Families will be 'nuked' in Ulster loan sale - campaigner
A massive sell-off of problem mortgages by Ulster Bank will trigger a wave of similar deals, debt campaigners have warned.
Ulster Bank is offering more than 900 family home loans to so-called vulture funds, as part of a bigger sale aimed at clearing the decks of the bank's legacy of boom-era problem assets.
Loan sales by banks are now common in Ireland but most involve business debt. Up to now, most mainstream lenders have shied away from selling mortgage customers' debt, for fear of being seen to throw vulnerable borrowers to so-called vulture funds.
David Hall of the Irish Mortgage Holders' Organisation said it means vulnerable people will be "nuked and sold to vulture funds."
However, a spokeswoman for Ulster Bank said borrowers whose loans are now being sold are not "typical customers."
"Ulster Bank has confirmed a significant impaired loan portfolio sale enabling the bank to strengthen its balance sheet for the benefit of its customers and much needed competition in the banking market. The loans involved do not belong to typical customers; they are all in Ulster Bank's problem debt management unit and in arrears or under specialist management for a significant period of time."
Mortgage customers in short-term arrears and farmers with cash flow difficulties linked to falling milk prices will not see their Ulster Bank loans sold off by the bank, but borrowers now most at risk of repossession will.
The sale of €2.5bn of distressed business loans (65pc), buy-to-let mortgages (23pc) and owner-occupier mortgages (12pc) is aimed at substantially clearing out all remaining toxic property linked loans on the bank's book on both sides of the border.
Unlike AIB and Bank of Ireland, which both transferred masses of bad loans to Nama after the crash, Ulster Bank has had to work through all of its own problem property loans.
The type of loans involved, including the fact that all of the business and personal debt to be sold is classed as "non-performing" by the bank, means they can be expected to sell at a knockdown price.
So-called vulture funds, mainly US investors that specialise in buying bad loans, are the only likely buyers of the Ulster Bank loans.
That will raise fears that borrowers can expect a more aggressive approach once their loans have been sold, although in this case, all are already some way towards repossession.
All of the loans being sold are in deep arrears, and are being dealt with by Ulster Bank's problem debt management unit.
About 5pc, or €125m, of the total face value of the loans being put up for sale are owed by farmers, in many cases linked to off-farm investments.
It's understood those loans have been in deep distress over years, and are not a result of recent falls in milk prices.
Debtors won't be told until the sell-off closes whether their loans are included in the sale. Customers who fear their loan is now on the market can contact the bank and will be told if their account is up for sale.
The huge sale, which includes thousands of individual borrowers, including families, is the first time customers' home loans have been sold by Ulster Bank since the crash. The bank has previously offloaded in the region of €16bn of distressed commercial property loans, however.
It is understood that 95pc of the 900 owner-occupier home loans being sold are two years or more in arrears on repayments, and are classed by the bank as so-called non-cooperating borrowers.
All are already subject to legal action by the bank to repossess their home and most are three years behind on repayments.
The Central Bank's code of conduct for dealing with customers in arrears only covers customers who have engaged with their bank, so is unlikely to offer any protection to those whose mortgages are now being sold.
Their contracted rights as bank customers will not change, however, regardless of who buys the debt.
Mr Hall of the Irish Mortgage Holders' Organisation says the Ulster Bank sale will be the first of many, as other banks would now do the same.
He said mortgage holders who are part of the Ulster Bank loan book sale were likely to be people unable to make any repayments on their home loans.
"This is simply the outsourcing of the repossessions process to vulture funds," he said.
Frontline staff at Ulster Bank were informed about the planned sale, dubbed Project Oyster, yesterday.
It is expected to be completed later this year.