Pre-emptive insolvency, the time is now.

A headline today caught our attention, it was about an injunction to have an insolvency solution honoured.

Personal insolvency is a legislation backed process (unlike informal debt deals) and for this reason you can’t unilaterally decide, as a creditor, to opt out of one that is already in existence.

What is interesting at this point in time is that many of the applications we track in the courts when gathering possession statistics are about applications for change of name of the plaintiff. This occurs when loan books are being sold and the proceedings are being altered to reflect the new owner.

There is considerable confusion even within the courts because of this and it may be a case that a person could use this as an opportunity to seek personal insolvency because in the midst of this there is a lower level of likelihood that loan buyers will engage in the process.

Failing to do this means they lose …

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Devil in the detail in debt write downs

(this article appeared in the Sunday Business Post on the 23rd of March)

The banks are starting to write down debt. Should we be surprised? Recent news of large write downs on home loans by AIB has left out some of the necessary detail to add context to the story. The lender has equally shied away from confirmation of what happened, making it all a bit opaque.

Why would a bank choose to offer a capital reduction by writing off part of a mortgage? An alternative is to split the loan into a part which the customer can afford to pay and another part which is ”warehoused. If zero interest is charged on the warehoused part, then the affordability for the customer can be the same as if this part is written down, even if the psychological impact is different.

It is likely that there are peculiarities in the cases where debt has been written down, which means this will only happen in the minority of cases. For example, if a loan was on a one off house with a …

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The Mortgage Restructuring Arrangement Bill 2013, a brief look under the hood

This is a piece of legislation currently at Bill stage, I can’t help but think they didn’t get anybody involved in the actual mortgage industry to contribute to this.

It was put forward by Deputy Joan Collins who is part of the new political party United Left (please update that website folks!). The ideas put forward do have some merit, but it smacks of left wing thinking wrapped up in centrist jargon which might stand a chance of passing a slightly right of centre decision making government.

Much of it has similar references to the Insolvency Act 2012, with a difference being that this is a negotiation that can be acted on independently of the insolvency solutions. It could probably do with some re-writing, for instance at several points it talks about people who don’t make it through this being able to go for a DRN, DSA or PIA – when (for …

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AIB debt writedowns? What does it mean?

The Irish Times carried an article that stated that AIB would write down some mortgage debt. What does this mean though and who will be the beneficiary?

To begin with, the write-downs should be no surprise, that is what the provisions AIB have been putting aside for several years are for, in fact, to date it’s almost like they weren’t playing fairly because they were booking provisions but not actually using them for what they were for.

Secondly, there are 33,000 AIB mortgages with problems, of these about 10,000 are ‘unsustainable’ and for those mortgages there will be losses booked – that is the ‘writedowns’ they are talking about in the main, but on the end of whatever solution comes out of if the person may not be the owner of the home.

Several solutions are things like ‘split mortgages’ which require no writedown, others will be ‘mortgage to rent’ which will, because in that process the ownership will change and that means crystallizing the loss. How many of the 10,000 will come out …

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