Mortgage borrowers at Irish Bank Resolution Corporation are in a state of flux at present. Although the latest is that the Special Liquidator of IBRC, accountants KPMG have finally arranged for mortgage payments to be taken from customer accounts in March after the fiasco in February, it still appears that individual mortgage borrowers will not be able to buy out their mortgages at a discount.
However in the Dail this week, the Minister for Finance Michael Noonan confirmed that the Special Liquidator was readying the mortgage book – estimated to be worth €1.8bn – for sale in a single job lot. This may turn out to be good news for individual mortgage holders if the experience of another Irish mortgage book sale is replicated at IBRC.
Last year, subprime lender GE Money sold its entire mortgage book to Australian outfit, Pepper Home Loans. The price paid was understood to be about 40c in the euro, which no doubt reflects the severe impairment on Irish subprime loans. This operation recently reported its results for 2011. Last week, the Sunday Business Post – not available online without a subscription – reported that Pepper was doing deals with its borrowers and is writing down debt to what are considered more sustainable levels, in some cases by 50%. It should be remembered that GE’s loans were subprime and will be more underwater than Irish Nationwide’s which represent the bulk of the €1.8bn loanbook that the Special Liquidator will bring to market shortly.
Having said that, IBRC loans are distressed and it will be interesting to see who bids for them. The pillar banks, AIB/EBS, Bank of Ireland and Permanent TSB are in no shape to take on more residential mortgage debt. Nor will there be appetite at the foreign players, Danske, Ulster and KBC. So, it may well be a new player or a company like Pepper that buys the loans. There is a good chance that the buyer will cut deals with borrowers, particularly where there is negative equity and arrears – after all, the new owner will pay a price which reflects the profile of the loans.
Any sale will be concluded by August 2013, at which point, NAMA will be picking up any legacy unsold loans.
The revelation that the Special Liquidator would sell the mortgage loanbook in one job lot, was made this week in the Dail when the Minister for Finance Michael Noonan responded to a question from the Sinn Fein finance spokesperson Pearse Doherty. The full exchange is here with emphasis added. The exchange also revealed that sales in the pipeline at IBRC prior to 6th February 2013 will be halted as the Special Liquidator needs value the assets and start the sale process afresh.
Deputy Pearse Doherty: To ask the Minister for Finance following the Irish Bank Resolution Corporation Act and the appointment of a special liquidator to resolve IBRC’s balance sheets, the way the liquidator will deal with outstanding loans to the company; the way the liquidator will approach the outstanding issue of loans that are secured against mortgaged properties, where the property owner has arranged a debt write down with their bank following a sale; his views on whether the liquidator should allow property sales to go ahead and loans to be separated out from properties and repaid to the liquidator, or whatever asset manager is eventually appointed, on their own..
Minister for Finance, Michael Noonan: I am advised by the Special Liquidators that any properties for sale where the sales contract has not been signed will be included in the valuation process as set out in the IBRC Act. No property will be sold unless the bid is equal to in excess of the independent valuation that is to be obtained as part of that process. The contractual terms and conditions of mortgage customers will not change as a result of the appointment and all debts owing to IBRC (In Special Liquidation) remain due and enforceable.
I have been advised that it is the intention of the Special Liquidators to package and sell the mortgage book as a portfolio. Borrowers, third parties and other financial institutions will be given the opportunity to bid for specific portfolios (or component parts therof) as part of an open and transparent process. As this sales process has not yet commenced, the Special Liquidators are not in a position to comment or speculate on the impact this may or may not have on the borrowers concerned or the arrangements that may or may not be agreed with the eventual purchasers of those assets.
That’s what Liquidators do – they liquidate. It’s the capitalist way, except that with a bunch of schoolteachers running the country, realisation of what constitutes the correct action comes two to three years and several billion too late. The benefits of this will trickle down as homeowners have their loans rebased by more commercial entities.
By the end of summer Anglo/IBRC will be like ashes in an urn. The dregs will be parked in a NAMA SPV before being sold for a pittance to the likes of Lonestar, who will in turn “sell” them (mostly to the original borrowers) for a quick turn.
The schoolteachers will see that the landscape is much more benign without the toxic waste previously known as Anglo and will turn their attention to NAMA – the holder of the rest of the property poison , under the direction of an accountant and an ex customs official…… And a bulb will light over heads of the teachers.
NAMA’s grand schemes of property development (other than the north docks , which they gave to do in order to house the Central Bank) will be shelved and NAMA will be on its way out ( I would predict before the next election)
And that is what should have happened three years ago.
Get ready for the disposal period which is about to begin. It brings opportunities, not least in lifting the burden of unsustainable mortgage payments from our people.
NAMA on its way out….good. No more NAMA wine lake…not good :(
When we gat a headline that states: “IBRC Liquidator disposes of entire portfolio within 4 months and has now been instructed by the government to liquidate NAMA’s loan portfolio by the end of the year” we will have something to celebrate.
Until then we have to put up with the mentality that puts receivers over frilly satin knickers and other female baubles and ensures that COMIcal jurisdictions are set in legal agreements with debtors. Talk about losing the plot.
Hope you got home ok? You missed a tropical storm! It has flooded out many rooms!!
Busy day here in the foyer of this place! The receptionist isnt the best doing a bad job with guests!
Chat soon,
Trich
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