Irish Nationwide mortgage holders face being ‘thrown to the wolves’

Mortgage holders tied to loans with Irish Nationwide face being “thrown to the wolves” or unregulated firms and left without financial protection, it has been warned.

Fianna Fáil announced details of a bill yesterday to extend rights to borrowers if the loan books of banks are sold, which TDs said would take a number of small legislative changes.

However, one Government TD said any universal promise to protect borrowers whose loans are sold on may be legally unsound and leave the State open to compensation claims.

The disagreement centres around the upcoming sale of Irish Nationwide’s mortgage book. The former bank’s loans are now tied up inside the Irish Bank Resolution Corporation.

The loan book, which covers more than 12,000 borrowers, must be sold by IBRC’s special liquidator by the end of March or the loans will instead be transferred into the State’s bad bank, Nama.

As the law stands, customer mortgages can be sold to a third party not regulated by the Central Bank.

Such a sale for Irish Nationwide’s customers would “greatly expose those mortgage holders to very significant risks,” said Fianna Fáil’s Michael McGrath.

“If the mortgage is sold to an unregulated entity and if you get into any difficulty at all with a mortgage, they will be in position to move essentially immediately.

“These mortgage holders are being thrown to the wolves by the Government. It is completely unacceptable.”

Mr McGrath said data from last year showed half of Irish Nationwide mortgage holders were in difficulty.

The bill would also apply to the customers of any other financial institution whose home loan is sold to an unregulated third party.

Finance Minister Michael Noonan said he was open to looking at the proposals. A spokesman said he also wanted to see who was interested in the sale.

However, Fine Gael TD Simon Harris said any such protective move could leave the State open to legal action. “Implementing Fianna Fáil’s legislation could heap further costs at the feet of taxpayers, by leaving the special liquidator and the State open to legal challenge and compensation,” he said.

Earlier this week, Mr Noonan stated: “I will keep this area under review and have asked my officials to continue their assessment of the issue.”