Speak softly but carry a big stick. That seems to be the approach AIB favours in addressing the problem of mortgage arrears. The bank, having tried persuasion with mortgage defaulters, has now adopted a much tougher approach with some borrowers.
AIB has taken legal action with two ends in view: first, to secure repossession of owner-occupied homes or buy-to-let properties from borrowers who either cannot, or will not, repay their loans; and second, to force others who are in mortgage arrears to agree a restructuring arrangement with the banks. Where borrowers in this latter category do engage in such a process, the bank has agreed to halt the legal process leading to repossession – thereby allowing time for debt restructuring terms to be negotiated.
Figures supplied to the Oireachtas finance committee indicate that AIB has taken legal steps to repossess 5,709 owner-occupied homes, suggesting a high level of potential repossessions. But that figure almost certainly over states the number of properties the bank is likely to take into ownership. Last year AIB reduced arrears on its domestic residential mortgage by almost one fifth, mainly through debt restructuring agreements with borrowers. And in under half of the 5,709 cases where legal proceedings have begun, these cases remain at an early stage in the repossession process. AIB has made clear that its policy is to keep people in their homes where possible, with repossession seen as a last resort: to date some 608 properties have been taken into bank ownership.
The banks have been slow to face up to the challenge of mortgage arrears, and the Government, as it prepares to sell part of the State's stake in Permanent TSB and AIB, has been reluctant to interfere in that process. Both banks are in State ownership, and the Government is concerned to protect the taxpayers' interest, by ensuring that most of the public money invested in their rescue is repaid in time. And that priority means the Government has very limited scope to help those with mortgage arrears.