressed mortgage holders hoping to get some of their debt written off under the State's new personal insolvency deals.

"We don't have a policy for writing off debt," Brown told the Sunday Independent last week.

Rather than write off debt, claimed Brown, Ulster Bank instead tries to come to arrangements with struggling homeowners to make their mortgages more affordable – and allow them to stay in their own home. One such arrangement is the split mortgage, where part of a mortgage is parked.

However, the State's new insolvency mechanism, the Insolvency Service of Ireland (ISI), which allows distressed borrowers to strike debt deals with their banks, could run into trouble if banks refuse to write off debt.

The ISI's debt deals are expected to include debt write-offs, particularly for homeowners in negative equity. The ISI has said that it hopes to be in a position to accept applications for the new debt deals later this month.

"Banks are inherently wary of the ISI although they accept that it is now a reality," according to a report published by Stubbs Gazette in conjunction with Red C earlier this year. "They are pushing to settle informally with debtors and so presumably obtain a better deal and avoid practitioner fees."

Brown also warned that Ulster Bank would step up repossessions against customers in mortgage arrears who were refusing to co-operate with the lender.
"About 35 per cent of our customers who are in arrears for more than 90 days haven't engaged with us," said Brown. "I don't think they are all strategic defaulters. I suspect that about 20 per cent of those in arrears may be choosing not to pay. We will be increasing legal activity in those cases."

Ulster Bank was the first bank to offer tracker-mover mortgages – where homeowners can keep their tracker mortgages even if they move house. However, there has not been much demand for Ulster Bank's tracker-mover mortgages so far, according to Brown. "I expect the take-up to improve once house sales pick up," said Brown. "We are starting to see house sales rising."

Ulster Bank trimmed its losses in the first six months of this year, according to results published by the bank last Friday. The bank's losses for the first six months of the year came to €387m – down from €675m over the same months last year.