An Post in talks with non-bank start-up MoCo to offer mortgages

An Post is in talks with a non-bank start-up called MoCo about setting up a partnership to enter into the Irish mortgage market next year, buoyed by the planned exits of Ulster Bank and KBC Bank Ireland from the Republic, according to sources.

MoCo, the trading name of a company registered in Dublin last year as Cedar Lending Services, is led by a number of financial industry executives and is currently going through the application process with the Central Bank of Ireland to be authorised as a retail credit firm.

An Post declined to comment on the talks. However, the managing director of the postal service's retail division, Debbie Byrne, said: "Mortgages is a category we still very much have our sights on. Meaningful discussions are ongoing with a number of parties and, subject to the right proposition and commercial terms, we would hope to bring a strong mortgage proposition to the market in 2022."

‘Quick application decisions’

Sources told The Irish Times that talks are most advanced with MoCo. The digital-focused company says on its website that it aims to offer “transparent mortgage products, efficient application process” and “quick application decisions”.

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Chief executive Patrick Good, who previously worked with Key Capital, Banca Mediolanum and Davy, declined to comment on its plans and talks with An Post when contacted, as the company is going through the regulatory authorisation process.

An Post executives secured board approval in September 2018 for a new financial services strategy, signalling at the time that it planned to offer mortgage rates priced at discount to the market. Planning was put on hold last year amid the Covid-19 crisis.

It is believed that MoCo has been in talks with international asset managers and life and pensions companies about providing funding for mortgages and also aims to operate through the broker channel.

Institutional investors have long been the natural investors of repackaged loan portfolios in the bond market – buying notes backed by income from mortgage books. However, they are increasingly looking at putting money directly into mortgages in the hunt for income yields.

The Netherlands has led the way in Europe, with local asset manager the Dutch Mortgage Funding Company, starting in 2014 to channel funds from a group of domestic pension funds into mortgage origination through its MUNT Hypotheken brand.

Top figures at MoCo also include: chief operating officer Aidan Sherry, a former head of strategic alliances at AIB; John Walsh, who previously worked as a senior IT executive with loan servicing firms Link and Capita; and chief commercial officer Tommy Canavan, a former senior legal counsel at German asset manager Aurelius.

Non-bank lenders such as Dilosk, Finance Ireland and Avant Money have entered the owner-occupier mortgage market in recent years, helped by the fact that mainstream banks must hold high levels of expensive capital to protect depositors.

Legacy

Irish banks are currently required to hold about three times more capital against mortgages than average peers across the EU, a legacy of the scale of the Republic's property price crash in 2008 and subsequent arrears crisis, according to a report published by Banking & Payments Federation Ireland earlier this year.

Goodbody Stockbrokers analyst Eamonn Hughes estimates that Irish mortgage lending will grow from €10 billion this year to €14 billion in 2025, with residential property construction set to be underpinned by the Government's new housing strategy, unveiled this week. The exits of Ulster Bank and KBC, partly due to high Irish capital requirements, will reduce the number of retail banks in the Republic to three.