Vultures hover with Ulster Bank ready to sell €900m of problem mortgages
Ulster Bank has lined up a new portfolio of €900m of problem mortgages for sale, including a significant number in which borrowers had struck short-term forbearance deals with the bank.
Unusually for such loan sales, many of the affected borrowers had engaged with the bank to secure at least short-term debt deals.
This is despite Ulster Bank stressing in the past that customers who engage with the bank and make repayments, even on loans in deep arrears, are less likely to see their loan sold to so-called vulture funds.
On average the private home mortgages in the current sale have been subject to five debt forbearance deals. Mortgage campaigner David Hall said that indicates a high level of engagement by borrowers.
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.
"As signalled in Q3 2018, Ulster Bank can now confirm it has prepared a portfolio of its non-performing mortgages for sale. The PDH [private dwelling house] loans have been assigned to this portfolio following a concentration of effort with customers in difficulty to ensure they were given every opportunity to agree a sustainable solution and to remain in a home they can afford. For all of these customers, the continued extension of forbearance cannot unfortunately be maintained.
"Not all mortgages, PDH or BTL [buy to lets], are sustainable and we are obliged to reduce the level of non-performing loans on our balance sheet. For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position."
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.
The mortgages carved out for the latest sale are likely to be snapped up by so-called vulture funds.
Brendan Burgess of Askaboutmoney.com said the mortgage holders will be better off if their loans are sold to a vulture fund because they are more likely to cut deals than the bank.
The new pot of problem loans is made up of 3,200 primary home mortgages, and 400 buy-to-let mortgages.
The details indicate that in many cases borrowers had agreed temporary interest-only or other short-term fixes. Average arrears among the home loans in the portfolio are 58 months. The average number of missed payments is 26. Among the home loans, 40pc first fell into arrears seven years ago. Among the buy-to-let mortgages, 85pc have been in arrears for more than a year.
The sale had been well flagged as it follows last year's sale of a €1.4bn portfolio of distressed home loans by Ulster Bank to the US investment giant Cerberus.
Ulster Bank CEO Jane Howard said earlier this year customer awareness that a deal was in the works had prompted greater engagement from some borrowers.
A sale process is expected by early autumn. Borrowers will then be informed in writing if they are affected.
The bank also launched a major push to engage with customers in arrears ahead of lining up the sale.
However, Mr Burgess claimed Ulster Bank had stopped putting long-term payment arrangements in place for those in arrears. It was only doing short-term deals, he said.
"These people will be better off if a vulture fund buys the loans as it will do a proper deal with them. Ulster Bank has not being doing deals for a long time, and has instead decided to sell problem loan books," Mr Burgess said.