Friday 21 September 2018

Permanent TSB to pull 4,000 split mortgages from loan sale

Photo: Stock Image
Photo: Stock Image
Charlie Weston

Charlie Weston

Permanent TSB is to row back on plans to sell thousands of mortgages where homeowners are meeting revised payment arrangements.

The bank is set to confirm today that it is removing some 4,000 so-called residential split mortgages from a €3.7bn sale of distressed loans.

The plan to include the split mortgages as part of the sale of what was 18,000 residential and buy-to-let mortgages has generated huge controversy, with Permanent TSB criticised at an Oireachtas committee meeting over it.

Concern has been expressed that the portfolio of non-performing loans is likely to be bought by a vulture fund.

With a split mortgage what is owed is divided in two. Repayments on a portion of the loan are put on ice until a future date, with agreement with the homeowner to make payments on a portion of the loan.

The deals are offered to those who are unable to meet full payments, with the arrangement reviewed at set periods.

However, the Permanent TSB version of split mortgages are classified as non-performing loans under European regulatory guidance.

Debt advocate David Hall had offered to buy the split mortgages by raising money on behalf of a "friendly vulture fund".

The 4,000 residential split mortgages are understood to be worth around €900m.

Permanent TSB is selling loans because it is under pressure from regulators to lower its bad-debt ratio from 26pc to the European Union average of about 5pc over the medium term.

Following lengthy discussions with European Central Bank's single supervisory mechanism (SSM) banking supervisory arm, a decision has been taken by Permanent boss Jeremy Masding to pull residential split mortgages from the sale of the distressed mortgages.

However, the bank still faces the prospect of the single supervisory mechanism regarding the split mortgages as non-performing and the bank will continue to come under pressure to radically reduce its level of non-performing loans.

The bank holds its annual general meeting today, at which investors will be told the sale of the non-performing loan book is going ahead without the split mortgages being included.

A spokesman for the bank had no comment.

AIB has put €3.8bn of distressed debts on the market. Ulster Bank put €1.6bn of impaired mortgages on the market last week. Lloyds Banking Group is seeking to sell its remaining €5bn of mainly performing Irish home loans, which were issued by the then Bank of Scotland (Ireland).

Irish Independent

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