Irish firm in talks to buy up to 2,000 distressed mortgages
Arizun secures €750m for ‘mortgage-to-rent’ scheme plan
Minister for Housing Simon Coveney. The Government this week overhauled an existing six-year-old mortgage-to-rent plan. Photograph: Eric Luke
An Irish company seeking to buy distressed loans under the State’s expanded “mortgage-to-rent” scheme is in talks with two lenders to acquire debt attached to as many as 2,000 properties.
Arizun, one of three groups known to be seeking to participate in the scheme, has secured €750 million from a European financial institution to fund its plan, according to its chief executive Cathal O’Leary.
He declined to name the lenders or the European investor, citing confidentiality agreements.
The Government this week overhauled an existing six-year-old mortgage-to-rent plan, which had been affected by low take-up by troubled borrowers.
The revision will allow private financial firms to bulk-buy loans in default from banks at deep discounts to their original value.
It would see the borrowers surrender ownership of the home in exchange for having their borrowings written off and a minimum 20-year guaranteed lease, with an option to extend by a further 20 years.
The Irish Times reported on Friday that a consortium led by investment firm Merrion Capital in Dublin is also planning to enter this space.
Mortgage campaigner David Hall has established an organisation, called I Care Housing, to do something similar.
To qualify for the Government’s scheme, borrowers would have to be eligible for social housing.
However, Arizun is also interested in entering into mortgage-to-rent arrangements with families that do not qualify for State-funded accommodation, said Mr O’Leary, who previously worked as head of South African investment firm Investec’s bond desk in Dublin.
The firm is initially targeting loans that are at least two years in arrears, of which there were more than 34,500 at the end of September, according to Central Bank data.
Banks are prohibited by data protection laws from sharing details that would identify individual borrowers to potential buyers of the loans.
However, they are allowed share high-level data, such as the sizes of particular soured loans, names of the streets where the borrowers live and their income levels.
This allows would-be buyers of the loans to calculate what batches are worth.
The banks, in turn, would inform borrowers of the eligibility for the scheme, allowing them to work directly with the financial firm seeking to buy their loans.
In most instances, the banks would already have written down the value of the mortgages on their own books to below the going market price, to account for legal and other costs associated with potentially seizing, maintaining and selling the property.
Mr O’Leary, who has been chief executive for three months, said his firm would be prepared to pay prices slightly above the distressed level at which they are valued by the banks.
This would allow the lenders to free up some provisions previously set aside to cover expected losses on the loans.