Sale of 6,500 home loans by Ulster Bank to tempt vultures
Ulster Bank has put 6,500 Irish mortgages, with a combined €1.6bn of debt, on the market in the latest mass sale of home loans by an Irish bank.
The loans are split between 2,900 buy-to-let investor loans and 3,600 so-called primary dwelling home (PDH) or owner-occupier mortgages.
The 3,600 primary dwelling home mortgages are in deep arrears of 44 months on average.
The auction means the number of owner-occupier loans now up for sale across the Irish banks is around 20,000. Permanent TSB and Lloyds Banking group, which includes the old Bank of Scotland Ireland (BoSI).
In the Ulster Bank sale, almost three-quarters of PDH borrowers first entered arrears between seven and nine years ago. On average, the affected borrowers have been through three periods of forbearance with the bank.
The sale also includes 2,900 buy-to-let mortgages, again in deep arrears. The loans are understood to be largely in negative equity. The buyers are likely to be so-called vulture funds.
The loans now marked for sale make up around a third of Ulster Bank's stock of non-performing loans. Along with other Irish lenders, Ulster is under pressure to reduce its share of those bad loans from the current 17pc level to around 5pc. The sale now under way will take the bad loan ratio down to around 10pc or 11pc.
Customers will only find out whether their loan is included after the sale completes, but will then still have 90 days to reach a deal that could see them removed from the sale.
Ulster Bank previously sold €2.5bn of loans in its so-called Project Oyster book of problem debt to Cerberus. That sale included more than 900 family home loans, as well as farm debts, commercial and buy-to-let loans.
Mortgage campaigner David Hall, of the Irish Mortgage Holders Organisation (IMHO), condemned the latest decision to sell. Ulster Bank should have tried alternatives, such as debt-for-equity swaps or providing people an "interest for life" in their properties, he said.
IMHO wants a tax on sales of family home loans via emergency legislation.
However, it's understood Ulster Bank has taken comfort from the Central Bank's position that delinquent borrowers are not being subject to harsher treatment by investment funds than by banks.
The Central Bank's deputy governor, Ed Sibley, said on Wednesday that there is "absolutely no evidence" that overseas buyers of Irish loan portfolios are more aggressive in seeking to foreclose when mortgages are in default, than mainstream banks.
However, the Financial Services Union (FSU) which represents many front-line bank staff said yesterday that it was concerned at Ulster Bank's move.
"We know these announcements place thousands of home owners under additional stress as they fear their loan will be bought by so-called 'vulture funds'," a spokesperson said.
The union sought an assurance that Ulster Bank would only sell to regulated entities.
That is unlikely however, because it would narrow the field of potential buyers.
Currently, buyers of outstanding loans don't have to be regulated - even though financial institutions must be regulated in order to issue new loans.
Legislation proposed by Fianna Fáil's Michael McGrath is aimed at extending the regulatory regime to all mortgage owners.
The sale leaves Ulster Bank with a significant stock of problem owner-occupier and buy-to-let mortgages to work through, however it is understood the remaining debts are less stressed and new lending will also shift the bad-loan ratios.