Sunday 22 October 2017

'Vulnerable' tenants worry as AIB sells off mortgages

The bank’s move to jettison toxic residential mortgages comes as all Irish lenders mull how best to ditch legacy loans. (Stock image)
The bank’s move to jettison toxic residential mortgages comes as all Irish lenders mull how best to ditch legacy loans. (Stock image)

Gretchen Friemann

AIB has agreed to sell a €400m portfolio of 1,200 buy-to-let mortgages to Goldman Sachs in the biggest deal of its kind since the financial crisis.

The sale by the State-owned bank will raise concerns among tenants about how the new owners plan to recoup their investment.

AIB yesterday announced it is contacting borrowers to inform them of the loan transfer.

The deal, dubbed Project Cypress, comes as the State-backed lender prepares to return to the stock exchange later this year in a near €3bn flotation that will reduce the Government's ownership in AIB by 25pc.

A spokesperson for the bank said the vast majority of the mortgages are in "deep long-term arrears". AIB declined to confirm the price paid.

However, it is understood the face value of the loans is close to €400m, which are tied to 1,200 homes.

A number of global private equity firms cast an eye over the Project Cypress portfolio, including Lone Star, Davidson Kempner and Cerberus Capital Management, according to sources.

The bank's move to jettison toxic residential mortgages comes as all Irish lenders mull how best to ditch legacy loans.

As reported by this newspaper last month, Permanent TSB is expected to finalise a strategy on its €5.9bn book of non-performing loans by mid year and is tipped to follow in AIB's wake and offload a similar-sized portfolio of mortgages.

While many offshore banks have cast off impaired residential mortgage books, Irish lenders have so far adopted a more patient stance given the political and social tensions generated by taxpayers' €64bn bail-out of the sector.

The number of legal proceedings issued by banks to repossess homes has halved in the past two years, defying fears of a flood of evictions as lenders grapple with mortgages issued during the property boom.

But Lorcan Sirr, a lecturer in DIT's School of Surveying and Construction Management and a vocal advocate for greater legal protection for tenants and homeowners, stressed residents of properties controlled by opportunist investors remain vulnerable.

Long-term

He said private equity funds are not "long-term" players in the market, pointing out that legislation aimed at preventing mass evictions - the so-called Tyrellstown amendment - can be easily circumvented.

"What they do instead is sell in batches of nine units", Mr Sirr said, adding the properties are often snapped up by another set of buy-to-let investors.

AIB's project Cypress deal will be closely monitored by the market as other lenders weigh similar moves. The bank swung back in to the black this year and is the first of the Irish banks to pay a dividend.

Irish Independent

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