Monday 21 October 2019

Ulster Bank cuts around 400 problem mortgages from latest sell-off as smaller €800m sale agreed

Photo: PA
Photo: PA

Donal O'Donovan and Charlie Weston

Ulster Bank has cut the number of home loans included in its latest sell-off of bad debts by around 400, saying restructuring deals have been struck with the borrowers.

In July, Ulster Bank had lined up an initially €900m portfolio of problem mortgages for sale, which was to include 3,200 so called private dwelling house (PDH) mortgages and 400 buy-to-let loans.

A smaller €800m sale has now been agreed. Loan servicer Pepper backed by US fund CarVal is the buyer. A deal has been struck to sell the bulk of the mortgages to debt servicer Pepper backed by US fund CarVal.

While Pepper will be the legal owner CarVal is financing the transaction, Ulster Bank said.

Controversially, a significant number of the borrowers involved had previously struck short-term forbearance deals with the bank but are still regarded as “non-performing” by the bank and by regulators who are driving the push across all of the Irish banks to slash bad loan levels.

In an update on Tuesday, Ulster Bank said the total number of loans has been reduced including as a result of some longer term debt deals being struck with borrowers.

The sale is now made up of 2,800 PDH loans and 375 buy-to-let mortgages.

Ulster Bank said none of the home loans being sold is currently in a debt arrangement.

A spokesperson for the bank said that it does not see a prospect of striking long term sustainable debt deals with the remaining borrowers whose loans are to be sold.

“For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position and we are obliged to reduce the level of non-performing loans on our balance sheet. We take this step only as a last resort following an extensive campaign to find sustainable solutions for our customers. In fact, the portfolio has reduced since it was announced due to more customers entering a sustainable arrangement,“ the bank said.

Customers will be given 60 days notice of sale, and a customer helpline has been set up.

Of the cohort of PDH mortgages now included in the sale the average arears is now €36,000, average missed payments is 28 months and on average the borrowers have had five previous forbearance agreements.

The smaller number of buy-to-let mortgages have lower arrears on average and 90pc have been in arrears for more than 12 months during their lifetime.

However, none of the mortgages to be sold is currently in an agreed long-term restructuring the bank sees as sustainable, or is likely to be, said an Ulster Bank spokesperson.

Loans are classed as non-performing by regulators if they have been the subject of two or more forbearance deals, and all Irish banks are under pressure to slash their stocks of such bad loans. Ulster Bank's aim is to cut bad loans from 10pc of its lending to 5pc.

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