€670m in mortgages to be sold

More than €670m worth of Irish mortgages are to be sold to a US-based private equity firm for an undisclosed sum.

South African investment bank, Investec, yesterday announced a deal to sell its sub-prime mortgage business Start Mortgages to an affiliate of Lone Star Funds which is headquartered in Dallas, Texas.

The deal includes the transfer of Start’s 3,700 mortgages to Lone Star, as well as an additional €100m worth of mortgages held by Nua Mortgages.

“The transaction supports Investec’s strategic objective to simplify and reshape its specialist banking business and together with the sale of Kensington Group Limited... substantially reduces the assets within its legacy non-core business,” a company statement read.

The transaction is the latest acquisition of Irish loans by so-called “vulture funds”, after the controversial sale earlier this year of half of the €1.6bn Irish Nationwide mortgage book to Lone Star and fellow US fund, Oaktree Capital.

Start mortgage-holders, however, have nothing to fear from yesterday’s developments, according to co-founder of the financial advice group New Beginning, Ross Maguire.

Vulture funds such as Lone Star, which buy underperforming assets at discounted prices, sometimes have more scope to renegotiate with mortgage-holders which can work out in consumers’ favour, he said.

“They’re not any more aggressive than banks but they are here to make money. They buy under-performing assets at discount so they sometimes have more scope to do deals with customers. There’s a bit of scaremongering around vulture funds that they’re going to throw people out of their homes but that’s not going to happen.

“They are more imaginative than banks with restructuring, it can actually work out in consumers’ favour.”

Mr Maguire also indicated that Start had been among the most proactive lenders in the market in engaging with customers and hoped that this would continue under Loan Star.

As the entire Start Mortgages business is to be sold to Lone Star, the Central Bank Code of Conduct on Mortgage Arrears will continue to apply to the business which employs 70 staff. It is understood the lender’s employees will not be affected by the move.

Start reported a pre-tax loss of £21m (€26m) and had gross assets of £540m, to the year ended March 2014. The business has €1.1bn in assets under its management.