Some 2,000 PTSB borrowers in arrears to sell property

Some 2,000 Permanent TSB mortgage holders are selling their property as part of a the bank's solution to arrears this year, the Oireachtas finance committee heard today.

The bank’s “assisted voluntary sales” or closure solution meant the bank worked with the borrower to sell the property. This figure “doubled” to “roughly 2,000 from June to September, Shane O’Sullivan, head of the bank’s asset management unit said

Permanent TSB has “offered” solutions to 26 per cent of mortgage holders in arrears, ahead of a target of 20 per cent set by the Central Bank.

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Shane O’Sullivan, managing director of the PTSB asset management unit, addressing the committee

However, a quarter of those treatments are legal cases taken against customers in arrears. The bank has just over 25,000 customers in arrears greater than 90 days, Shane O’Sullivan, head of the bank’s asset management unit said.

Mr O’Sullivan said it had “offered treatments” to 6,650 borrowers in the six months up to the end of June. This includes 1,500 short-term treatments (such as a moratorium or interest only mortgage), 2,750 long-term solutions (such as split mortgage or term extensions), 800 assisted voluntary sales and 1,600 legal cases in which a solicitor has been asked to secure a date.

The bank presented more recent figures up to September 3rd which included borrowers in arrears of less than 90 days and showed assisted voluntary sales of some 2,000. In “assisted voluntary sale” or “closure” the bank works with the borrower to sell the property, Mr O’Sullivan said.

This is when “despite everyting” there is “no affordability or sustanaiblity evident” and at the end of the term there is “no way” the borrower could pay the capital, he said.

Fine Gael TD Kieran O’Donnell questioned the escalation in assisted voluntary sales at the bank in the past two months which has more than doubled from 800 in late June to 2000 in early September and suggested that borrowers were not being given alternatives. “It appears to be escalating at a drastic level,” he said.

PTSB chief executive Jeremy Masding replied that the bank had been "playing catch-up" and had "no arrears management capability" when he started.

The bank is doing “write offs” for mortgages “at the end of a process” and it was some €11m so far this year, Mr Masding said.

Permanent TSB said it has € 1.7bn set aside in a stock of provisions for possible debt write downs of a € 17.7bn loan book (almost 10 per cent).

“It’s not for debt write downs. It’s a stock of provisions which I may or may not use. I will do everything I can not to use that stock of provisions,” Mr Masding said. In buy-to-let this was € 1.5bn or € 6.5bn (23 per cent). Sixty per cent of the total mortgage the book at the bank is tracker mortgages, Mr Masding said.

When legal cases are removed the bank still meets its 20 per cent Central Bank target, Mr Masding said. Mr O’Sullivan said many of the 1,600 legal cases started long ago and some had been held up because of the Dunne judgement. He would not estimate how many of these cases would end in repossession.

Permanent TSB said up to September 3rd it had offered 3,500 split mortgages, up from 1,500 at the end of June. Most of these mortgages see 30 and 45 per cent of the value of the property warehoused with no interest, Mr O’Sullivan said. These split mortgages are reviewed every three years to see if the customer’s circumstances have changed, Mr Masding said.

Mr Masding said the bank seeks restructured mortgages to be repaid by the time the customer reaches the age of 65. He said “trade-down” of home at this time was a legitimate request and he preferred not to extend loans post-retirement.

Sinn Féin TD Pearse Doherty said there were computer generated letters being sent by the Permanent TSB to customers asking for the voluntary surrender of property over mortgage arrears of just €300. “There is a heavy concentration on getting people to surrender their properties,” Mr Doherty said

Mr Masding responded that he was not aware of this issue. Mr O’Sullivan said there was a “legacy book” of customers for many years on a moratorium who might seem in arrears only a few hundred euro in arrears but this was very different in reality with no sustainability in the mortgage.

Fine Gael TD Regina Doherty asked if borrowers who thought they were compliant could be getting letters telling them they had no choice but to sell their home. “That is correct, we are moving from repeatedly offering short term treatments to trying to offer options in the long term” Mr O’Sullivan said. Such letters were never sent without a conversation in advance, he said.

Fianna Fail senator Thomas Byrne said while the bank was exceeding Central Bank targets, in over a third of solutions it was asking borrowers to leave their home or engage in legal proceedings. “You are doing better than the Government asked you to....we are criticising the banks” but the Government set these targets for the banks, he said.

The bank said it stood over a constituency case outlined by independent TD Stephen Donnelly in which a customer would have to default on a credit union loan to repay their split mortgage resulting in the borrower having to drop out of their college degree. “I would stand with that letter” Mr Masding said. “Customers have to make a choice about prioritisation of debt” Mr O’Sullivan said.

Mr Donnelly said the reply was “deeply disappointing”. If people were being forced to leave university to pay the split mortgage that is “bad for the country” he said. “While you are meeting the targets, the consequence of meeting targets is to the detriment of Irish citizens and economic recovery,” Mr Donnelly said.

On Priory Hall Mr Masding said PTSB would take a similar view to AIB and work with mortgageholders towards a “sustainable solution” in a “very sad” and a “unique” case.

The bank’s approach to the meeting was welcomed by committee members, Mr Masding dispensed of the opening statement to make more time for questions and provided three slides to members outlining how it has provided treatments for mortgage arrears.

Committee chairman Ciarán Lynch said he would write to the other banks seeking their figures to be compiled in a similar manner before Central Bank Governor Patrick Honohan meets the committee later this month.

The committee hearing today was the last of its hearings with the four main lending Irish banks. Earlier in the week it heard from Bank of Ireland, Ulster Bank and AIB. Figures from the four banks show that they had sent 14,721 legal letters and 2,439 requests for voluntary surrender, Sinn Féin TD Pearse Doherty said after the meeting today.