This article was originally published by Independent.
THE revelations that a family got a massive chunk of their mortgage debt written off by state-rescued AIB will infuriate and delight people in equal measure.
Many of those who are in their 30s and 40s who over-borrowed during the housing bubble, and are now in financial trouble, will be encouraged by the latest debt deal. These people will feel AIB is just facing up to reality here.
It was necessary to forgive €150,000 in mortgage debt for the Dublin family to stay in their home.
The alternatives, such as repossession, were too messy for the family and for the bank. The family has had its income severely impacted by wage cuts and tax hikes and was unable to service a €400,000 mortgage. All AIB has done is “right-size” the mortgage to make it affordable.
Others, who have been careful to avoid getting heavily indebted or who are struggling to meet large mortgage repayments despite the income squeeze, may resent the generosity of the bank.
After all, these people will argue, we taxpayers chucked close to €21bn into AIB to stop it going under. Is that money to be now used to bail out homeowners who bought big homes they can’t afford during the property boom?
It is one of those dinner-table discussions, and there is no right answer.
But it is indisputable that something has to give if families with mortgages that are too big are to be returned to being economic participants again.
Either these people have their homes repossessed, or they get debt write-down deals.
What this latest case also shows is the effectiveness of a group like David Hall’s Irish Mortgage Holders Organisations, which negotiated the agreement with AIB.
Mr Hall’s group has done 250 deals in just four months.
Contrast that with the State’s Insolvency Service, which is almost a year in existence and has completed just eight debt deals so far.
It seems that informal deals, that involve the likes of a split mortgage and debt write-offs, are set to be the way out of our mortgage mess.