IRISH LIFE & Permanent is seeking to sell its €500 million subprime mortgage book after being ordered by regulators to shrink its loans, according to two people with knowledge of the matter.

The company, which was the fifth Irish lender to fall under State control, wants first-round bids for Springboard Mortgages’s loan book by the end of this week, according to one of the people, who declined to be identified, as the sale is not public.

The Government has injected €2.7 billion into Irish Life Permanent, which is being split up.

The company, which is selling various loan books to lower its loan-to-deposit ratio, is also looking for a buyer for its life assurance unit.

Irish Life & Permanent established Springboard with US banking group Merrill Lynch in January 2007 to sell mortgages to what it called “near prime” customers – those without long credit histories or who had irregular income sources.

Irish Life & Permanent bought out Merrill Lynch in June 2008 and the unit stopped writing loans 12 months later.

Other subprime players in the Irish market – GE Money, Nua, Fresh and Stepstone – all closed for new business in 2008. Following the decision of Springboard Mortgages to stop writing mortgages, Investec-owned Start Mortgages became the only subprime lender in the Irish market.

At the time of its decision to offer no new lending, Springboard had about 4,000 customers and €500 million in loans with an average loan-to-value of 54 per cent.

The group has also hired KPMG to advise on the disposal of its £6.8 billion UK residential mortgage book as it seeks to cut its loan-to-deposit ratio from 227 per cent at the of June to a Central Bank target of 122.5 per cent by 2014. Irish Life spokesman Ray Gordon declined to comment on the group’s plans to sell Springboard. – (Bloomberg)