KBC Bank denies three-month insolvency deals on mortgages

IMHO chief had said deal allows clients an accelerated Personal Insolvency Arrangement

KBC Bank has denied it has reached an agreement with the Irish Mortgage Holders’ Organisation which would see insolvent borrowers discharged of their debts within three months.  Photograph: Krisztian Bocsi/Bloomberg

KBC Bank has denied it has reached an agreement with the Irish Mortgage Holders’ Organisation which would see insolvent borrowers discharged of their debts within three months. Photograph: Krisztian Bocsi/Bloomberg

 

KBC Bank has denied it has reached an agreement with the Irish Mortgage Holders’ Organisation (IMHO) which would see insolvent borrowers discharged of their debts within three months if they surrendered their mortgaged property.

The IMHO’s director David Hall said today his organisation had reached a deal with both AIB and KBC to allow IMHO clients with unsustainable mortgages to be processed through an accelerated Personal Insolvency Arrangement which would include all unsecured debt.

He claimed the term of the arrangement would be no longer than three months, significantly shorter than a Personal Insolvency Arrangement, which can currently last for up to six years.

He said his organisation had been “hugely critical of the shortcomings of the Insolvency Service of Ireland to date” and described the agreement reached between it and the lenders as “a significant and very positive step”.

He said it would allow individuals and families to have a fresh start and contribute to society quicker by becoming debt-free through a formally binding, legislative framework. “For those whom this is suitable, it will provide the shortest effective bankruptcy term in the world.”

However, KBC issued a statement tonight in which is said no such agreement had been reached.

“KBC has not reached an agreement with the IMHO relating to the approval of shorter term insolvency arrangements,” it said.

“At KBC Bank Ireland, we seek to identify sustainable resolution options for all our customers who are in financial difficulty with their mortgage repayments.

“If however a personal insolvency arrangement would be deemed necessary, KBC assesses such on a case-by-case basis based on individual customer affordability, which will amongst other factors determine the duration of the insolvency arrangement.”

The Irish Times contacted Mr Hall seeking clarification of his earlier claims. He said there was “no written agreement”, but the bank was “agreeable to facilitate short insolvency arrangements”. This had been “agreed at a meeting held with them last week”, he said.

Meanwhile, Irish banks have been accused of engaging in a box-ticking exercise when dealing with distressed borrowers by proposing solutions which do not genuinely address the problem of mortgage arrears in the long term.

Under fresh targets announced today by the Central Bank, mortgage lenders will have to have offered 85 per cent of borrowers in arrears of 90 days or longer “sustainable solutions” by the end of the year. Offers will have to have been accepted and implemented for 45 per cent of all mortgage holders in arrears within the next six months.

The Central Bank’s guidelines state that 75 per cent of arrangements reached between borrowers and lenders must have their terms met.

However, the figure of 75 per cent was described by Fianna Fáil’s finance spokesman Michael McGrath as too low. He said it would allow banks to impose solutions that were not genuinely sustainable.

“There is no doubt that after a long wait we are now seeing activity in relation to this problem of mortgage arrears,” he said. “However, I am not convinced that as yet we are seeing the appropriate solutions being put in place.”

Mr McGrath suggested the Central Bank target of 25 per cent compliance would see banks presiding over a scenario in which one in four distressed borrowers were unable to meet agreed repayment schedules.