Central Bank meets BoI and AIB boards on mortgages

THE CENTRAL Bank has met the boards of Bank of Ireland and AIB to press them to take a personal interest in ensuring their banks are taking enough action to tackle the mortgage crisis.

The deputy governor of the Central Bank, Matthew Elderfield, met the board of Bank of Ireland yesterday at the lender’s head office in Dublin.

His deputy, Fiona Muldoon, the director of credit institutions and insurance supervision, met the board of AIB last week.

A spokesman for the Central Bank confirmed the meetings with the two banks and said the regulator would be meeting the board of Permanent TSB next month.

A spokesman for Bank of Ireland said it has “ongoing interaction with the Central Bank at various levels on a range of issues”.

AIB had no comment to make on its meeting with the regulator.

The contact with the boards of the banks marks an intensification of the Central Bank’s efforts to press the banks into tackling rising arrears and unsustainable home loans under the so-called “mortgage arrears resolution strategies” they have been asked to draw up.

Mr Elderfield said last week that he or Ms Muldoon would be telling the boards of the banks in the meetings that they had to take “a direct and personal interest in the mortgage situation”.

The boards must ensure “the strategies are working, the operational targets are being hit and they are being realistic about the quality of their books and are offering solutions that are going to be able to tackle the unsustainable mortgage group,” he said.

The number of mortgages in arrears of at least 90 days or which have been restructured reached 116,288 cases, or 15.2 per cent of the 764,138 home loans, at the end of March, up from 86,271 cases or 11 per cent a year earlier.

The regulator has set the banks a deadline of tomorrow to show how they are segregating distressed mortgages into categories of borrowers who can afford to repay their mortgages with forbearance or interest-only for a period of time and borrowers who cannot afford to repay the loans.

The banks must show how they intend to deal with unsustainable mortgages by modifying the loans so borrowers repay a lower sum or decide which properties are to be repossessed and the borrower advised to use the bankruptcy regime to deal with their debts.

The Central Bank has asked the banks to develop a range of new mortgage products to deal with distressed loan cases and pilot them over the coming months before offering them more widely to their customers later this year.

The products include split mortgages, in which part of the debt is frozen to reduce repayments, and downsizing or negative equity mortgages, in which borrowers can carry any remaining on their home to a newly acquired property.

The banks are also working on mortgage-to-rent schemes to be offered to customers with State housing associations where struggling borrowers can remain in their homes but become tenants.