By Eamon Quinn
Permanent TSB may seek to securitise the €900m in so-called split mortgages it has decided to strip out from its distressed mortgage sales plan, marking “a very messy” and potentially costly outcome to a sales process mired in political controversy, said Owen Callan, a senior analyst at Investec Ireland.
The bank has cut back an original plan to sell off €3.7bn worth of troubled home loans and buy-to-let mortgages and will instead sell off loans, worth €2.2bn, linked to 11,200 properties to new buyers, who are likely to be vulture funds.
Some 70% of the troubled loans Permanent TSB plans to sell are currently principal homeowners.
The bank will no longer attempt to sell €900m worth of split mortgages, a plan which had thrown up political opposition and led to a bill, sponsored by Fianna Fáil finance spokesman Michael McGrath, to apply Central Bank regulation to vulture funds, beyond the service providers as applies currently.
Permanent TSB didn’t spell out its specific plans but Mr Callan said it will have the option to securitise the loans, particularly for the split mortgages.
Such a process would mean the underlying risk of the loans would no longer be carried on its balance sheet but upfront costs and service provider fees are not known at this stage, he said.
The sale of split mortgages is particularly controversial because the Central Bank had once promoted split mortgages as a way for lenders to work through their crisis-era problem home loans.
The selloff by Irish banks of their troubled home loans remains controversial.
Mr McGrath said he welcomed the decision to pull back split mortgages from the sale and expects the bill regulating vulture funds to pass into law in the coming months.
“I am not for a moment suggesting that it solves all the problems but it is an important step in bringing a degree of accountability,” he told the Irish Examiner.
Speaking to reporters after bank’s AGM, chief executive Jeremy Masding indicated that after ECB guidance, the lender now has alternative ways for dealing with split mortgages.
He said the market is still “very positive” for loan sales and the removal of the split mortgages won’t affect the new sale, expected to be completed this year.
Permanent TSB said it has helped customers stay in their homes, while the sale would help reduce the risk for the bank and the country.
With €5.2bn in non-performing loans, or around 26% of a €20.4bn loan book, the lender has one of the largest troubled loan books in the eurozone.