AIB has written off €150,000 from a €400,000 loan on a family home and allowed the homeowners to keep their property.

It is the largest writedown involving a family home that was not repossessed.

The agreement was negotiated informally between AIB and its customer through a third-party broker, the Irish Mortgage Holders Organisation.

Last November, AIB entered into an arrangement with the Irish Mortgage Holders Organisation, a group that was set-up to help struggling borrowers.

Since the arrangement was put in place, a number of deals have been done between the bank and its customers that involve debt writedown.

This latest deal involves a married couple, who have two children, with a mortgage of €400,000, which had become unmanageable.

Under the deal, AIB agreed to write off €150,000 of the loan, as well as parking a portion of it on condition that the owners continue to pay capital and interest on around €200,000.

AIB would not comment on the deal, but bank sources confirmed that it had been agreed.

Sources also said any such deal would only be done if the value of the house involved had dropped dramatically and the owners were unable to afford the original loan.

Independent TD Stephen Donnelly welcomed the news that the family have been allowed to keep their home.

Speaking in the Dáil, he also criticised the inconsistency in approach from various banks in terms of offering debt writedowns, in particular Bank of Ireland.

Taoiseach Enda Kenny said the targets set for the banks are being monitored by the Department of Finance and the Central Bank on a constant basis and that information comes to the Cabinet sub-committee that looks at credit.

Mr Kenny said that he does not see the need for a system review and that the system has to operate on a case-by-case basis.