Donohoe to check protections for PTSB mortgage holders

Minister for Finance Paschal Donohoe intends to review protections for home owners from mass repossessions in light of Permanent TSB's likely sale of 14,000 home loans to a so-called vulture fund.

Mr Donohoe said he was “deeply conscious of the worry and concern” caused by the bank’s planned sale of a €3.7 billion portfolio of non-performing loans. The portfolio contains €2.7 billion of home loans including debts on which customers are making payments after reaching restructuring arrangements with the bank.

The minister said he would be asking the Central Bank for its views on the "legal and regulatory environment" protecting customers.

Permanent TSB’s sale has stirred controversy as the lender, which is 75 per cent owned by the State, will likely sell the loans - one of the biggest portfolios of home loans offloaded by bank since the financial crisis - to an unregulated investment fund that is not covered by the rules protecting struggling mortgage holders.

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Mr Donohoe said he would be meeting Fianna Fáil, which wants to stop the sale and is planning new legislation to extend protections to mortgage holders whose loans are acquired by vulture funds.

Speaking after a conference on Brexit at Croke Park's conference centre in Dublin, the minister gave assurances to Permanent TSB customers that the regulatory environment protecting mortgage holders was "strong" but that he would look afresh at it to make sure "it's as strong as it needs to be."

Existing regulations had facilitated the reduction in a “very large number of loans” in the banking sector and avoid the kind of house possessions that we feared on our darkest days,” he said.

“What I will aim to do is build on the legal and regulatory environment to make sure that everyone is treated as fairly as possible and I will do that work across the coming weeks,” he said.

Asked whether he was confident that the sale of the loan portfolio would not lead to repossessions on a grand scale, he said that much of what could happen depended on the sale process.

“What I am confident is that we will have the right kind of legal and policy environment that have prevented the kind of mass home repossessions that were threatened in the past, that we will maintain that and we will deepen that in the future.”

“No legal rights that anybody has at the moment will be affected by any sale when and if that sale happens, so the current legal rights of any home loan owner will be maintained.”

Mr Donohoe sought to distance himself from the decision to sell such a large portfolio of non-performing loans, saying that it was at the direction of the bank's independent regulator, the European Central Bank.

The minister emphasised the greater importance of repairing the bank.

The level of non-performing loans at the bank - 28 per cent of its loan book, five times the European average - was “a great difficulty” and could be even more acute if economic circumstances changed, he said.

He was informed of the bank’s decision to sell the loan book two days before the last cabinet meeting last week but said that he was limited from speaking further as it was commercially sensitive.

Asked if AIB, the other majority State-owned bank, had notified him it was planning a similar sale of home loans, Mr Donohoe said that he had not received any indication from any other bank of a sale.

Mr Donohoe defended Permanent TSB’s past handling of its bad loans and high levels of mortgage arrears, saying that they had been reduced by more than 40 per cent from the height of the financial crisis.

“They have engaged with the insolvency framework, they have engaged with many of their customers and they now have a core of debt now that is posing a very big challenge for the bank,” he said.

The director of the Insolvency Service of Ireland, Lorcan O'Connor, has criticised the banks for not agreeing more debt restructuring deals with customers under the statutory insolvency regime. If they had done so, they would not now have to offload large portfolios of loans at the ECB's direction, he said.