AIB sells 620 distressed mortgages to ‘ethical’ investment group

AIB has sold a portfolio of underperforming loans to an "ethical" investment consortium, the first such transaction undertaken by a lender in the Republic.

The bank's Project Iris portfolio, which contains 620 owner-occupier mortgages in long-term arrears, has been sold to the Home Solution Initiative group, which has pledged to find borrower-friendly solutions to the outstanding arrears problem.

The aim is to keep as many borrowers in their homes as possible.

Previously the bank sold distressed debt only to international investment funds, or what have been dubbed vulture funds.

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The loans had an original book value of €150 million. The discount involved in the sale was not disclosed. AIB said around 95 per cent of the loan book first entered default over five years ago.

Most of the households are expected to end up in the Government’s mortgage to rent scheme – whereby borrowers agree to surrender their homes but remain in the property as social housing tenants.

This would make the deal one of the largest social housing transactions of recent times.

The Home Solutions Initiative consortium comprises debt collection agency Everyday Finance, London-based investment group LCM Partners, Arizun Assessment Management which offers a private rental scheme and the Irish-based Home for Life (HFL) group. Home for Life is backed by AIB.

HFL chief executive Paul Cunningham described the new strategy as "a milestone in how lenders and their customers address unsustainable mortgage debt."

HSI was in a bidding war with the Irish Mortgage Holders Organisation, set up by mortgage campaigner David Hall, to acquire the loans.

Customer restructuring

AIB said the sale followed an extensive period of customer restructuring and engagement.

“AIB group has worked with customers, and over 115,000 cases have been provided with solutions, including over 48,000 PDH (private dwelling house) solutions,” it said.

“ This has been achieved by AIB offering customers a comprehensive range of solutions over an extended number of years, partnering on the enhanced Mortgage-to-Rent scheme in 2017 with significant success, the completion of a series of proactive customer contact and engagement programmes, and a comprehensive case by case review prior to the conclusion of this initiative,” it said.

Separately, AIB has called for binding bids next week for a portfolio of non-performing private residential mortgages, dubbed Project Oak, according to sources. The original value of the portfolio was about €1 billion, but it will trade at a discount.

AIB put a planned sale of the loans on hold last March, at the height of the coronavirus crisis. Overseas firms, Lone Star and Cerberus, were among firms circling the assets at the time and are believed to be among three bidders currently in the running for the portfolio.