Government selling out on 13,000 former Irish Nationwide mortgage-holders
Loans have a combined par value of €1.8bn and have been split into four portfolios
This is debatable and cold comfort to the 13,000 mortgage holders, who now face an uncertain future. The expectation is that an international investment fund will buy up some or all or the mortgage loans at a substantial discount and then set about collecting the maximum amount from the homeowners.
One former senior banker I spoke to yesterday said this was an efficient way of dealing with the loans. The funds would have a five- to seven-year horizon and would strike deals with borrowers to get the cash flowing. He also dismissed the idea that they would jack up interest rates, on the premise that this would most likely injure a borrower’s ability to repay. They’d be shooting themselves in the foot, he said.
The likelihood is that these funds who buy the mortgages will be unregulated entities and so won’t be covered by the Consumer Protection Code, the Code of Conduct on Mortgage Arrears and the Consumer Credit Act.
Nama is also an unregulated entity but the State agency would be expected to adhere to these various codes.
In a statement issued to me yesterday, the Central Bank said it was “concerned that the consumer protections available to mortgage-holders under the statutory codes could be impacted by the sale of mortgage books to unregulated firms”.
The Central Bank has communicated its preference that the “outcome of any sale of mortgage books by regulated entities would ensure continuity of borrower protections under codes”.
This doesn’t appear to be carrying a lot of weight with the Department of Finance or the liquidators. The process is the process, full stop.
If the sale results in the mortgages being sold to an unregulated foreign vulture fund, then so be it. This would bring fresh investment to the economy rather than soaking up valuable funds from existing retail banks that are needed for lending into the economy.
But imagine the political reaction if AIB, Bank of Ireland or Permanent TSB announced they were going to sell a large chunk of their Irish mortgage books to an unregulated foreign fund?
That’s what the Government is doing to 13,000 Irish Nationwide borrowers. It’s not really good enough.