Business Irish

Monday 20 November 2017

Investors could take control of Ulster's loan book

Mortgage holders may become 'less inclined to pay', document warns

Laura Noonan and Donal O'Donovan

MORE than 16,000 of Ulster Bank's mortgage holders could become "less inclined to pay their loans" if investors who bought into the loan book's securitisation enforce their right to take more control of the loan book.

The claim is made in a document published on the stock exchange this week, which also reveals that the mortgage holders could all have to get their properties surveyed and registered for the first time if the changes go ahead.

The news comes almost five years after Ulster first spun off the €2.5bn pool of loans to investors in a deal that transferred the debts of Ulster's balance sheet.

Control of the mortgage pool makes no difference to people with home loans taken out with Ulster, they still pay their mortgages back through Ulster Bank and have no direct relationship with the investors in the securitisation vehicle.

However, the investors who took part in the securitisation are now entitled to take more control of the loans, because Ulster's credit rating has fallen below the minimum level specified in the original securitisation deal.

But investors are being urged not to seek that bigger role, because of a "very real concern" that any such move would "have a material adverse effect on the timing and/or amount of collections made under the loans in the loan pool".

If the investors vote to enforce their rights at a meeting on September 8, all 16,326 mortgage holders will be notified that the ownership of their mortgages has changed, something that "may" make borrowers "less inclined to pay their loans".

"The serving of such notices on all 16,326 mortgage borrowers is also likely to generate unfavourable media attention and comment," according to a document published by Celtic Residential Irish Mortgage Securitisation 11 (CRMS 11), which holds the loans.

CRMS 11 goes on to argue there is a "significant likelihood" that it could take "several years" for the transfer to take effect, something that could in itself "have a negative impact on the timing and the amount of collections".

"No such comparable bulk transfer of mortgages in securitisation or otherwise ... has to date been undertaken in Ireland and there is some concern that an exercise of this nature on such a scale could overwhelm the existing system," CRMS 11 adds.

The document also warns that a "possible consequence of a very recent change of legislation in Ireland" could mean that the underlying titles for all unregistered properties in the pool would have to be registered.

"This will involve seeking permission from borrowers for surveyors to attend the secured properties to map them for first registration, the engagement of lawyers to certify title and contact affected borrowers to verify title information," the document adds.

Ulster Bank yesterday declined to comment in detail on the situation, but stressed that there would be "absolutely no impact" on mortgage holders. Homeowners remain liable for their debts regardless of who owns the loans.

The last report on the mortgage pool shows its 16,326 loans had an average value of just under €155,500.

Some 5.5pc of the loans were in arrears for more than three months, while the average loan to value of the portfolio was just over 61pc.

Irish Independent

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