Staff dealing with lending questioned over verbal agreements
Bank staff involved in lending have been asked to complete surveys about their dealings with developers, including whether they ever gave any verbal agreements to these customers.
The surveys were completed in recent weeks and were designed to assess the kind of lending agreements in place between institutions and their developer customers.
The transfer of land cannot be governed by anything but a written agreement, but verbal agreements can have legal force in relation to bank loans.
None of the major banks were prepared to comment yesterday, although they all conceded verbal agreements were common in the latter stages of the boom.
Meanwhile the Department of Finance has said the National Asset Management Agency (NAMA) would pay a lower price for a loan that came with inadequate collateral behind it.
"The price NAMA will pay for loans is determined, among other things, by the collateral on those loans. Therefore, if the collateral on the loans is weaker than expected, this will be reflected in a lower purchase price," said the department in a statement yesterday.
Banks have denied that inadequate security on loans is a major problem, but sources close to NAMA accept the issue is becoming a significant one. Legal sources said last night the issue of inadequate security was a wide-ranging one.
In some cases the collateral behind the loan is simply inadequate to cover the value of the entire loan. In other cases solicitors have failed to register the security despite giving an earlier commitment to do so and in some other cases a dispute has arisen about the actual piece of land and its boundaries.
Due diligence on the first tranche of loans to be transferred into NAMA by Anglo Irish Bank has been completed.
The top developers were regarded as leading customers of the major banks and loans were often rushed though in 24 hours to prevent the loan business being poached by another bank.